Direct and Spillover Effects of ATP-Funded Photonics Technologies

More documents

Recommendations

Info

TABLE 5.Estimated Employment Compensation Effect Through 2006(ATP Award to Displaytech)Model Variables Best-Guess Scenario Worst-Case Scenario Best-Case ScenarioAverage 2003 Compensation $55,000 $40,000 $70,000Opportunity Cost (%) 75% 65% 85%U.S. Share of Displaced Business 30% 50% 20%RESULTS (FOR EMPLOYMENT COMPENSATION EFFECT ONLY)IRR (%) 19.4% -2.71% 40.2%7% Social Discount RateNPV (millions 2005 dollars) $1.85 -$1.03 $6.20Discounted Benefit Cost Ratio 1.79 0.56 3.65All-Scenario Monte Carlo Simulation @ 7%: Probability NPV>0, p>0.985% Social Discount RateNPV (millions 2005 dollars) $2.36 -$0.89 $7.26Discounted Benefit Cost Ratio 2.00 0.62 4.08All-Scenario Monte Carlo Simulation @ 5%: Probability NPV>0, p>0.993% Social Discount RateNPV (millions 2005 dollars) $2.97 -$0.72 $8.51Discounted Benefit Cost Ratio 2.25 0.70 4.57All-Scenario Monte Carlo Simulation @ 3%: Probability NPV>0, p>0.995–6 percent through 2002–2003, and there was 6–8 percent unemployment nationwide indurable goods manufacturing. 21 Had Displaytech not hired them, many of these people wouldhave eventually been employed elsewhere, perhaps with a lag period in finding work (theaverage duration of unemployment among white-collar technical workers was three to sixmonths). Moreover, U.S. Department of Labor studies on workers displaced in 1999–2001showed that, when they did find other jobs, on average they made roughly 65–85 percent oftheir previous wages, with significant variation by industry and region. 22 Finally, some U.S.firms, namely Kopin and Three-Five Systems, would gain market share without Displaytech.As we mention above, the U.S. share of the overall microdisplay market is about 30 percent,and we use various estimates from 20–50 percent as the U.S. share of the sales displaced byDisplaytech.Taking these alternative opportunities for the employees into account, we took the averagewage levels (varying from $40,000–70,000 in 2003, per Department of Labor ranges),21. U.S. Department of Labor (2003a).22. U.S. Department of Labor (2002).28 DIRECT AND SPILLOVER EFFECTS OF ATP-FUNDED PHOTONICS TECHNOLOGIES
subtracted the opportunity value of those employees doing other things (varying from 65–85percent), and subtracted what might have been the U.S. share (varying from 20–50 percent).Given the employment trends in Figure 6, and assuming Displaytech continues to employ atleast 50 people through 2006, then adjusting for technology-sector wage inflation, using theOffice of Management and Budget’s (OMB) statutory social discount rate of 7 percent, andnetting out the $1.75 million ATP grant, we estimate the net present value (NPV) of thedifference over the period 1995–2006 between Displaytech with and without ATP as $1.85million (2005 dollars), our best-guess scenario point estimate. The OMB’s 7 percent comesfrom the historical average return for private investments. However, there is compellingtheoretic support (e.g., Caplin and Leahy, 2004) that social planners should use lowerdiscount rates than private returns. Indeed, the United Kingdom (HM Treasury, 2003)standard is 3.5 percent in evaluations for time periods up to 30 years, and lower rates foreven longer periods. So, we also explored two alternative social discount rates. At a 5 percentsocial discount rate, the best-guess scenario NPV is $2.36 million, and at 3 percent it rises to$4.04 million.Discount rate notwithstanding, if we count only this employment effect, this represents adecent, though not spectacular, 19.4 percent internal rate of return (IRR) from the ATPinvestment and discounted benefit to cost ratios ranging from 1.79 to 2.25. (Note that thesevalues are only for the direct economic effects on Displaytech, its employees, and competitorsand do not include direct effects on downstream consumers or indirect knowledge spillovereffects outside of the market.) Our NPV estimate of the direct employment compensationeffect ranges from -$1.03 million in the worst-case scenario at the 7 percent discount rate to$8.51 million in the best-case scenario at the 3 percent discount rate. Assuming simpletriangular probability functions on the low, best-guess, and high values for the variousparameters, we used Monte Carlo simulation to generate probability distributions, shown inFigure 7, for the additive value of the ATP award. The award has positive net value to thenation in more than 98 percent of the Monte Carlo variations under each of the threediscount rates, with mean values of $1.63 million at 7 percent, $2.17 million at 5 percentand $2.66 million at 3 percent. The internal rate of return averaged about 18 percent. Thesefigures for employment compensation are less speculative than the estimates that follow forthe consumer surplus and knowledge spillover effects, and, as such, they represent a mostconservative set of estimates.CONSUMER SURPLUSFor the impact of Displaytech on consumer surplus in the market, as indicated by the uppershaded region in Figure 5, we estimate the net increase in the value of sales, accounting forpotential price and quantity effects to consumers and competitors and for some displacedsales volume from U.S.-based competitors.In the current main application of Displaytech microdisplays, viewfinders, the advantagesof their specific ferroelectric liquid crystal technology are not yet enabling anything thatalternative microdisplay approaches cannot. As one impartial industry observer weinterviewed put it, the performance difference for the end users from FLC in viewfindersDisplaytech 29
Page 1 and 2: NIST GCR 06-893Direct and Spillover
Page 5 and 6: AbstractTo evaluate the impact of t
Page 7: AcknowledgmentsThis research would
Page 10 and 11: This report presents the findings f
Page 12 and 13: 6. This case study suggests that ke
Page 14 and 15: 3. Comparison of Displaytech and Un
Page 17 and 18: 1. Introduction and BackgroundThe A
Page 19 and 20: the Department of Defense (DOD), Na
Page 21 and 22: Hence, we consider two additional s
Page 23 and 24: area because many photonics technol
Page 25 and 26: FIGURE 2Worldwide Photonics Compone
Page 27 and 28: TABLE 3.Matched Case Study Firms by
Page 29 and 30: 2. DisplaytechINTRODUCTIONIn June 1
Page 31 and 32: significant interest worldwide. The
Page 33 and 34: FIGURE 3Cross-Section of a Ferroele
Page 35 and 36: TABLE 4.Crowded Display Competition
Page 37 and 38: FIGURE 4.Competing Electronic Displ
Page 39 and 40: wafer. For FLC-on-silicon microdisp
Page 41 and 42: FIGURE 5.Within-Market Increase in
Page 43: FIGURE 6.Estimated ATP Employment E
Page 47 and 48: FIGURE 8.Historic Display Price-Qua
Page 49 and 50: TABLE 6.Estimated Consumer Surplus
Page 51 and 52: TABLE 7.Organizations and Groups Mo
Page 53 and 54: FIGURE 12.Patent Citations to Displ
Page 55 and 56: ColorLink’s pi-cell color switche
Page 57 and 58: FIGURE 14.Geographic Distribution o
Page 59 and 60: competitors, were added by patent e
Page 61 and 62: FIGURE 16.Citations to Displaytech
Page 63 and 64: TABLE 9.Top Organizations and Indiv
Page 65 and 66: FIGURE 19.Corporate Citations to Di
Page 67 and 68: TABLE 10.Corporations Citing Post-1
Page 69 and 70: 3. Comparison ofDisplaytech and Uni
Page 71 and 72: acklights of LCDs; and they are bri
Page 73 and 74: which was to give DuPont access to
Page 75 and 76: FIGURE 20.Timing of Displaytech and
Page 77 and 78: Table 11. Organizations and Groups
Page 79 and 80: FIGURE 23.Patent Citations to Uniax
Page 81 and 82: In summary, together with Uniax ear
Page 83 and 84: TABLE 12.OLS Regression Results on
Page 85 and 86: FIGURE 26.Corporate Citations to Un
Page 87 and 88: TABLE 13.ContinuedTop 25 Individual
Page 89 and 90: FIGURE 28.Corporate Citations to Un
Page 91 and 92: 4. Findings and ObservationsFINDING
Page 93 and 94: microdisplays. We cannot fully dise
Page 95 and 96:
TABLE 15.Publication and Citation R
Page 97 and 98:
social ties, distance in the sense
Page 99 and 100:
FIGURE 30.Flowchart of ATP Technolo
Page 101:
government policies, which establis
Page 104 and 105:
• ATP goals inherently involve se
Page 106 and 107:
iv. Suppliers. Three or four on who
Page 108 and 109:
Business Journal of Phoenix, The (2
Page 110 and 111:
Paul, J. (2000), A Brief History of
Page 113:
ABOUT THE AUTHORSTodd A. Watkins is
show all

Direct and Spillover Effects of ATP-Funded Photonics Technologies

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?