Direct and Spillover Effects of ATP-Funded Photonics Technologies

1. Introduction and BackgroundThe Advanced Technology Program (ATP) aims to stimulate the development of technologieswith potential broad national economic benefits. ATP seeks to support research projects thatotherwise would not be undertaken by the private sector, or carried out as quickly with thenecessary scale or scope, because of the high technical risk associated with the research.When ATP was authorized in the Omnibus Trade and Competitiveness Act of 1988, its goalswere “to assist U.S. business in creating and applying the generic technology and researchresults to (1) commercialize significant new scientific discoveries and technologies rapidly and(2) refine manufacturing technologies” (Public Law 100–418). ATP seeks to foster economicgrowth and the competitiveness of U.S. firms by advancing technologies with potentiallylarge net social value for the nation, but that would not otherwise emerge in time tomaximize their competitive value or realize first-mover advantages. By supporting specificcommercially relevant, high-risk technology development projects, ATP aims, among otherthings, to accelerate the benefits of emerging technologies, to widen potential applicationareas, and to increase the likelihood of technical success and hence commercial success.The economic rationale for ATP is an R&D market failure argument relating to risk anduncertainty, imperfect information, externalities and spillovers, and incomplete markets.Therefore, a central issue for program evaluation is whether ATP is successful at fosteringand enabling economic spillovers.WHY ARE ECONOMIC SPILLOVERS OF POLICY INTEREST?The links between competitiveness and technology, and the questions those links raise fortechnology policy or, more broadly, industrial policy, have major implications for a nation’swealth, living standards, and national security. Policymakers and economists have longunderstood that technological innovation is important for economic growth. Francis Bacon(1626) fantasized about a utopian civilization, New Atlantis, which flourished through theapplication of science to understanding nature in a learned society he called Solomon’sHouse. In 17th century Britain, the society served as the model for the Royal Society, theorigin of today’s National Academies of Science. Bacon’s proclamation that “knowledge ispower” became, in The Wealth of Nations (1776), Adam Smith’s pin factory that embodiedproductive technology. Joseph Schumpeter (1942) saw innovation as the dynamic engine ofIntroduction and Background 1