EN 1 Error! Unknown document property name. EN
European Competitiveness in
Key Enabling Technologies
FINAL REPORT
Authors: Birgit Aschhoff, Dirk Crass, Katrin Cremers, Christoph Grimpe,
Christian Rammer
Centre for European Economic Research (ZEW), Mannheim, Germany
Felix Brandes, Fernando Diaz-Lopez, Rosalinde Klein Woolthuis,
Michael Mayer, Carlos Montalvo
TNO, Delft, the Netherlands
Date: May 28th, 2010
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This report is a background study to the European Competitiveness Report 2010. The study
was commissioned by the European Commission, DG Enterprise within a Framework
Contract co-ordinated by the Austrian Institute for Economic Research (Wifo) (co-ordinator:
Michael Peneder).
Contact
Dr Christian Rammer
Department of Industrial Economics and International Management
Centre for European Economic Research (ZEW)
L 7, 1
D-68161 Mannheim
Germany
Phone: +49 621 1235 184
Fax: +49 621 1235 170
E-Mail: rammer@zew.de
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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Content
1 Introduction ..........................................................................................................19
1.1 Background ............................................................................................................19
1.2 Objective ................................................................................................................22
1.3 Empirical Approach................................................................................................22
2 Methodological Issues...........................................................................................26
2.1 KETs, Innovation and Competitiveness ..................................................................26
2.2 Measuring Technological Competitiveness .............................................................32
2.3 Strengths, Weaknesses, Challenges and Policy Intervention....................................42
3 Nanotechnology.....................................................................................................48
3.1 Definition and State of Technology.........................................................................48
3.2 Technological Competitiveness, Industry Links and Market Potentials ...................51
3.2.1. Technological Competitiveness...............................................................................51
3.2.2. Links to Sectors and other Fields of Technologies...................................................64
3.2.3. Market Potentials....................................................................................................72
3.3 Success Factors, Barriers and Challenges: Cluster Analysis ....................................74
European Competitiveness in KETs ZEW and TNO
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3.3.1. Nanotechnology cluster Europe: Northrhine Westphalia (Germany) .......................76
3.3.2. Technology cluster Non-Europe: Kyoto (Japan)......................................................82
3.3.3. Conclusion on nanotechnology cluster benchmark between Germany and Japan.....88
3.3.4. Factors influencing the future development of nanotechnology ...............................91
3.4 Conclusions and Policy Implications.......................................................................95
4 Micro- and nanoelectronics ................................................................................101
4.1 Definition and State of Technology.......................................................................101
4.2 Technological Competitiveness, Industry Links and Market Potentials .................102
4.2.1. Technological Competitiveness.............................................................................102
4.2.2. Links to Sectors and Fields of Technologies .........................................................115
4.2.3. Market Potentials..................................................................................................121
4.3 Success Factors, Barriers and Challenges: Cluster Analysis ..................................125
4.3.1. Micro- and Nanoelectronics Europe: The Grenoble cluster ...................................126
4.3.2. Micro- and Nanoelectronics Canada: The Ontario region ......................................132
4.3.3. Conclusion on microelectronics cluster benchmark between France and Canada...139
4.3.4. Factors influencing the future development of microelectronics ............................142
4.4 Conclusions and Policy Implications.....................................................................145
5 Industrial Biotechnology ....................................................................................149
5.1 Definition and State of Technology.......................................................................149
5.2 Technological Competitiveness, Industry Links and Market Potentials .................151
5.2.1. Technological Competitiveness.............................................................................151
5.2.2. Links to Sectors and Fields of Technologies .........................................................164
5.2.3. Market Potentials..................................................................................................170
5.3 Success Factors, Barriers and Challenges: Cluster Analysis ..................................173
5.3.1. Industrial biotechnology cluster Europe: Cambridge (United Kingdom)................174
5.3.2. Technology cluster Non-Europe: Bay Area (United States of America) ................182
5.3.3. Conclusion of industrial biotechnology cluster comparison...................................187
5.3.4. Factors influencing the future development of industrial biotechnology ................190
5.4 Conclusions and Policy Implications.....................................................................192
6 Photonics .............................................................................................................196
6.1 Definition and State of Technology.......................................................................196
6.2 Technological Competitiveness, Industry Links and Market Potentials .................199
6.2.1. Technological Competitiveness.............................................................................199
6.2.2. Links to Sectors and Fields of Technologies .........................................................210
6.2.3. Market Potentials..................................................................................................216
6.3 Success Factors, Barriers and Challenges: Cluster Analysis ..................................218
6.3.1. Photonics Europe: The Optical Technologies Berlin-Brandenburg cluster (OpTecBB)
.............................................................................................................................219
6.3.2. Photonics Non-Europe: Quebec photonics network...............................................225
6.3.3. Conclusions on Photonics Cluster Comparison .....................................................231
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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6.3.4. Factors influencing the future development of photonics.......................................233
6.4 Conclusions and Policy Implications.....................................................................234
7 Advanced Materials............................................................................................238
7.1 Definition and State of Technology.......................................................................238
7.2 Technological Competitiveness, Industry Links and Market Potentials .................241
7.2.1. Technological Competitiveness.............................................................................241
7.2.2. Links to Sectors and other Fields of Technologies.................................................255
7.2.3. Market Potentials..................................................................................................263
7.3 Success Factors, Barriers and Challenges: Cluster Analysis ..................................269
7.3.1. Advanced Materials Europe: Wallonia’s Plastiwin cluster.....................................269
7.3.2. Technology cluster non-Europe: Changsha material cluster ..................................276
7.3.3. Conclusion on Advanced Materials Cluster Comparison.......................................283
7.3.4. Factors influencing the future development of advanced materials ........................286
7.4 Conclusions and Policy Implications.....................................................................288
8 Advanced Manufacturing Technologies ............................................................295
8.1 Definition and State of Technology.......................................................................295
8.2 Technological Competitiveness, Industry Links and Market Potentials .................297
8.2.1. Technological Competitiveness.............................................................................297
European Competitiveness in KETs ZEW and TNO
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8.2.2. Links to Sectors and Fields of Technologies .........................................................309
8.2.3. Market Potentials..................................................................................................315
8.2.4. Factors influencing the future development of AMT .............................................316
8.3 Conclusions and Policy Implications.....................................................................318
9 Summary and Conclusions.................................................................................323
9.1 Technological performance...................................................................................323
9.2 Conclusions from Cluster Analyses.......................................................................334
9.3 Failures and Success Factors.................................................................................341
9.4 Generic Policy Conclusions ..................................................................................346
10 References ...........................................................................................................351
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................27
Figure 2-2: System and market failure framework..........................................................................43
Figure 2-3: Development of technology clusters ............................................................................45
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................51
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............52
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................53
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................54
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............55
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................56
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................57
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................59
European Competitiveness in KETs ZEW and TNO
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Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................60
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................61
Figure 3-11: Change in the number of nanotechnology patents between 1991/95 to
1996/00 and 1996/00 to 2001/05, by country (EPO/PCT patents; compound
annual growth rate in percent) ......................................................................................61
Figure 3-12: Composition of nanotechnology patents in Europe, by subfield and country
(percent)........................................................................................................................62
Figure 3-13: Specialisation patterns of nanotechnology patenting in Europe, by subfield
and country of inventor (percent) .................................................................................63
Figure 3-14: Sector affiliation of nanotechnology patent applicants, by region (EPO/PCT,
1981-2007 applications, percent)..................................................................................67
Figure 3-15: Change in the sector affiliation of nanotechnology patent applicants before
and after the end of 2001, by region (EPO/PCT, percentage points) ...........................68
Figure 3-16: Concentration of applicants in nanotechnology patenting 1981-2007, by
region (EPO/PCT patents 1981-2007, percent) ............................................................71
Figure 3-17: Share of nanotechnology patents linked to other KETs by subfield
(EPO/PCT patents 1981-2007, percent) .......................................................................71
Figure 3-18: Links of nanotechnology patents to other KETs by subfields (EPO/PCT
patents 1981-2007, only patents with links to other KETs, percent)............................72
Figure 3-19: Shares of nanotechnology research in Germany and Japan by actors (2004)...............76
Figure 3-20: Estimated public and private funding for nanotechnology R&D in 2005 by
world regions (million €) ..............................................................................................76
Figure 3-21: Network of nanotechnology clusters in Northrhine-Westphalia ......................................77
Figure 3-22: Knowledge transfer in the NRW nanotechnology cluster (example Muenster) ...........80
Figure 3-23: Knowledge clusters in Japan ........................................................................................83
Figure 3-24: Institutes for nanotechnology research, development and assessment .........................84
Figure 3-25: Public and private funding of nanotechnology research 2005-2008 (annual
average, billion Euro) ...................................................................................................93
Figure 4-1: Number of microelectronics patents (EPO/PCT) 1981-2005, by region of
applicant......................................................................................................................103
Figure 4-2: Market shares of microelectronics patents (EPO/PCT) 1991-2005, by regions
(percent)......................................................................................................................104
Figure 4-3: Market shares in microelectronics patents 1991-2005 for national
applications and triadic patents (percent) ...................................................................105
Figure 4-4: Microelectronics patent intensity 1991-2005 for EPO/PCT and triadic
patents (number of patents per 1 trillion of GDP at constant PPP-$) .........................106
Figure 4-5: Composition of microelectronics patents (EPO/PCT) by subfields (percent) ............107
Figure 4-6: Market shares for EPO/PCT microelectronics patents by subfields 1991-
2005 (percent).............................................................................................................107
Figure 4-7: Composition of microelectronics patents (applications at home patent
offices), by region, subfield and period (percent).......................................................108
Figure 4-8: Average annual rate of change in the number of microelectronics patents
(applications at home patent offices), by region, subfield and period
(percent)......................................................................................................................110
Figure 4-9: Number of microelectronics patent applications (EPO and PCT) 1981-2005
by European applicants, by country............................................................................111
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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Figure 4-10: Patent intensity in microelectronics 1991-2005 of European countries
(EPO/PCT patents) .....................................................................................................111
Figure 4-11: Change in the number of microelectronics patents between 1991/95 to
1996/00 and 1996/00 to 2001/05, by country (EPO/PCT patents; compound
annual growth rate in percent) ....................................................................................112
Figure 4-12: Composition of microelectronics patents in Europe, by subfield and country
(percent)......................................................................................................................113
Figure 4-13: Specialisation patterns of microelectronics patenting in Europe, by subfield
and country of inventor (percent) ...............................................................................113
Figure 4-14: Sector affiliation of microelectronics patent applicants (EPO/PCT), by
region (average of 1981-2007 applications, percent) .................................................117
Figure 4-15: Change in the sector affiliation of microelectronics patent applicants before
and after the end of 2001 (EPO/PCT), by region (percentage points)........................118
Figure 4-16: Concentration of patenting activity in microelectronics (EPO/PCT patents,
2000-2007 applications) .............................................................................................120
Figure 4-17: Share of microelectronics patents linked to other KETs by subfield
(EPO/PCT patents 1981-2007, percent) .....................................................................121
Figure 4-18: Links of microelectronics patents to other KETs by subfields (EPO/PCT
patents 1981-2007, only patents with links to other KETs, percent)..........................121
Figure 4-19: Global semiconductor market 1990-2009, by region (billion US-$, current
prices) .........................................................................................................................123
Figure 4-20: Worldwide semiconductor sales 2007, by market segment (percent) ........................123
European Competitiveness in KETs ZEW and TNO
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Figure 5-1: Number of industrial biotechnology patents (EPO/PCT patents) 1981-2005,
by region of applicant .................................................................................................152
Figure 5-2: Market shares of industrial biotechnology patents (EPO/PCT) 1991-2005
(percent)......................................................................................................................153
Figure 5-3: Market shares in industrial biotechnology patents 1991-2005 for national
applications and triadic patents (percent) ...................................................................154
Figure 5-4: Industrial biotechnology patent intensity 1991-2005 for EPO/PCT and
triadic patents (number of patents per 1 trillion of GDP at constant PPP-$)..............155
Figure 5-5: Composition of industrial biotechnology patents (EPO/PCT) by subfields
(percent)......................................................................................................................156
Figure 5-6: Market shares for industrial biotechnology patents (EPO/PCT) 1991-2005,
by subfields (percent) .................................................................................................156
Figure 5-7: Average annual rate of change in the number of industrial biotechnology
patents (applications at home patent offices), by region, subfield and period
(percent)......................................................................................................................157
Figure 5-8: Composition of industrial biotechnology patents (applications at home patent
offices), by region, subfield and period (percent).......................................................159
Figure 5-9: Industrial biotechnology patents (EPO/PCT) in Europe 1981-2005, by
country ........................................................................................................................159
Figure 5-10: Patent intensity in industrial biotechnology 1991-2005 of European countries
(EPO/PCT patents) .....................................................................................................160
Figure 5-11: Change in the number of industrial biotechnology patents between 1991/95
to 1996/00 and 1996/00 to 2001/05, by country (EPO/PCT patents;
compound annual growth rate in percent) ..................................................................161
Figure 5-12: Composition of industrial biotechnology patents in Europe, by subfield and
country (percent).........................................................................................................162
Figure 5-13: Specialisation patterns of industrial biotechnology patenting in Europe, by
subfield and country of inventor (percent) .................................................................162
Figure 5-14: Sector affiliation of industrial biotechnology patent applicants (EPO/PCT),
by region (average of 1981-2007 applications, percent) ............................................166
Figure 5-15: Change in the sector affiliation of industrial biotechnology patent applicants
before and after the end of 1999 (EPO/PCT), by region (percentage points).............167
Figure 5-16: Concentration of patenting activity in industrial biotechnology (EPO/PCT
patents, 2000-2007 applications) ................................................................................169
Figure 5-17: Share of industrial biotechnology patents linked to other KETs by subfield
(EPO/PCT patents 1981-2007, percent) .....................................................................169
Figure 5-18: Links of industrial biotechnology patents to other KETs by subfields
(EPO/PCT patents 1981-2007, only patents with links to other KETs,
percent) .......................................................................................................................170
Figure 5-19: World ethanol and biodiesel production: projections to 2017....................................172
Figure 5-20: US-European comparison of the success of biotechnology clusters (2003)...............174
Figure 5-21: Actors in the Cambridge biotechnology cluster .........................................................175
Figure 5-22: Distribution of the number of employees in biotechnology firms in the
Cambridge cluster.......................................................................................................176
Figure 5-23: Number of new biotechnology firms in the Cambridge cluster..................................176
Figure 5-24: The emergence of technology clusters in Cambridge over time.................................177
Figure 5-25: San Francisco Bay Area biotechnology public company financial highlights
($m) 2005 (percentage change over 2004) .................................................................182
Figure 5-26: Bay Area main component ties by dyad .....................................................................185
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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Figure 5-27: Academic spin-offs in the Bay Area since the origin of the cluster ...........................185
Figure 6-1: Number of photonics patents (EPO/PCT) 1981-2005 by region of applicant ............199
Figure 6-2: Market shares in photonics patents (EPO/PCT) 1991-2005, by region of
applicant (percent) ......................................................................................................199
Figure 6-3: Market shares in photonics patents 1991-2005 for national applications and
triadic patents (percent) ..............................................................................................201
Figure 6-4: Patent intensity 1991-2005 for photonics patents (number of EPO/PCT and
triadic patents per 1 trillion of GDP at constant PPP-$) .............................................202
Figure 6-5: Composition of photonics patents (EPO/PCT, 1981-2007 applications) by
subfields (per cent) .....................................................................................................203
Figure 6-6: Market shares for EPO/PCT photonics patents by subfields 1991-2005
(percent)......................................................................................................................203
Figure 6-7: Composition of photonic patents (applications at home patent offices), by
region, subfield and period (percent)..........................................................................204
Figure 6-8: Average annual rate of change in the number of photonics patents
(applications at home patent offices), by region, subfield and period
(percent)......................................................................................................................205
Figure 6-9: Number of potonics patents in Europe (EPO/PCT) 1981-2005 by country of
inventor.......................................................................................................................206
Figure 6-10: Patent intensity in photonics 1991-2005 of European countries (EPO/PCT
patents)........................................................................................................................207
European Competitiveness in KETs ZEW and TNO
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Figure 6-11: Change in the number of photonics patents between 1991/95 to 1996/00 and
1996/00 to 2001/05, by country (EPO/PCT patents; compound annual
growth rate in percent)................................................................................................207
Figure 6-12: Composition of photonics patents by subfields and countries (EPO/PCT,
1981-2007, percent)....................................................................................................208
Figure 6-13: Specialisation patterns of photonics patenting in Europe, by subfield and
country, relative to Europe total (percent) ..................................................................209
Figure 6-14: Sector affiliation of applicants of photonics patents, by region (EPO/PCT,
1981-2007 applications, percent)................................................................................211
Figure 6-15: Change in the sector affiliation of photonics patents applicants before and
after the end of 1999 (EPO/PCT), by region (percentage points)...............................213
Figure 6-16: Concentration of applicants in photonics patenting (EPO/PCT patents) 1981-
2007, by region (percent)............................................................................................215
Figure 6-17: Share of photonics patents linked to other KETs by subfield (EPO/PCT
patents 1981-2007, percent)........................................................................................216
Figure 6-18: Links of photonics patents to other KETs by subfields (EPO/PCT patents
1981-2007, only patents with links to other KETs, percent) ......................................216
Figure 6-19: Photonics World Market by Sector, 2005...................................................................216
Figure 6-20: Location of the Quebec photonics network ................................................................225
Figure 7-1: Number of patents (EPO/PCT) in advanced materials 1981-2005, by region
of applicant .................................................................................................................242
Figure 7-2: Market shares for EPO/PCT patents in advanced materials, 1991-2005
(percent)......................................................................................................................242
Figure 7-3: Market shares in advanced materials patents 1991-2005 for national
applications and triadic patents (percent) ...................................................................244
Figure 7-4: Patent intensity 1991-2005 in advance materials (number of EPO/PCT and
triadic patents per 1 trillion of GDP at constant PPP-$) .............................................245
Figure 7-5: Composition of EPO/PCT advanced materials patents by subfields (percent)...........245
Figure 7-6: Market shares for advance materials patents (EPO/PCT) by subfields 1991-
2005 (percent).............................................................................................................247
Figure 7-7: Composition of advanced materials patents (applications at home patent
offices), by region, subfield and period (percent).......................................................248
Figure 7-8: Average annual rate of change in the number of advanced materials patents
(applications at home patent offices), by region, subfield and period
(percent)......................................................................................................................249
Figure 7-9: Advanced materials patents (EPO/PCT) in Europe 1981-2005, by country of
inventor.......................................................................................................................251
Figure 7-10: Patent intensity in advanced materials 1991-2005 of European countries
(EPO/PCT patents) .....................................................................................................251
Figure 7-11: Change in the number of advanced materials patents between 1991/95 to
1996/00 and 1996/00 to 2001/05, by country (EPO/PCT patents; compound
annual growth rate in percent) ....................................................................................252
Figure 7-12: Composition of advanced materials patents in Europe, by subfield and
country (percent).........................................................................................................253
Figure 7-13: Specialisation patterns of advanced materials patenting in Europe, by
subfield and country (percent) ....................................................................................254
Figure 7-14: Sector affiliation of applicants of advanced materials patents (EPO/PCT), by
region (average of 1981-2007 applications, percent) .................................................257
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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Figure 7-15: Change in the sector affiliation of applicants of advanced materials patents
before and after the end of 1997 (EPO/PCT), by region (percentage points).............258
Figure 7-16: Concentration of applicants in advanced materials patenting (EPO/PCT
patents) 1981-2007, by region (percent).....................................................................261
Figure 7-17: Share of advanced materials patents linked to other KETs by subfield
(EPO/PCT patents 1981-2007, percent) .....................................................................262
Figure 7-18: Links of advanced materials patents to other KETs by subfields (EPO/PCT
patents 1981-2007, only patents with links to other KETs, percent)..........................263
Figure 7-19: Expected penetration rates for selected advanced materials (percent) .......................265
Figure 7-20: Geographical distribution of the Plastiwin Cluster.....................................................270
Figure 7-21: Geographical location of the Changsha Cluster .........................................................277
Figure 7-22: Interactions within the different actors in the Chinese national and regional
innovation system .......................................................................................................281
Figure 8-1: Number of AMT patents (EPO/PCT) 1981-2005 by region of applicant...................297
Figure 8-2: Market shares of AMT patents (EPO/PCT) 1991-2005, by regions (percent) ...........298
Figure 8-3: Market shares in AMT patents 1991-2005 for national applications and
triadic patents (percent) ..............................................................................................299
Figure 8-4: AMT patent intensity 1991-2005 for EPO/PCT and triadic patents (number
of patents per 1 trillion of GDP at constant PPP-$)....................................................300
Figure 8-5: Composition of AMT patents (EPO/PCT) by subfields (per cent).............................301
Figure 8-6: Market shares for AMT patents (EPO/PCT) 1991-2005, by subfields
(percent)......................................................................................................................302
European Competitiveness in KETs ZEW and TNO
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Figure 8-7: Composition of AMT patents (applications at home patent offices), by
region, subfield and period (percent)..........................................................................303
Figure 8-8: Average annual rate of change in the number of AMT patents (applications
at home patent offices), by region, subfield and period (percent) ..............................304
Figure 8-9: Number of AMT patent applications (EPO and PCT) 1979-2005 by
European applicants, by country.................................................................................305
Figure 8-10: Patent intensity in AMT 1991-2005 of European countries (EPO/PCT
patents)........................................................................................................................305
Figure 8-11: Change in the number of AMT patents between 1991/95 to 1996/00 and
1996/00 to 2001/05, by country (EPO/PCT patents; compound annual
growth rate in percent)................................................................................................306
Figure 8-12: Specialisation patterns of AMT patenting in Europe, by subfield and country
(percent)......................................................................................................................307
Figure 8-13: Sector affiliation of AMT patent applicants (EPO/PCT), by region (average
of 1981-2007 applications, percent) ...........................................................................311
Figure 8-14: Change in the sector affiliation of AMT applicants before and after the end
of 1999 (EPO/PCT), by region (percentage points) ...................................................312
Figure 8-15: Concentration of patenting activity in AMT (EPO/PCT patents, 1981-2007
applications; percent)..................................................................................................314
Figure 8-16: Share of AMT patents linked to other KETs by subfield (EPO/PCT patents
1981-2007, percent)....................................................................................................315
Figure 8-17: Links of AMT patents to other KETs by subfields (EPO/PCT patents 1981-
2007, only patents with links to other KETs, percent) ...............................................315
Figure 9-1: Number of patents by European applicants 1981-2005 (EPO/PCT patents),
by KET .......................................................................................................................324
Figure 9-2: Dynamics of patent applications in KETs by European applicants 1991-2005
(EPO/PCT patents; 2000=100) ...................................................................................325
Figure 9-3: Compound annual growth rate of the number of patents 1991-2005
(EPO/PCT patents; percent), by KET.........................................................................326
Figure 9-4: Market share of Europe in KETs 1991-2005 (EPO/PCT patents; percent) ................327
Figure 9-5: Share of patents by KET that have been assigned to other KETs (EPO/PCT
patents 1981-2007; percent) .......................................................................................328
Figure 9-6: Links to other KETs of overlapping patents by KET (EPO/PCT patents
1981-2007; percent)....................................................................................................328
Figure 9-7: Sector affiliation of patent applicants by KET (EPO/PCT patents 1981-2007;
percent) .......................................................................................................................329
Figure 9-8: Composition of overlapping patents by KETs (EPO/PCT patents, 1981-2007
applications; percent)..................................................................................................330
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
EN 15Error! Unknown document property name. EN
List of Tables
Table 2-1: IPC classes used to delineate KETs..............................................................................37
Table 3-1: Examples for current and planned nanotechnology products by industry ....................50
Table 3-2: Change in the number of nanotechnology patents between 1991/95 to
1996/00 and 1996/00 to 2001/05 by subfield and country(EPO/PCT patents,
compound annual growth rate in percent) ....................................................................64
Table 3-3: Technological sector affiliation of nanotechnology patents (EPO/PCT), by
region (1981-2007 applications, percent) .....................................................................65
Table 3-4: Technological sector affiliation of nanotechnology patents (EPO/PCT), by
subfield (1981-2007 applications, percent) ..................................................................66
Table 3-5: Sector affiliation of applicants of nanotechnology patents, by subfield
(EPO/PCT, 1981-2007 applications, percent) ..............................................................69
Table 3-6: 15 main patent applicants in nanotechnology by region (EPO/PCT, 2000-
2007 applications).........................................................................................................70
Table 3-7: Estimates and forecasts for the size of the global nanotechnology market
(billion US-$)................................................................................................................74
Table 3-8: Overview of nanotechnology institutions in the NRW nanotechnology
cluster network .............................................................................................................78
Table 3-9: Government funding categorised as nanotechnology & materials (billion
Yen) ..............................................................................................................................86
European Competitiveness in KETs ZEW and TNO
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Table 3-10: Summary of findings from nanotechnology cluster comparison..................................90
Table 4-1: Change in the number of microelectronics patents between 1991/95 to
1996/00 and 1996/00 to 2001/05 by subfield and country (EPO/PCT patents,
compound annual growth rate in percent) ..................................................................115
Table 4-2: Technological sector affiliation of microelectronics patents (EPO/PCT), by
region (average of 1981-2007 applications, percent) .................................................115
Table 4-3: Technological sector affiliation of microelectronics patent applications
(EPO/PCT), by subfield (average of 1981-2007 applications, percent) .....................116
Table 4-4: 25 main patent applicants in microelectronics by region (EPO/PCT patents,
2000-2007 applications) .............................................................................................119
Table 4-5: Estimates and forecasts for the size of the global microelectronics market
and selected subfields (billion US-$)..........................................................................124
Table 4-6: Summary of findings from microelectronics cluster comparison...............................141
Table 5-1: Change in the number of industrial biotechnology patents between 1991/95
to 1996/00 and 1996/00 to 2001/05 by subfield and country (EPO/PCT
patents, compound annual growth rate in percent) .....................................................164
Table 5-2: Technological sector affiliation of industrial biotechnology patents
(EPO/PCT), by region (average of 1981-2007 applications, percent)........................165
Table 5-3: Technological sector affiliation of industrial biotechnology patent
applications (EPO/PCT), by subfield (average of 1981-2007 applications,
percent) .......................................................................................................................165
Table 5-4: 15 main patent applicants in industrial biotechnology by region (EPO/PCT
patents, 2000-2007 applications) ................................................................................168
Table 5-5: Estimates and forecasts the size of subfields of the global industrial
biotechnology market (billion US-$ unless otherwise specified) ...............................172
Table 5-6: Summary of findings from industrial biotechnology cluster comparison ..................188
Table 6-1: Change in the number of photonics patents between 1991/95 to 1996/00 and
1996/00 to 2001/05 by subfield and country (EPO/PCT patents, compound
annual growth rate in percent) ....................................................................................210
Table 6-2: Technological links to sectors of photonics patents (EPO/PCT), by region
(1981-2007 applications, percent) ..............................................................................210
Table 6-3: Technological links to sectors of photonica patents (EPO/PCT), by subfield
(1981-2007 applications, percent) ..............................................................................211
Table 6-4: Sector affiliation of applicants of photonics patents, by subfield ((EPO/PCT
1981-2007 applications, percent)................................................................................213
Table 6-5: 20 main patent applicants in photonics by region (EPO/PCT patents, 2002-
2007 applications).......................................................................................................214
Table 6-6: Estimates and forecasts for the size of the global photonic market and
selected subfields........................................................................................................217
Table 6-7: Summary of findings from photonics cluster comparison..........................................232
Table 7-1: Change in the number of advanced materials patents between 1991/95 to
1996/00 and 1996/00 to 2001/05 by subfield and country (EPO/PCT patents,
compound annual growth rate in percent) ..................................................................255
Table 7-2: Technological sector affiliation of advanced materials patents (EPO/PCT),
by region (average of 1981-2007 applications, percent) ............................................256
Table 7-3: Technological sector affiliation of advanced materials patents (EPO/PCT),
by subfield (average of 1981-2007 applications, percent)..........................................256
Table 7-4: Sector affiliation of applicants of advanced materials patents (EPO/PCT), by
subfield (average of 1981-2007 applications, percent)...............................................259
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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Table 7-5: 25 main patent applicants in advanced materials by region (EPO/PCT
patents, 2000 to 2007 applications) ............................................................................260
Table 7-6: Estimates and forecasts of the size of global markets for advanced materials ...........266
Table 7-7: Impact of advanced material technology on the ICT, energy and
biotechnology sectors (percent of contribution) .........................................................268
Table 7-8: Summary of findings from advanced materials cluster comparison...........................285
Table 8-1: Change in the number of AMT patents between 1991/95 to 1996/00 and
1996/00 to 2001/05 by subfield and country (EPO/PCT patents, compound
annual growth rate in percent) ....................................................................................308
Table 8-2: Technological sector affiliation of AMT patents (EPO/PCT), by region
(average of 1981-2007 applications, percent).............................................................309
Table 8-3: Technological sector affiliation of AMZ patents (EPO/PCT), by subfield
(average of 1981-2007 applications, percent).............................................................310
Table 8-4: Sector affiliation of applicants of AMT patents (EPO/PCT), by subfield
(average of 1981-2007 applications, percent).............................................................312
Table 8-5: 25 main patent applicants in AMT by region (EPO/PCT patents, 2000-2007
applications)................................................................................................................313
Table 8-6: Estimates and forecasts for the size of the global AMT market (billion US-$)..........316
Table 9-1: Summary overview on technological competitiveness of Europe in KETs ...............331
Table 9-2: Policy recommendations for different phases in the life cycle of a cluster ................335
European Competitiveness in KETs ZEW and TNO
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Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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1 INTRODUCTION
1.1 Background
Strengthening the innovative performance of the EU economy is a main goal of both the
European Commission and the governments of EU member states. Fostering innovation
demands a multi-dimensional approach that takes into account both the incentives for firms to
innovate, the internal and external drivers and barriers for innovation, and the framework
conditions conducive to innovation, including financing, skills, competition, regulation and
public funding.
Among the many factors that drive innovation, emerging new technologies have always
played a key role in the history of innovation. New technological developments open up new
paths for inventing new products and processes and advancing current technology.
Particularly important in this respect are those technologies that have a great potential to
affect innovation in many different industries and fields of application. These so-called "key
European Competitiveness in KETs ZEW and TNO
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enabling technologies" (KETs) have spurred invention and technical progress in the past
tremendously, including technologies such as the steam engine, electricity, synthetic materials
or computing, and will most likely do so in the future.
Common characteristics of KETs include a high demand for R&D, skills and capital
expenditure, a multidisciplinary approach cutting across many technology areas, long time
horizons between basic research results and implementable innovations, high multiplier
effects and high spillovers to other emerging technologies, and a great potential for enabling
product and process innovation (EC, 2009a,b). KETs are closely linked to the concept of
general purpose technologies (see Lipsey et al., 2005). They are expected to provide
significant improvements in economic terms, offer a widening variety of uses in an increasing
number of application areas and industries. Most often, the scope of their impacts depend on
the development of other complementary technologies and innovations.
This report deliberately focuses on KETs that are likely to drive innovation in manufacturing
while discounting those KETs that primarily affect innovation in services. In addition, KETs
are confined to fields of science and technology that provide new technological principles on
which more complex product and process innovation can rest upon and that prepare the
ground for further technological developments in individual industries. Finally, KETs are
supposed to offering both significant economic potentials in terms of opening up new markets
and contributing to the main societal challenges of our today's world.
Based on this reasoning, the European Commission came up with a list of five KETs (see EC,
2009a,b):
Nanotechnology
Industrial biotechnology
Advanced materials
Micro- and nanoelectronics (including semiconductors)
Photonics
All five KETs have in common that they are important enabler for new products as they offer
new approaches to design and process materials and alter their functionality. With regard to
process innovation, a highly important enabler is advanced manufacturing technologies,
e.g. robotics, automation and process control technology. Since process innovation is an
important dimension of industrial competitiveness, advanced manufacturing technologies are
regarded as another KET in this report.
Provided that these technologies will effectively exert a major impact on industrial innovation
on a global level, it is critical for the EU economy to keep pace with the technological
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
EN 21Error! Unknown document property name. EN
development in these KETs in order to benefit from their innovative potentials and spillovers
to other sectors of the economy. Although new knowledge emerging in these technology areas
may be acquired from sources outside the EU, either by co-operation with external partners or
through technology acquisition, there are many arguments why a strong position in
generating new technologies is important for leveraging the economic benefits of these
technologies. On the one hand, developing commercial applications based on KETs often
requires a close interaction between fundamental research and industrial innovation as well as
a certain degree of technological competence in order to absorb and apply new knowledge.
On the other hand, first mover advantages do play a major role, particularly when it comes to
path-breaking technologies. These advantages include learning and reputation effects as well
as standard settings and developing innovation-friendly regulation.
It is both these close links between R&D and commercial use and the expected high impacts
of KETs on productivity and competitiveness that motivate governments across all highly
developed countries to provide a fruitful ground for both developing and using KETs within
their territory. Most EU Member States as well as the European Commission have
implemented policy approaches in favour of KETs, combining a variety of instruments from
different policy areas. Analyses of the current state of technology in Europe, the technological
European Competitiveness in KETs ZEW and TNO
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performance vis-à-vis the main competitors in North America and East Asia, and the
obstacles in terms of market and system failures that hinder the advance of KETs can help to
further develop these policy approaches and to increase the coherence of policies at regional,
national and EU levels. This study aims to deliver some of these analyses.
1.2 Objective
The purpose of this study is to analyse the technological competitiveness of Europe in six
KETs: nanotechnology, industrial biotechnology, advanced materials, micro- and
nanoelectronics, photonics, and advanced manufacturing technologies. While there are many
studies on technological performance and dynamics for each of these technologies and their
subfields, a comparative study that evaluates the situation in each KET based on a common
methodology and metrics is still lacking: This report attempts to close this gap to some extent.
In addition to analysing the state of technological competitiveness, we explore the challenges
and weaknesses that may affect future prospects of these KETs in Europe and discuss the
policy actions that may be needed to strengthen technology performance and advance
commercial applications. In particular, the study investigates, for each KET,
the performance of actors from Europe (both enterprises and public institutions) in producing
new technology compared to the main competing regions (North America, East Asia);
the industrial sectors and fields of applications that are most affected by a certain KET;
the likely medium-term market potentials and application prospects;
the factors that are likely to drive technological and commercial success;
the market and system failures and other barriers that may impede technological progress, and
how these failures are tackled by policy activities;
the role of governments for the development of each KET, focussing on public funding of
R&D, fiscal incentives, public procurement and lead markets;
Based on these findings we derive policy conclusions on how to strengthen the EU's
technological competitiveness in these KETs.
1.3 Empirical Approach
A major challenge of this study is related to the fact that most of the KETs considered are in a
premature state of commercialisation. Only few commercial applications have been developed
so far, and many product markets are still to emerge. In addition, KETs are difficult to assign
to individual sectors owing to their general purpose character. As a consequence, analysing
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
EN 23Error! Unknown document property name. EN
strengths and weaknesses of KETs in Europe cannot rest on traditional competitiveness
analyses based on industry statistics.
We attempt to respond to these challenges by combining quantitative and qualitative analyses.
Technological competitiveness and the links between KETs and industrial sectors are
explored through patent data. The rationale for this choice is given below and explored in
more detail in section 2.2. Market potentials and application prospects are summarised based
on existing reports and studies. Barriers and challenges as well as the role of governments are
explored through case studies of successful clusters
Analysing competitiveness of emerging technologies is anything but straightforward. While
the concept of competitiveness is related to markets, upcoming technologies are typically at a
pre-competitive stage with no or only a very few applications yet on the market, and only a
few firms competing in markets with products or technologies clearly based on one of the
KETs. Consequently, traditional concepts of analysing competitiveness such as market shares,
trade performance, productivity and growth in value added cannot be applied to analyse
competitiveness in emerging KETs. In order to provide an empirical assessment of the current
situation of international competitiveness in each KET, patent data seem to be the most
European Competitiveness in KETs ZEW and TNO
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relevant source. Patent applications refer to technical inventions that have reached a certain
state of feasibility and thus represent the successful completion of some stage of R&D efforts.
Most patents are applied by firms and are linked to their competitive strategies. Although
comparability of patent data is limited due to different economic values a patent may
represent, different degrees of technological novelty and different degrees of actual
applicability, patent data are nevertheless a widely used source to analyse dynamics in certain
fields of technology and identify the regional distribution of new knowledge generation,
including specialisation of countries on certain fields of technology (see Moed et al., 2004).
Exploring barriers, challenges and the role of government for each KET is another demanding
task. Given the short time frame of just nine weeks to produce this report, case study approach
has been chosen. Case studies focus on regional clusters that have proved to be successful in
generating innovations in the respective KET. When looking at successful clusters we expect
to learn on how barriers (i.e. market and system failures that may hinder technological
development and the application of new technologies) can be overcome through private and
public actions, including policy activities. The types of market and system failures and how
these could be identified is explored in section 2.3 in more detail.
For each KET, a cluster from Europe and one from outside Europe (North America, East
Asia) was selected and studied in detail based on studies, reports, presentations and other
documents. Cluster here denotes a group of actors within a certain region which interact in
developing and applying new technologies. Actors typically include manufacturing
companies, research institutions, private and public users of technologies, intermediaries (e.g.
technology centres, financing institutions) and other stakeholders (e.g. from education, the
broader public).
The report is organised along KETs. For each of the five KETs mentioned in the EU
communication, we present a standard set of analyses in a separate chapter:
definition and state of technology;
technological competitiveness of Europe and EU member states vis-à-vis the main
competitors (North America, East Asia);
links to sectors and other fields of technology;
market potentials and application prospects (as given in the literature);
success factors, barriers and challenges;
policy conclusions.
Advanced manufacturing technologies are captured in a less comprehensive way, focussing
on technological competitiveness and links to industrial sectors.
Chapter 1
List of Figures
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing
the respective source as highly important), 2004-2006 ................................................20
Figure 2-2: System and market failure framework..........................................................................36
Figure 2-3: Development of technology clusters ............................................................................38
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of
applicant........................................................................................................................44
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent) ...............45
Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national
applications and triadic patents (percent) .....................................................................46
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$) .......................................47
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent) ...............48
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by
subfields (per cent) .......................................................................................................49
Figure 3-7: Composition of nanotechnology patents (applications at home patent
offices), by region, subfield and period (percent).........................................................50
Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period
(percent)........................................................................................................................52
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)....................................................................53
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries
(EPO/PCT patents) .......................................................................................................54
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The final chapter summarises generic findings from each KET study and derives policy
conclusions on how Europe could improve its competitiveness in the area of KETs.
The following chapter 2 discusses some generic issues on the link between KETs and
competitiveness.
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2 METHODOLOGICAL ISSUES
2.1 KETs, Innovation and Competitiveness
There is no doubt that technical progress is the singly most important source for increasing
productivity and wealth (Romer, 1986; Lucas, 1988; Färe et al., 1994; Fagerberg, 2000).
Technical progress can take a variety of forms, ranging from developing and applying
fundamentally new technologies to adopting organisational concepts through learning and
copying. History has shown that the emergence of certain new technologies has spurred
innovation and technical progress tremendously, leading to significantly higher levels of
productivity and enabling radically new types of products and services. Such path-breaking
technologies may be termed "key enabling technologies" (KETs). The most prominent
historical examples include technologies such as the steam engine, electricity, synthetics,
semiconductors, computing and the Internet. These technologies did not only drive industrial
innovation, they also offered more effective responses to societal challenges, e.g. in health,
communication or the environment, though new technologies often were also raising new
concerns on their potentially negative implications on safety, health and the environment as
well as on ethical, legal and social issues.
This report focuses on new technologies that are likely to serve as KETs today and in the
years coming, and how their contribution to Europe's competitiveness can be fully exploited.
The role of KETs for competitiveness can be analysed from a firm and a macroeconomic
perspective. From a firm perspective, the main impact of KETs is to drive innovation,
enabling firms to introduce new products and new processes. From a macroeconomic
perspective, KETs can raise an economy’s level of productivity, allowing for higher per-
capita income and increase in wealth. Both dimensions are discusses below.
KETs and Innovation in Firms
The link between KETs and firm competitiveness basically rests on the role of KETs as a
driver for innovation. First, KETs offer opportunities for product and process innovation to
many firms, particularly in manufacturing. The emergence of KETs can be viewed as a
technology-push to innovation efforts of firms and raise the overall level of innovation
activities in an economy (see Helpman, 1998; see also van Ark and Piatkowski, 2004, on the
role of ICT, and Baptista, 1999, on the role of new process technology as drivers for
innovation). Secondly, innovation research has shown that innovative firms are often more
productive and grow faster than non-innovative firms, indicating a higher level of firm
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competitiveness (see Crépon et al., 1998; Griffith et al., 2006; Harrison et al., 2008; Janz et
al., 2004). A higher level of innovativeness in terms of the degree of novelty and the amount
of R&D effort tends to be associated with higher economic performance in terms of
productivity and growth (Peters, 2008; Hall and Mairesse, 2004) which underpins the special
role of developing and applying new technologies for raising competitiveness. Thirdly,
applying new technologies early and broadly often requires a close interaction between the
producers and users of new technologies (see Fagerberg, 1995; Porter, 1990).
Competitiveness effects of new technologies strongly depend on the speed of their diffusion
and on the rate at which innovative opportunities of these technologies are explored and
implemented. Being first in generating new scientific findings is no sufficient condition for
generating economic returns from new technologies. The main challenge for any innovation
project, including innovations based on KETs, is to balance technological opportunities
originating from research with the user needs, a cost-efficient production and the capabilities
of business partners (suppliers, distributors, users), having in view the innovative strategies of
competitors.
This complex system of interlinked sources of innovation is revealed by the information
sources firms typically use for their innovation activities (see Figure 2-1). Sources that are
more closely linked to technology pushes from KETs -scientific journals, universities and
public research institutes- are less often assessed as highly important while competitors,
suppliers and customers are clearly more important, as are internal sources.
Figure 2-1: Information sources for innovation (per cent of innovative enterprises citing the
respective source as highly important), 2004-2006
0 10 20 30 40 50 60
Internal sources (R&D, marketing, ...)
External sources:
Customers
Suppliers
Competitors
Scientific journals
Consultants
Universities
Public research institute
manufacturing total
R&D intensive industries
Note: Multiple sources per enterprise allowed. R&D intensive industries: NACE (rev. 1.2) divisions 23-24, 29-35.
Figures based on data from AT, BE, CY, CZ, EE, ES, FR, GR, HR, HU, LT, LU, NL, PL, PT, RO, SK, TR.
Source: Community Innovation Survey 2006, weighted figures.
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This result is not surprising as it reflects two important aspects of the role of KETs for
innovation. First, new technologies in their early stage are developed and transferred into
commercial innovations only by a few firms ("technology leaders"). These firms need to
combine a high level of technology competence with the ability to accept a high financial risk
since new, radical technological developments take long time, afford high investment and are
likely to fail. Only large firms with high R&D budgets and laboratories or small, specialised
and venture capital backed firms will be able to go this way. Consequently, direct economic
impacts of KETs in their early stages tend to be low. High macroeconomic effects of KETs
result from their spread through the economy which can take considerable time. A high rate of
diffusion requires a low level of technological uncertainty and a low price. Technological
uncertainty is typically reduced through learning, standardisation and the experiences made in
applying a new technology to various fields of applications. Lowering prices for new
technologies depend on the degree of competition and the ability to utilise economies of scale
at various stages of production. In addition, a broad adoption of new technologies is supported
by many incremental innovations that transfer advantages of a certain technology into user-
specific designs of new products and processes. The number of innovating firms is much
higher in this diffusion stage of a new technology than in its introduction stage, and the
impulses from suppliers, competitors and customers are much more important than pure
technology impulses.
KETs and Productivity
From a macroeconomic point of view, KETs can help to increase productivity, and thus
wealth, through enabling a more efficient use of production factors and through structural
change. Within a production function environment, positive productivity effects of KETs may
be reflected by a higher rate of technical progress. Alternatively, one may model KET effects
as a separate input factor, e.g. as a stock of new knowledge that resulted from R&D on KETs.
Higher efforts to develop KETs result in larger knowledge stocks and likewise higher output
levels. Within a sector-specific production function environment, KETs will most likely shift
sector shares since output of sectors that produce KETs and that can obtain productivity
advantages from KETs are likely to grow faster. Whether this structural change transfers into
higher productivity will depend on productivity levels compared to traditional sectors that are
little affected by KETs. In a dynamic perspective, positive productivity effects from a KET-
driven structural change is most likely since technology sectors will experience above-average
productivity growth.
A main impact of KETs is to accelerate technical progress. KETs as defined in this report are
new technologies that enable product and process innovation in manufacturing. In general,
applying KETs will enable producers to using labour, capital, energy and other inputs more
efficiently. It is important to stress that in contrast to other sources for technical progress
Chapter 2 Methodological Issues
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diffusion of existing technologies, improving skills through education and training, learning
from good practice- KETs are more likely to result in a leap upwards in efficiency levels,
particularly when the use of KETs affect many sections of the economy simultaneously. A
prominent example of an escalating technical progress in the recent past was information and
communication technologies (ICTs). ICTs have accelerated productivity growth in the 1990s
considerably and widely. They account for almost 70 percent of total factor productivity
growth in 1995-2001 (see Timmer and van Ark, 2005). The main momentum for the
contribution of ICTs to productivity growth were its wide diffusion across many different
industries, including sectors with traditionally low technology intensities (in terms of the
amount of new technology used in production) such as retail or transportation.
In addition, the particularly strong productivity impacts of ICTs resulted from the network
characteristics of this technology. Productivity effects in one firm did not only originate from
the use of ICT within this firm, but also from ICT use by business partners (suppliers and
customers) since ICTs have allowed to design external business processes more efficiently.
KETs that exert less significant network effects are likely to result in lower economy-wide
productivity gains.
ICTs also have shown, however, that there may be substantial time lags between the invention
and first application of a new KET, and its economic impacts. The basic inventions for state-
of-the-art ICTs today have been made decades ago, such as digital data processing (the first
computer was invented in the 1940s) or cellular telephone communication (the technological
principles have been discovered in the 1920s). For many new technologies, the most
important applications are often out of sight in early stages of technology development.
Application potentials typically emerge from the interaction of suppliers, producers and users
of a new technology, through learning from using (Rosenberg, 1982) and from a fierce
competition among technology producers who are seeking competitive advantages by
customising new technologies to the needs of users. More complex technologies in particular
tend to generate increasing returns to adoption (Arthur, 1989).
One may thus conclude that magnitude of macroeconomic productivity effects from KETs
will depend on
the speed of diffusion of KETs;
the breadth of diffusion across many sectors and user groups;
the occurrence of network effects when using a certain KET;
the maturation of a KET in terms of the variety of technological applications and innovative
solutions that have been developed over time.
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A second important dimension of KETs’ macroeconomic contribution is to open up entirely
new markets, or at least to shift product quality in existing markets to higher levels. KETs
advance industrial change, which is likely to involve higher levels of input-output relations
since entirely new products and higher-quality products are likely to obtain higher output
prices per unit. Opening-up new markets can also help to unlock additional demand and new
resources for production, thus increasing net output.
An important issue in this respect is the timing of the emergence of new markets. Economies
that are able to open-up new KET-based markets earlier than others could gain a temporary
monopoly which can provide a source for additional income. More importantly, in a dynamic
perspective these first mover advantages can translate into positive cumulative effects (see
Porter, 1990). Such cumulative effects may result from network effects among producers,
suppliers and users who can learn from each other and leverage economies of scale and scope.
In addition, first movers may be able to defining global standards, establishing global
distribution channels and building up reputation as technology leaders. Another source is
follow-up innovations which build upon the accumulated technological knowledge in the
respective field of technology. These cumulative effects will also act as entry barriers to other
economies and can secure a long term lead in a certain KET.
History provides many examples for such cumulative technological advantages of economies,
e.g. the U.S. in aircraft, space and defence technologies, Japan in microelectronic household
applications, or Germany in mechanical engineering. Cumulative technological advantages
can be reinforced by adaptations of the education, innovation, production and policy system
to the specific needs of the leading technology sector. While such adaptations in the
behaviour of actors, the working of institutions and the layout of regulations help to further
advance these technologies, they may also be a source of lock-in effects and path dependence
which can make it more difficult to adjust to new upcoming technologies.
KETs and Policy
Provided that economy-wide productivity and wealth effects of KETs primarily depend on the
speed and breadth of their diffusion, the issue of technological competitiveness could be
linked to the ability of adopting and adapting KETs rather than on generating them. However,
both dimensions are closely interlinked. Firms and countries that have been able to develop
and adopt KETs early and broadly often have gained long term advantages in terms of
competitiveness and income. Although new knowledge emerging in these technology areas
may be acquired from external sources and need not be produced by those commercialising
this knowledge, there are several barriers to such a pure technology absorption and diffusion
approach:
Chapter 2 Methodological Issues
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First, the development of commercial applications originating from KETs typically requires a
close interaction between fundamental research (often conducted at governmental
laboratories or universities) and industrial R&D and innovation. An appropriate
framework is needed to exchange knowledge between these two sectors, including
incentives for researchers in the public sector to actively engage in technology transfer.
Secondly, in order to fully utilise the innovative potential of KETs, firms need to have a
certain (often high) degree of technological competence in order to absorb and effectively
apply these technologies. Absorptive capacities include the ability to conduct in-house
R&D as well as organisational skills to manage innovation processes and to integrate new
technologies into existing business practices. Skills of employees, and the ability to
further develop these skills, are often a key resource in this respect.
Thirdly, commercial success of applications based on KETs is often subject to time, and first
movers can often gain long term competitive advantages through early learning and
reputation building.
Finally, commercialisation calls for an adequate regulatory framework which needs to be
developed and adapted parallel to the technological progress achieved in each KET.
Interaction between actors who develop new technologies and actors who design the
regulatory framework facilitates an innovation oriented regulatory framework.
Introducing such a framework early can also generate a competitive advantage if other
countries later adopt the regulatory setting.
Given these arguments, it is important for the EU economy to keep pace with the
technological development in KETs. Member States as well as the European Commission
have recognised the need for active support of KETs. Public support includes a wide variety
of policy activities, ranging from funding of academic research and industrial R&D projects
to cluster initiatives, public awareness measures, standardisation, promotion of venture capital
supply, and education and training activities (see OECD, 2009c). In some KETs, Member
States have developed national technology strategies, particularly in nanotechnology and
(industrial) biotechnology. Policies of Member States tend to define country-specific
technological priorities within each KET and implement different sets of instrument. They
also rarely coordinate their activities within a specific field of technology.
While offering policies that fit to the specific strengths and weaknesses of national science
and technology systems is certainly a main asset of research and innovation policy in Europe.
Nevertheless, advancing KETs may require joint efforts of European economies, particularly
in the areas of regulation and standardisation. International coordination and cooperation in
KET-related policies could also help to better utilise synergies and economies of scale in
developing and applying KETs.
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2.2 Measuring Technological Competitiveness
The concept of technological competitiveness used in this report refers to the ability of
knowledge producing actors (in a certain region or sector) to produce economically relevant
new technological knowledge. This view of competitiveness is related to technology markets.
It attempts to measure the ability of actors to add new, commercially relevant knowledge to
these markets, i.e. to be faster than others in developing a certain new technology, or to
identify a way of technological advance not followed by anyone else. This understanding of
competitiveness is different from competitiveness in the market, which refers to the ability to
sell goods under a competitive environment, i.e. to prevail over competitors.
Analysing technological competitiveness in emerging technologies is anything but
straightforward. Upcoming technologies are typically at a pre-competitive stage with no or
only a few applications yet on the market. There also only few firms that can clearly be linked
to one field of technology and that are not dealing with other technologies or products.
Mostly, KET applications are commercialised by multi-technology firms with a product
portfolio that includes many products based on other technologies. KETs also cannot be
linked to industry classifications (for which statistical data would be available) since the
cross-sectional nature of KETs implies that firms from different industries develop and apply
a certain KET. Consequently, traditional concepts of analysing competitiveness based on
industry data such as market shares, trade performance, productivity and growth in value
added cannot be applied to analyse competitiveness in emerging KETs.
In order to provide an empirical assessment of the current situation of international
competitiveness in each KET, patent data seem to be the most relevant source. Patent
applications refer to technical inventions that have reached a certain state of feasibility and
thus represent the successful completion of some stage of R&D efforts. Most patents are
applied by firms and so are linked to their competitive strategies. Although comparability of
patent data is limited due to different economic values a patent may represent, different
degrees of technological novelty and different regulations of national patent offices, patent
data are nevertheless a useful source to analyse dynamics in certain fields of technology and
identify the regional distribution of new knowledge generation, including specialisation of
countries on certain fields of technology (see Moed et al., 2004). Patent data have widely been
used to analyse technological performance particularly for KETs, such as nanotechnology
(see Palmberg et al., 2009; Igami and Okazaki, 2007; Li et al., 2007; Hullmann, 2006; Huang
et al., 2004; Heinze, 2004; Noyons et al., 2003). Compared to other indicators of
technological performance such as scientific publications or R&D expenditures, patent data
are more closely related to innovations and product markets.
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Patent Data as Technology Indicators
Using patent data as empirical base for analysing technological competitiveness of KETs has
several advantages:
Patent data contain information on the technological area(s) a certain patent is related to,
based on an internationally standardised classification system (International Patent
Classification - IPC). Since IPC classes are highly disaggregated, most KETs can be
directly identified through a number of IPC codes. Patent data also contain text
information of the technical content of a patent (patent abstracts) which would provide an
alternative source to identify patents that are related to certain fields of technology by
applying a text search. The latter approach is, however, time consuming and requires an
in-depth technical knowledge of each KET and is thus not feasible for this study.
Patent data allow to determining the "market share" of the EU in the total production of new
technical knowledge in each KET in the past two decades or so, and how these market
shares have developed over time. Patent data also enable to differentiating by country of
applicant and thus to pattern technological competitiveness in each KET by EU member
state.
Patent data contain information on the applicants which can be linked to other data in order to
identify the institutional background of an applicant (higher education institution, public
sector research institution, private firm, individuals) or the sector affiliation. Sector
affiliation of applicants is important information to evaluate the role of each KET for
different sectors.
Patent data allow to some degree an analysis of technological links between certain fields of
technology, e.g. by looking at the different IPC classes assigned to a certain patent, or by
looking at patent citations.
However, patent data also have a number of limitations (see Griliches, 1990; Moed et al.,
2004) that limit their applicability as technology indicators and that complicate their analysis:
Not all commercially promising inventions are patented. Many firms opt to protect new
knowledge by other means than patenting, particularly by keeping the knowledge secret.
This is especially relevant for process technology which is difficult to observe and thus to
imitate.
Patents represent different economic values and different degrees of technological novelty.
Though many efforts have been made to quantify the value of patents, e.g. through
analysing patent renewals, patent citations, opposition procedures, size of patent families
or the number of IPC classes (see Harhoff et al., 1999, 2003), none has produced a result
that could be applied across different fields of technology, different patent authorities and
different groups of applicants. In particular, most measures can not accurately capture the
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high skewness of the value distribution, i.e. that only a few patents are really very
valuable, and most are economically irrelevant. As a result, any count of patent data,
whether weighted by a "relevance factor" or not, is problematic as it is likely to compare
entities of completely different values.
Not all patents are applied to seek protection but are used to block competitors’ patenting
activities or to disinform others about one's own technological strategy. This “strategic
patenting” seems to have become more important in recent years. Patents applied for
strategic reasons are likely to be less accurate indicators for technological advance since
most of these patents won’t result in innovations on the market.
Patent data applied at different patent authorities are difficult to compare because of different
patent national laws, different practices at patent offices and different application
procedures. As a consequence want cannot simply add up patent data applied at different
patent offices.
Applying for patent protection at a specific patent office is linked to the applicant's strategy
for commercialising this invention, which depends on the applicant's market orientation as
well as on the attractiveness of a particular market for this invention at a particular point
in time.
Patent data are available only with a considerable time lag after the underlying invention has
been made. First, there may be a time lag between invention and patent application which
is due to the process of preparing a patent file. More importantly, patent applications are
disclosed only 18 months after the date of application. The time lag becomes even larger
when one wants to consider only patents that have been applied at more than one patent
office (e.g. so-called triadic patents applied in Europe, the USA and Japan) since many
applicants apply for patent protection in other countries only some time after the initial
application. When focussing on granted patents, time lags become even worth since patent
examination may last a year or more.
Changes in patent laws can make it difficult to analyse long term trends in patenting. The
introduction of the Patent Cooperation Treaty (PCT), for instance, changed application
behaviour in the way that an increasing share of patents is applied through the PCT
procedure.
We try to tackle some of these shortcomings of patent data in the following way:
We analyse patent families rather than individual patents. A patent family is a group of
patent applications filed by the same applicant(s) in one or more countries that are related
to a single invention. By doing this, we reduce the incidence of double-counting of one
and the same invention in patent data. In the following, the term "patent" always refers to
a patent family. For each patent we identify the year of application (i.e. the oldest priority
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year of all applications belonging to one family) and the countries for which patent
protection has been sought as well as the names of the patent applicants.
We focus on patents that include an application at the EPO or a PCT application (so-called
EPO/PCT patents). These patents are likely to represent higher economic values since
these applications are more costly than applying just at a single national patent office.
In addition, we run parallel analysis for regional patent applications in Europe, North
America and East Asia in order to avoid likely biases from different attractiveness of
regions for commercialising inventions in a certain field of technology.1 For this purpose
we look separately at patent families that have been filed at the EPO, at the USPTO and
the JPO (including patents transferred to these authorities through the PCT procedure). In
addition, triadic patents are determined as patent families that have been filed at each of
the three patent offices or at any other combination of national patent offices including at
least one patent office from each region.
We refrain from weighting patent applications by patent value indicators such as patent
citations or opposition for two reasons: First, such a procedure would add another time lag to
our analysis since only older patents have a chance to be forward cited by other patents or to
receive opposition. Secondly, the extent of forward citations and oppositions varies by
national patent offices and will thus reduce comparability across regions.
All patent analysis rest on the Patstat database generated by the EPO. We use the September
2009 edition of Patstat.
Identifying KETs in Patent Data
There are two approaches to assign patents to technology areas. One is to identify key words
(and combination of these) that characterise a certain technology and to search in patent
abstracts for the occurrence of these key words. Another one is to use patent classes. Patent
classes describe for which fields of technology a patent is relevant to. They are assigned by
patent examiners, using a hierarchical classification system. The most commonly used one is
the International Patent Classification (IPC). Both approaches have advantages and
disadvantages. The key word based approach is more flexible for applying tailor-made
definitions of technology fields but requires an in-depth knowledge of all subareas within
1
To illustrate the point, suppose Europe is unattractive for commercialising certain inventions in green biotechnology (a field
which is not analysed in this report). Inventors from the USA and Japan will see little need to protect their inventions in the
European market and only apply for patent protection in the USA and Japan (and maybe some other markets outside Europe).
As a consequence, the share of European applicants in all patent applications in Europe (i.e. at national patent offices of
European countries or at EPO) in this technology field is likely to be rather high. In case Europe is becoming more
unattractive over time, it is likely that the share of European applicants in Europe is further increasing. Both facts could be
misinterpreted as a technology advantage of Europe.
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each technology field and great experience on how certain technology content is typically
phrased in the patent abstract. Different strategies of applicants to phrase patent abstracts as
well as different standards for patent abstracts at different patent offices can limit its
applicability. A key word search can also be very time consuming when it comes to
combining key words and searching across patent data from various patent authorities.
Given the large number of technology fields to be covered and the short time that was
available for conducting the empirical analyses for this report, we decided to use the patent
classification system to assign patents to KETs. Based on the literature and input from
experts, each KET has been defined by a list of IPC codes or a combination of them (see
Table 2-1).
Identifying nanotechnology is rather straightforward since patent offices have introduced
separate classes to mark patent applications related to that field of technology. EPO uses
the tag class Y01N which has been introduced in 2003 and is also used to classify patents
applied prior to 2003 (see Palmberg et al., 2009). In addition, the IPC class B82B covers
the manufacture of nanostructures.
The KET micro- and nanoelectronics covers new technologies related to semiconductors,
piezo-electrics and nanoelectronics which all are easily to identify through IPC classes.
We include the nanotechnology trap class Y01N 12 (nanoelectronics) deliberately to this
KET which results in a certain overlap between patents assigned to nanotechnology and to
microelectronics.
The field of photonics relates to optical technology applications in the areas of lasers,
lithography, optical measurement systems, microscopes, lenses, optical communication,
digital photography, LEDs and OLEDs, displays and solar cells. All these areas can be
identified through IPC classes. There is some overlap to micro- and nanoelectronics in the
area of optical communication.
Industrial biotechnology is more difficult to identify through IPC classes since many classes
covering inventions related to industrial biotechnology are also related to red and green
biotechnology (see van Beuzekom and Arundel, 2009). We apply a rather narrow
definition which focuses on enzymes, micro-organisms, amino acids and fermentation
processes and only consider patents that are not related to the fields of medicine or
agriculture. Some subfields of industrial biotechnology such as biopolymers and
biotechnologically produced vitamins are poorly covered because they are difficult to
distinguish from chemical polymers and chemically produced vitamins. Despite the
narrow definition, industrial biotechnology patents as defined in Table 2-1 still include
patents applied by applicants from the pharmaceutical or seed industry, reflecting the
close link between industrial, red and green biotechnology. These patents are excluded
from the analysis.
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Table 2-1: IPC classes used to delineate KETs
KET IPC
Nanotechnology Y01N, B82B
Micro- and nanoelectronics H01H 57/7, H01L, H05K 1, H05K 3, H03B 5/32, Y01N 12
Photonics F21K, F21V, G02B 1, G02B 5, G02B 6, G02B 13/14, H01L 25/00, H01L 31,
H01L 51/50, H01L 33, H01S 3, H01S 4, H01S 5, H02N 6, H05B 31, H05B 33
Industrial biotechnology C02F 3/34, C07C 29/00, C07D 475/00, C07K 2/00, C08B 3/00, C08B 7/00,
C08H 1/00, C08L 89/00, C09D 11/04, C09D 189/00, C09J 189/00, C12M,
C12N, C12P, C12Q, C12S, G01N 27/327; except for co-occurrence with A01,
A61 and some subclasses of C07K, C12N, C12P C12Q, G01N; except patents
applied by applicants from the pharmaceutical and seed industry
Advanced materials B32B 9, B32B 15, B32B 17, B32B 18, B32B 19, B32B 25, B32B 27, C01B 31,
C04B 35, C08F, C08J 5, C08L, C22C, D21H 17, H01B 3, H01F 1, H01F 1/12,
H01F 1/34, H01F 1/44, Y01N 6
Advanced manufacturing
technologies
a) robotics/automation: B03C, B06B 1/6, B06B 3/00, B07C, B23H, B23K,
B23P, B23Q, B25J, G01D, G01F, G01H, G01L, G01M, G01P, G01Q, G05B,
G05D, G05F, G05G, G06M, G07C, G08C; except for co-occurrence with sub-
classes directly related to the manufacture of automobiles or electronics; b)
computer-integrated manufacturing: co-occurrence of G06 and any of A21C,
A22B, A22C, A23N, A24C, A41H, A42C, A43D, B01F, B02B, B02C, B03B,
B03D, B05C, B05D, B07B, B08B, B21B, B21D, B21F, B21H, B21J, B22C,
B23B, B23C, B23D, B23G, B24B, B24C, B25D, B26D, B26F, B27B, B27C,
B27F, B27J, B28D, B30B, B31B, B31C, B31D, B31F, B41B, B41C, B41D,
B41F, B41G, B41L, B41N, B42B, B42C, B44B, B65B, B65C, B65H, B67B,
B67C, B68F, C13C, C13D, C13G, C13H, C14B, C23C, D01B, D01D, D01G,
D01H, D02G, D02H, D02J, D03C, D03D, D03J, D04B, D04C, D05B, D05C,
D06B, D06G, D06H, D21B, D21D, D21F, D21G, E01C, E02D, E02F, E21B,
E21C, E21D, E21F, F04F, F16N, F26B, G01K, H05H
Source: ZEW
Advanced materials can cover a broad area of innovation in materials, including polymers,
macromolecular compounds, rubber, metals, glass, ceramics, other non-metallic materials
and fibres as well as the whole field of nanomaterials and speciality materials for electric
or magnetic applications. We focus on material innovations in the areas of layered
products, compounds, allays and nanomaterials (see Schumacher et al., 2007).
The most difficult KET to identify through patent classes is advanced manufacturing
technologies. The main challenge here is to delineate standard inventions in
manufacturing technologies from "advanced" ones. We distinguish two types of advance
manufacturing technologies. One relates to robotics, automation and control, measurement
and steering systems. The other refers to computer-integrated manufacturing processes.
While the former can be directly identified through IPC classes, the latter group consists
of patents that both are assigned to computing technology (G06) and to one of the many
IPC classes that relate to mechanical engineering (according to the definition of Schmoch
et al., 2003).
Each KET is divided into several subareas. Details are given in the respective KET chapters.
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“Market Shares” and Patent Dynamics
We measure technological competitiveness of European applicants by two indicators, the
“market share” and the dynamics of patent applications. The market share is the share of
patents from Europe in the total number of patents of a certain KET in a specific year. Market
shares are calculated for the three main world regions separately: Europe, North America and
East Asia.2
The dynamics of patent applications refers to the change in the number of patents over time.
Patent dynamics are analysed for the 1990s and 2000s. Owing to the time lag between patent
application and disclosure, the last year that is fully covered is 2005. The number of patent
applications from 2006 and 2007 is generally biased towards applicants from the respective
region since patents are typically first applied in the home region, while many patents seek
protection in other regions only some time after their initial application.
When looking at patent dynamics for patents applied at the EPO or through the PCT
procedure, one should note that there is a general upwards trend in this figure until the early
2000s for most fields of technology, including the KETs considered here. This is basically
due to a change in patent application behaviour that resulted in an increasing share of patents
applied at the EPO and - since the mid of the 1990s - through the PCT procedure in the total
number of patent applications across all patent offices. This dynamics does not necessarily
reflect an increasing patent output. However, during the 1990s the number of patent
applications did increase on a global level (see Eaton et al., 2004). This general trend in patent
output has to be kept in mind when interpreting the dynamics in a specific KET.
An important issue for determining market shares is how to regionalise patents. There are
basically two options: by country of applicant or by country of inventor. In many patent
analyses, inventor countries are used to assign a patent to a region. This is a valid approach
when one wants to know in which region new technological knowledge has emerged.
Assigning patents to country of applicants is a useful procedure if one wants to identify the
regions that have economic control over the technological knowledge represented by patents.
In this study, we apply both approaches. For analysing market shares and patent dynamics
between Europe, North America and East Asia, patents are assigned to regions according to
the location of the applicant (applying fractional counting in case one patent has applicants
from more than one region). Note that we do not consolidate patent applicants by company
groups (except for producing lists of largest applicants). This implies that patents applied by
2
Europe inlcudes all EU member states as well as Albania, Andorra, Bosnia-Hercegovina, Croatia, Iceland, Liechtenstein,
Macedonia, Monaco, Montenegro, Norway, San Marino, Serbia and Switzerland. North America includes the USA, Canada
and Mexico. East Asia covers Japan, China (incl. Hong Kong), Korea, Singapore and Taiwan. For all six KETs, these three
regions generate more than 95 percent of all patents.
Chapter 2 Methodological Issues
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European subsidiaries of North American companies are assigned to Europe, whereas
applications of North American subsidiaries of European companies are counted as North
American patents. Since many of the large international companies apply patents that have
been invented outside their home market region by their regional subsidiaries, differences
between the regional patterns that emerge based on country of applicants do not differ
significantly from the pattern that would emerge when analyses would be based on country of
inventor. At the same time, relying on applicant countries enlarges the analytical potential of
patent data since patents only applied at USPTO or JPO often miss address information on
inventors.
Analyses of patenting by country in Europe are based on the country of the inventors. This
procedure assures that we capture the actual production of patents within the territory of each
European country (though some imprecision may occur in border regions when inventors
reside in another country than the country of the workplace.
Industry Impacts and Market Potentials
A key issue in evaluating the role of KETs for competitiveness is the link between KETs and
industries. Since KETs are by definition general purpose technologies, they are likely to be
relevant for many industrial sectors and trigger innovation in many product markets and fields
of applications. While some of these markets are already in sight at the time new technologies
are developed, some other fields of application are to emerge later. This complicates a clear
assignment of KETs to industrial sectors.
We pursue two empirical approaches. First, we apply the IPC-to-industry assignment of
Schmoch et al. (2003) which links each IPC 4-digit class to a single industry sector based on
NACE rev. 1.1. This produces a sector pattern for each KET which shows the technological
relevance of patents for certain sectors. Secondly, likely industry impacts will be discussed
based on the sector a patent applicant belongs to. For this purpose, each applicant is assigned
to an industry (including separate "industries" for public research, government authorities and
private individuals). Firms are assigned to industries based on NACE rev. 2.0, though we
apply tailor-made sector groupings for each KET in order to best represent sector priorities of
applicants. The resulting KET-to-sector patterns allow to assessing the sectors from which
technological advance emerges in each KET. These sector links of KETs may hint to likely
impacts on a sector's growth and competitiveness originating from each KET.
A related issue concerns likely synergy effects between KETs. While each KET represents a
distinct field of technology, some KETs may cross-fertilise. As a consequence, strengths and
weaknesses in one KET may affect the performance of another. An obvious case is
nanotechnology which provides important technological stimuli for micro- and
European Competitiveness in KETs ZEW and TNO
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nanoelectronics, advanced materials, photonics and some areas of industrial biotechnology.
We analyse potential synergy effects empirically by analysing for each patent from a given
KET whether this patent was also assigned to other KETs. This analysis uses the fact that
most patents are assigned to several IPC classes, some may relate to one KET, some to others.
A large share of patents having IPC classes of two KETs indicate that there are rather close
technological relations between these two KETs insofar inventive activity tends to affect both
KETs to a significant extent.
Industry impacts of KETs are also reflected in their market potentials, i.e. the size of current
and expected sales that products based on a specific KET generate. Determining the current
and likely future market size of KETs is challenging. First, KETs are technologies rather than
products, i.e. they indicate the way how something is produced. Technologies can be used for
producing various products, which is particularly true for KETs. Secondly, products based on
KETs often are raw materials, components or intermediaries of more complex products. For
instance, nanomaterials may by used in a wide variety of manufactured products from
different industries. Semiconductors can be applied to a wide range of instruments, machinery
and equipment. Biotechnologically produced enzymes may be found in a number of food or
chemical products. New photonic applications such as OLED displays can be used in
electronic, automotive and telecommunication devices. Advanced materials as well as
dvanced manufacturing technologies can virtually be employed for producing any kind of
commodity. As a consequence, market potentials strongly depend on the underlying definition
of a KET and which sections of a value added chain are considered. Thirdly, technologies and
products for which market potentials are estimated often have not been introduced to the
market yet. Most of these potential applications areas are derived from concepts driven by
technological opportunities rather than the likely preferences of users. Market acceptance of
these concepts is largely unknown and it may well be that there will be no market at all for
some of these concepts. Historical experience with new technologies shows that many of the
most important applications areas were not envisaged in the infant stage of technological
development but emerged later through interaction of users and producers, and sometimes just
by chance. All this complicates to foresee future market development and results in low
accuracy of forecasts.
In this report, we compile figures on market potentials of KETs from various market forecasts
and technology outlooks which have been produced by various industry analysts and
consultants in recent years. The main purpose of this exercise is to determine how large
market volumes in the medium term (e.g. 2015/2020) for KETs and their subfields may be.
Most market forecasts used in this report are based on estimates made in the years 2006 to
2009, and hardly any has systematically considered the impacts of the economic crisis, which
further limits the accuracy of market forecasts.
Chapter 2 Methodological Issues
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The analysis of market potentials of KETs done in this report suffer from several weaknesses.
First, there are no established and commonly used definitions for each KET. Secondly, most
market forecasts refer to subfields of KETs, many of these subfields overlap, but the degree of
overlapping is not known. Thirdly, market forecasts tend to report rather the maximum
potential under favourable market conditions and often overestimate the actual development.
Fourthly, establishing the accuracy of past market forecasts is complicated by either a lack of
clear definitions of the technologies and products for which market forecasts are given, or by
applying definitions which are not reported in sales statistics or market analysis, impeding a
later evaluation of how well the forecast met the real market development. Finally, almost all
market forecasts refrain from determining to what extent future sales figures of new
technologies/products are associated with a decline in sales of established products (i.e. the
degree of substitution). As long as substitution elasticities are unknown, net growth of
markets resulting from KETs cannot be established which clearly limits the conclusions of
likely growth impacts of KETs.
In an ideal world, market potentials for KETs could be established by pursuing the following
methodology:
(1) Defining a KET based on a set of subfields/technology areas which are clearly delineated
and do not overlap.
(2) Determining the current volume of production and sales as well as for each
subfield/technology area (e.g. based on market research and industry survey).
(3) Establishing the degree to which a new technology/product is substituting existing
technologies/products and which factors drive the speed of substitution.
(4) Determining the current sales volume of technologies/products that are likely to be
substituted by new technologies/products.
(5) Identifying the most important factors that influence future demand for new applications
that emerge from a KET and making an attempt to determine the relative weight of each
factor (based on past experience and expert assessment).
(6) Developing scenarios how these factors may develop within the next say ten years,
distinguishing between pessimistic and optimistic scenarios (and a “realistic” between the
two extremes).
(7) Calculating likely market volumes for each subfield/technology area and for different
scenarios by differentiating between substitutive demand and additional demand.
European Competitiveness in KETs ZEW and TNO
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2.3 Strengths, Weaknesses, Challenges and Policy Intervention
A main aim of this report is to analyse the strengths, weaknesses and challenges for each KET
and to derive conclusions for policy intervention. For this purpose we apply a methodology
that is based on a “System and Market Failure Framework”. Within this framework, factors
that are likely to drive or impede the development of a certain technology are identified and
evaluated in a systematic way. The analysis is based on existing publications on each KET
and own research of successful clusters in Europe and overseas. In particular, we discuss the
types of market and system failures that may hinder the advance of a certain KET and how
these failures have been tackled. Based on these findings, upcoming challenges in each KET
area are discussed based on existing reports and reviews as well as expert assessments.
System and Market Failure Framework
To unveil the systemic and market characteristics that may influence the performance of each
KET area, we build upon an improved “system failure framework for innovation policy
design” as adopted the European Innovation Progress Report 2008 (EC, 2009c). The
framework has since been developed to include market failures and should hence serve as a
solid basis for the analysis for relative weaknesses in the KET areas in Europe. The
framework also explicitly includes the topics like the role of public funding, tax incentives
and the role of lead markets and public procurement that are of Interest in this study. The
main dimensions and criteria of the framework are shown in Figure 2-2.
The vertical axis contains the potential system and market failures. Essential to the framework
is that these characteristics are seen as the product of the actions and interactions of the
system’s actors that are identified on the horizontal axis. This detailed framework will enable
us to identify the system’s weaknesses, but also the actors that are involved or that are
missing and may create these weaknesses. A system failure, for instance, can be the lack of
interaction between companies and knowledge providers, i.e. an ill functioning knowledge
triangle. Such a failure may constitute a barrier for knowledge exchange and innovation.
Chapter 2 Methodological Issues
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Figure 2-2: System and market failure framework
Actors
System & Market failures
Co
n
su
m
er
s,
en
d-
u
se
rs
,
le
ad
-
m
ar
ke
ts
,
pu
bl
ic
pr
o
cu
re
m
en
t (
de
m
a
n
d)
M
an
u
fa
ct
u
re
rs
,
en
tre
-
pr
en
eu
rs
,
SM
E’
s,
M
N
C’
s
(su
pp
ly
)
K
n
o
w
le
dg
e
in
st
itu
te
s:
U
n
iv
er
sit
ie
s,
sc
ho
o
ls
(k
n
o
w
le
dg
e
pr
o
v
id
er
s)
Th
ird
pa
rt
ie
s:
B
an
ks
,
V
C,
la
w
ye
rs
(se
rv
ic
e
pr
o
v
id
er
s)
G
o
v
er
n
m
en
t:
Po
lic
y
m
ak
er
s,
le
gi
sla
to
rs
(ru
le
&
po
lic
y
m
a
ke
rs
)
System failures
Infra-
structure
Enabling structures
(roads, harbors, IT etc.)
Regulative institutions (rules & regulations,
policy, tax-incentives)
Social institutions
(norms, values, culture, social pressures)
Institutions
Competitive institutions (mimicking
competitors, shareholder pressure)
Strong network failure, closed group think
hinders innovation
Interaction
Weak network failure, lack of connections for
learning and innovation
Technical knowledge and know-how to
enable innovation
Capabilities
Organisational / Marketing knowledge and
know-how to enable innovation
Market failures
Barriers to entry / Market power blocking
new entrants
Externalities / Split incentives hampering
investments in innovation
Market
structure
Transparency / perfect information
hampering the right market functioning
Quality of demand hampering the level of
innovation
Market
demand
Quantity of demand hampering the diffusion
of innovation
Source: Klein Woolthuis (2010).
The framework helps to analyse the barriers and drivers within a KET area that affect the
successful adaptation and commercialisation of the respective technologies and that facilitate
systemic innovation and the development of the industries producing these technologies. For
newly emerging fields of technology, several dimensions are critical:
Actors have to be in place, ranging from innovative entrepreneurs to supportive policy
makers, and specialist consultants.
System characteristics have to be supportive, including the right infrastructure, well-trained
staff, a right mix of collaboration as well as competition to stimulate innovation.
Market characteristics should be right to enable actors to reap the benefits of their investments
and hence markets should not be blocked, prices should reflects costs, and demand should
be big enough and of enough quality to support innovation.
Interactions between the different actors should be present and of sufficient quality to make
the system work.
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An analysis of how KETs stimulate innovation according to this framework will unveil the
system’s functioning and the weaknesses when compared to the theoretical insights into
successful innovation systems and vis-à-vis more successful KETs outside the EU.
Analysing successful clusters
The relevant elements of the system, the prevailing failures and the challenges resulting from
these challenges will be identified based on a literature survey. In order to empirically assess
the significance of various system and market failures and the factors that drive success in
KETs, a set of successful clusters will be analysed in more detail. We have chosen to look at
clusters since high technological developments almost always takes place in collaborative
relationships between companies, research institutes, and specialist service providers such as
venture capitalists. In other words, whereas the technologies and their applications are world-
wide and footloose, their origins very often lie in regional concentrations of collaborative
relationship s between the science, industry and public triangle.
To distill the key factors that are considered to be at the basis of their success, we will
examine the history and development of these successful clusters. We do so, on the basis of
secondary data: scientific and vocational cluster publications, and publically available
information. We structure the analysis along the systemic and market characteristics presented
above. The analysis will also explicitly address the role of public funding, tax incentives and
the role of lead markets and public procurement. The main dimensions and criteria of the
framework are shown in the diagram below.
The choice of KET clusters is based on the following criteria:
The cluster has to have an established reputation, must be internationally recognised as a
leading cluster in that KET field
For comparing between EU and Non-EU policies towards KETs, each EU cluster is compared
to a non-EU cluster
The cluster must be successful, but the clusters do have to vary on their degree of maturity
We do not ‘put’ boundaries to the clusters. Clusters are dynamic conglomerations of actors
and activities which constantly change. Linkages and relationships do not keep to
geographical boundaries, and boundaries will shift as activities develop. Generally though,
activities do tend to cluster in a geographical area.
We categorise the clusters according to their phase of maturity, as a cluster in different stages
has different traits and requires different support. For the cluster development process, we
assume that clusters and the technologies they are based upon develop over time, as shown in
Figure 2-3. While newly emerging clusters tend to focus on a smaller number of actors, more
Chapter 2 Methodological Issues
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mature clusters have a wider variation of parties involved. Cluster that reach maturity may
start to act as a magnet attracting specialists from all over the world in fields of research and
commercialisation, but also lawyers, investors, and other specialists will want to ‘share the
pie’. It is with this inflow of knowledge and capital that the cluster reaches its maturity phase
as public funding and support looses importance compared to private sources.
The analysis of successful clusters will also be used to examine the role of public policy for
developing KETs. Three types of public intervention will be considered: the role of direct
public funding, the relevance of specific tax incentives, and the role of public procurement
and lead markets.
Figure 2-3: Development of technology clusters
Source: TNO
The KET clusters that we have chosen for this study are the following:
Nanotechnology
North Rhine Westphalia - Germany: A relatively young and dispersed cluster centred around
Aachen, Munster and Duisburg/Essen, each city area represented in different cluster
bodies and focussing on different markets.
Kyoto – Japan: A mature and concentrated cluster around Kyoto strongly promoted by
national strategy, public policy and funding. There is an abundance of private sector
involvement and venture capital and a strong focus on a limited number of knowledge
domains.
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Industrial biotechnology
Cambridge – United Kingdom: The Cambridge cluster has spontaneously developed and has
become the leading biotechnology cluster in Europe. Cluster (industry) development has
slowed down in recent years but the cluster remains world leading through top research
and very strong relationships between industry, science and public spheres, and a strong
entrepreneurial spirit.
Bay Area – United States: This is the leading biotechnology cluster in the world. Like
Cambridge, the cluster has developed spontaneously and is characterised by strong
industry – science linkages and an entrepreneurial culture (linked with private financing
opportunities).
Advanced materials
Wallonia’s Plastiwin cluster: This cluster brings together chemical manufacturers along the
plastics value chain, research centres, training centres and industrial associations.
Changsha material cluster: This cluster has emerged rather recently and is linked to other
strong industries in the region, including machinery, electronic and ICT industries. The
Changsha advanced materials cluster focuses on the integration of industry, training and
research, accompanied by active industrial policy which provides financial incentives and
promote SMEs in the advanced materials sector.
Micro- and nanoelectronics, including semiconductors
Grenoble – France: A large, mature cluster that originated as a result of the presence of the
National Nuclear Institute that served as lead customer and knowledge accelerator. The
cluster developed by carefully planned public policy and funding, and has become an
international magnet.
Ontario – Canada: A rather dispersed and recovering cluster (after the dotcom burst). Public
policy aimed at revitalizing the cluster, substantiated by very low costs for investment in
research and development as a result of tax breaks and incentives.
Photonics
Berlin-Brandenburg – Germany: A fast developing cluster that has its base in the earlier
relationships, knowledge and culture of the long established optical industry in the region.
In last decades, it rapidly developed into a high tech KET cluster, also with help of well
funded cluster platform OpTecBB.
Quebec – Canada: Very fast developing cluster that – like Berlin – is founded on a long
industrial tradition of optical technologies in the area. Cluster is still small and has a
strong focused on a limited number of knowledge fields and applications.
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For studying the development of clusters we rely on scientific and vocational publications on
the cluster, publications of the cluster management and other publically available information.
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3 NANOTECHNOLOGY
3.1 Definition and State of Technology
Nanotechnology is a cross-sectional field of technology that combines scientific approaches
from physics, chemistry and biology to discover and develop processes and substances for a
wide variety of applications, ranging from materials, electronics and chemicals to process
engineering, transportation and medicine. Nanotechnology deals with methods to analysing,
controlling and manufacturing structures on a molecular or atomic scale, i.e. of a size of 100
nanometers or less. The innovative power of nanotechnology rests on the fact that physical
and chemical properties of materials tend to change dramatically in this range of sizes.
Nanoscaled structures often alter in terms of electrical and magnetic properties, surface and
mechanical properties, stability, chemical processes, biological processes and optical features,
allowing for radically new technological solutions in many different industries. New
characteristics of nanostructures can be observed for many materials which adds to the variety
of application areas and implies that nanotechnology can have a significant impact for all
industries that process and use materials.
Nanotechnology is a rather new field of technology, though the start of systematic research in
nanotechnology may be dated back to the 1960s. Originally, nanotechnology was confined to
the idea to construct complex materials and devices out of single atoms (molecular
nanotechnology), but since the 1990s, all work related to nanostructures is regarded as a part
of this field of technology. Since the mid 1990s, nanotechnology research has been
developing an increasing number of industrial applications, reflected in a fast growing
number of nanotechnology patents and growing sales of products using nanomaterials or
produced with the help of nanotechnological processes. Today, two types of nanotechnology
approaches are distinguished. Top-down nanotechnology is used to describe attempts to scale
down materials to a nanolevel through physical techniques such as lithography, cutting,
etching, electro-spinning or milling. In electronics, for example, this approach has yet led to
arrive at 32 nanometers structures in semiconductor production. The bottom-up approach tries
to create new materials directly at a nanoscale, typically using physical, chemical and
biological approaches such as deposition, nanoparticle synthesis or liquid-phase processes. It
is envisaged that controlled self-assembly of molecules and their macrostructures based on the
manipulation of individual atoms can lead to completely new dimensions of nanotechnology.
Although the technological potentials of nanotechnology are huge, the majority of
nanotechnological products and processes that have been commercialised so far rest on a few
Chapter 3 Nanotechnology
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nanomaterials such as carbon nanostructures, silver and gold nanoparticles and nanowires and
nanoscaled metal oxides (see PCAST, 2008). The world market for nanotechnology products
is estimated to exceed some tens of billions €, though sales figures strongly vary according to
the underlying definitions and concepts (see Luther and Bachmann, 2009; Palmberg et al.,
2009). All market studies on nanotechnology have in common that they expect an exponential
increase in sales of nanotechnology products in the next ten years. In terms of sales volumes,
nanoelectronics is currently to most important field of application (e.g. piezoelectrics,
chemical/physical vapor deposition technologies, lithography steppers). Current application
areas include nanofilms used on computer displays, dendrimers in pharmaceuticals, scratch-
resistant coatings, water filtration based on nanomembranes, nanoscale transistors, carbon
nanotubes for producing lighter and stronger materials. More importantly, a vast variety of
applications are currently in the stage of prototype and pre-market entry. Table 3-1 presents
examples of current, planned and projected nanotechnology applications by industries.
Given the broad spectrum of scientific disciplines and application areas, nanotechnology can
be divided in a number of sub-areas, though no commonly used division has emerged so far.
There are basically two ways to identify sub-areas. From a science and technology
perspective, one may distinguish different research areas in nanotechnology related to
physics, chemistry, pharmacology and biology. From a use perspective, one can differentiate
by application area, e.g. industry sectors that apply nanotechnology in their products and
processes. Often these two perspectives are combined to delineate subareas such as
nanomaterials, nanoelectronics, nanobiotechnology, nanoscaled devices and systems (incl.
nanooptics) and nanomanufacturing.
As any new technology, nanotechnology does not only offer new perspectives for commercial
applications of new products and processes, but also raises issues of risks and safety.
Assessing safety impacts of nanostructured materials is complicated by the fact that
traditional testing and assessment methods may be not fully applicable to nanomaterials. Main
concerns relate to potential damaging effects of certain nanomaterials on lung tissues, the
brain or DNA, particularly with respect to carbon nanotubes or buckyballs (spherical
fullerines) (see Sargent, 2008). Research and technological development in nanotechnology
has to consider risk and safety issues seriously, and regulation needs to balance between
considering health and safety issues and stimulating innovation.
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Table 3-1: Examples for current and planned nanotechnology products by industry
Industry Established
nanoproducts
Recent market launch Prototype stage Concept stage
Chemicals - nanopowder
- nanostructured
active agents
- nanodispersions
- carbon nanotubes
- nanopolymer
composites
- hybrid composites
- nanoporous foams
- switchable
adhesives
- electrospun
nanofibers
- self-healing
materials
- self-organising
composites
- moleculare
machines
Electronics - silicon electronics
- nanoscaled
transistors
- polymer
electronics
- CNT field
emission displays
- MRAM memories
- phase-change
memory
- MEMS memory
- CNT data
memory
- CNT inter-
connected circuits
- moleculare
electronics
- nanowires for
producing
electricity
- spintronic logics
Optics - ultra-precision
optics
- anti-reflection
layers
- LED and diode
lasers
- nanoresolution in
microscopes
- OLED
- 2D photonic
crystals
- EUV lithography
optics
- quantum-dot
lasers
- 3D photonic
crystals
- all-optical
computing
- optical meta-
materials
- data transmission
through surface
plasmons
Medicine - nanoparticles as
contrast media
- nanoscale drug
carriers
- nanomembranes
for dialysis
- nanostructured
hydroxylapatitie
as bone substitute
- quantum-dot
markers
- nano cancer
therapy
- biocompatible
implants
- selective drug
carriers
- nanoprobes and
nanomarkers for
molecular
imaging
- artificial organs
through tissue
engineering
- nanoengineered
gels for
supporting nerve
cell growth
- neuro-coupled
electronics for
active implants
Environ-
mental
techno-
logies
- nanostructured
catalysts
- nanomembranes
for sewerage
- anti-reflection
layers for solar
cells
- nanooptimised
microfuel cells
- iron-nanoparticles
for groundwater
sanitation
- nano-titanoxyd
for photo-
catalytics
- large-area
polymer solar
cells
- nanosensorics for
environmental
monitoring
- nanocatalysts for
hydrogen
generation
- artificial
photosynthesis
- quantum-dot solar
cells
- nanocale rust for
cleaning water
Auto-
motive
- nanostructured
coatings
- nanocoated Diesel
injectors
- nanostructured
admixtures for
tires
- nanoparticles as
Diesel additives
- nanooptimised
lithium-ion
batteries
- LED headlights
- thin-film solare
cells for car roofs
- nanooptimised
fuel cells
- nanoadhesives in
production
- swithable, self-
healing coatings
- adaptive
bodyshell for
lower air
resistance
Textiles - nanoparticles for
dirt repellence
- nanosilver for
antibacterial
textiles
- nanocontainers
for scent
impregnation
- nano-titanoxyd
for UV protection
- aerogels for
thermal protection
- ceramic
nanoparticles for
abrasion
resistance
- phase-change
manterials for
active thermal
regulation
- textile-integrated
OLEDs
- electrically
conductive
textiles
- textile-integrated
sensorics and
actorics for
control of body
functions
- textile-integrated
digital assistance
systems
Source: Luther and Bachmann (2009, p. 7), own research.
Chapter 3 Nanotechnology
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3.2 Technological Competitiveness, Industry Links and Market Potentials
3.2.1. Technological Competitiveness
Patents are commonly used to assess technological developments and the performance of
countries in the field of nanotechnology. While first studies were based on keyword searches
(see Noyons et al., 2003; Huang et al., 2004; Heinze, 2004) more recent studies (Igami and
Okazaki, 2007; Palmberg et al., 2009; Hullmann, 2006) did use the new tagging category for
nanotechnology patents (Y01N) that has been introduced by EPO in 2003 (see Scheu et al.,
2006). The tagging exercise was undertaken retroactively resulting in a full coverage of all
patents related to nanotechnology.
Market shares
Measured in terms of patents applied at EPO or based on PCT (EPO/PCT patents), the
number of nanotechnology patents applied per year increased markedly since the mid 1990s,
exceeding 1,500 patents per year from 2002 on (Figure 3-1). Over the entire period from 1981
to 2005, more than 16,000 nanotechnology EPO/PCT patents were applied. Applicants from
North American applied the largest number of nanotechnology patents, followed by East
Asian and European applicants. Applicants from other than these three regions are of little
significance, though the number of patents from the rest of the world has increased, too. Their
market share is still below 10 percent.
Figure 3-1: Number of nanotechnology patents (EPO/PCT) 1981-2005, by region of applicant
0
100
200
300
400
500
600
700
800
900
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
European Competitiveness in KETs ZEW and TNO
EN 52Error! Unknown document property name. EN
North American applicants show the highest market share from 1992 onwards. Their
dominance is decreasing, however. In 2005, their market share felt to 39 percent while East
Asia could slightly increase its share in the total production of nanotechnology patents to 30
percent (Figure 3-2). Europe’s market share peaked in the early 1990s. Since 1996, Europe
contributes 26 to 27 percent to total nanotechnology patenting.
Figure 3-2: Market shares of nanotechnology patents (EPO/PCT) 1991-2005 (percent)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
Market shares for European applicants as presented in Figure 3-2 are likely to be
overestimated, however, since European applicants have a higher propensity to apply at EPO
while many applicants from North America and East Asia only apply at their home market
offices (which is assumed to be the USPTO for North America and the JPO for East Asia).
Market shares differ significantly when looking at regional patents (Figure 3-3). When only
looking at EPO applications, Europe was ahead in 2005 with a share in total EPO
nanotechnology patents of 37 percent. For USPTO applications, North American applicants
show the highest share (47 percent in 2005), while European applicants only contribute 15
percent to the total. For JPO applications, East Asian applicants account for about 55 percent
of all nanotechnology patents. European applicants are of less significance (19 percent in
2004) than North American applicants (25 percent). For triadic patents, i.e. patents that seek
patent protection in all three regions, a similar picture as for EPO/PCT patents emerges,
though the share of East Asia is higher (35 percent in 2004) and close to the one of North
America (37 percent). Europe’s market share is similar to the one for EPO/PCT patents (26
percent).
Chapter 3 Nanotechnology
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Figure 3-3: Market shares in nanotechnology patents 1991-2005 for national applications and
triadic patents (percent)
a. Europe1)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. North America2)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
c. East Asia3)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies (including PCT applications transferred to national patent offices from all three regions).
Source: EPO: Patstat, ZEW calculations.
In order to determine the relative importance of nanotechnology patents for a region, patent
intensities can be calculated. These relate the annual number of EPO/PCT patents and triadic
patents, respectively, from applicants of a certain region to the GDP of that region. This type
of specialisation indicator shows that North America and East Asia produce the highest
numbers of nanotechnology patents per GDP while Europe clearly follows behind. When
looking at triadic patents, East Asia reports a higher nanotechnology patent intensity than
North America are, indicating that North American nanotechnology patents are rather focused
on the North American and European market, while East Asian applicants more often serve
all three regions (Figure 3-4).
European Competitiveness in KETs ZEW and TNO
EN 54Error! Unknown document property name. EN
Figure 3-4: Nanotechnology patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT patents
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
10
20
30
40
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by subfields
The tagging system Y01N separates six subclasses of nanotechnology. These six subclasses
are used to delineate subfields within nanotechnology:
Nanobiotechnology
Nanoelectronics
Nanomaterials
Nanoanalytics (nanotools, nanoinstruments, nanomeasuring)
Nanooptics
Nanomagnetics
Furthermore, patents assigned to the IPC class B82B (nanostructures) form a seventh
subclass. Note that one and the same nanotechnology patent may be assigned to more than
one subclass. This overlap is rather high for nanostructures and nanooptics (47 and 40
percent, respectively, of all patents are also assigned to another nanotechnology subfield) and
low for nanobiotechnology (only 10 percent of patents falling in this subfield are classified
under another nanotechnology subfield)l.
The largest subfield is nanomaterials, accounting 30 percent of all nanotechnology patents
(Figure 3-5). All three main regions show similar shares for this subfield. 22 percent of all
nanotechnology patents fall in the subfield of nanoelectronics. Nanooptics and
nanobiotechnology follow with 12 percent each. Nanoanalytics (10 percent), nanostructures
(9 percent) and nanomagnetics (5 percent) are the smallest subfields in terms of patent counts.
East Asia reports well above average shares for nanoelectronics, nanooptics and
nanomagnetics while the shares for Europe are significantly smaller in these subfields. The
Chapter 3 Nanotechnology
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share of nanobiotechnology in total nanotechnology patenting in Europe is rather high, even
exceeding the respective share for North America.
Figure 3-5: Composition of nanotechnology patents (EPO/PCT) by subfields (percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Nanobiotechnology Nanoelectronics Nanomaterials Nanoanalytics
Nanooptics Nanomagnetics Nanostructure
Source: EPO: Patstat. ZEW calculations.
When looking at the technology market shares by subfield over time (Figure 3-6), Europe
shows rather high, though falling market shares in nanobiotechnology and low but increasing
ones in nanoelectronics. In nanomaterials, patenting market shares fell from the early 1990s to
the early 2000s, but have been increasing recently. A similar pattern emerges for the small
subfields of nanostructures and nanomagnetics. In nanooptics and nanoanalytics, Europe’s
market shares are rather low and fell in the most recent period.
North America reports high market shares in nanobiotechnology, nanoelectronics,
nanomaterials and nanoanalytics. Previously high shares in nanostructures have been
diminishing. East Asia is strong in nanooptics and nanomagnetics and has significantly
improved its position in nanomaterials and nanostructures.
European Competitiveness in KETs ZEW and TNO
EN 56Error! Unknown document property name. EN
Figure 3-6: Market shares for nanotechnology patents (EPO/PCT) 1991-2005, by subfields
(per cent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Nanobiotechnology
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanoelectronics
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanomaterials
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanoanalytics
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanooptics
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanomagnetics
0
10
20
30
40
50
60
70
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanostructure
Source: EPO: Patstat, ZEW calculations.
Analysing technological dynamics by subfields based on EPO/PCT patents may be biased
from varying attractiveness of the European market. For instance, a rise in demand for
nanotechnology in Europe may stimulate patenting by North American and East Asian
applicants at EPO, thus raising the number of EPO/PCT patents. A decreased attractiveness of
the European market may result in the opposite effect. In order to avoid such biases from the
market environment, we evaluate technological dynamics in nanotechnology by looking at
Chapter 3 Nanotechnology
EN 57Error! Unknown document property name. EN
patent applications by European, North American and East Asian applicants at their
respective “home patent office” (EPO, USPTO and JPO, respectively).
For all three regions we find a trend in patenting towards nanomaterials, nanoelectronics and
nanostructures while the share of nanobiotechnology, nanoanalytics, nanooptics and
nanomagnetics is decreasing over time (Figure 3-7). The strong increase of the share of
nanostructures may be associated with an increasing use of the respective IPC class (B82B)
over time by patent examiners and patent applicants and may exaggerate the real growth in
patenting in this subfield.
Figure 3-7: Composition of nanotechnology patents (applications at home patent offices), by
region, subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
No
rth
Am
e
ric
a
Ea
st
As
ia
nanobiotechnology nanoelectronics nanomaterials nanoanalytics
nanooptics nanomagnetics nanostructures
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Figure 7-7 reveals the specialisation of Europe with nanotechnology on nanobiotechnology
and nanomaterials while North American applicants focus on nanoelectronics and show an
above average share for nanoanalytics. East Asia reports the highest share of all three regions
for the subfields of nanoelectronics, nanooptics, nanomagnetics and nanostructures.
The specialisation pattern of East Asia was even more pronounced in the 1990s and has since
then diminished, particularly owing to a high growth in nanomaterials patenting. The very
low share for nanobiotechnology patenting remained stable, however. Europe’s pattern of
specialisation also tends to converge towards the world average. In the early 1990s,
European Competitiveness in KETs ZEW and TNO
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nanobiotechnology and nanomaterials accounted for almost 60 percent of all nanotechnology
patents, a share which felt to below 50 percent in the mid 2000s.
The average annual rate of change in the number of nanotechnology patents by subfield
shows high growth rates for nanostructures (which may be exaggerated owing to an increased
used of the respective IPC class over time) and nanomaterials in all three regions since the
mid 1990s (Figure 7-8).3 Growth rates for nanoelectronics were particularly high in the
second half of the 1990s but were lower in the first half of the 2000s. Nanomagnetics
experienced highest growth rates in the first half of the 1990s. In the 2000s, the number of
nanomagnetic patents did not increase anymore. Nanobiotechnology shows a heterogeneous
picture, with high current growth in East Asia, while growth in North America was highest in
the early 1990s. Nanoanalytics shows higher growth rates in the 1990s compared to the first
half of the 2000s. For nanooptics growth rates in Europe are currently lower than during the
1990s whereas North America reports stable growth rates in this subfield and East Asia
reports increasing ones.
3
In order to avoid erratic growth rates when considering year-to-year changes, we grouped patent applications to
four periods and calculated compound annual growth rates between two periods.
Chapter 3 Nanotechnology
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Figure 3-8: Average annual rate of change in the number of nanotechnology patents
(applications at home patent offices), by region, subfield and period (percent)
-10
0
10
20
30
40
50
60
70
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
nanobiotechnology nanoelectronics nanomaterials
nanoanalytics nanooptics nanomagnetics
nanostructures nanotechnology total
Europe
-10
0
10
20
30
40
50
60
70
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-10
0
10
20
30
40
50
60
70
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
For assessing the potentials and strengths of advanced material patenting by country in
Europe, we assign nanotechnology patents to countries based on the location of inventors
European Competitiveness in KETs ZEW and TNO
EN 60Error! Unknown document property name. EN
(regardless of the country of the applicant). In case a patent is applied by inventors from
different European countries we apply fractional counting. We only look at EPO/PCT patents.
Patenting at the country level in Europe
Within Europe, inventors from Germany represent the largest group of producers of
nanotechnology patents. Over the past three decades, 34 percent of all nanotechnology patents
applied at EPO/PCT and having European inventors came from Germany, followed by France
(17 percent), the United Kingdom (14 percent) and the Netherlands (8 percent) (see Figure
3-9). The number of nanotechnology patents from Germany grew particularly fast from 1997
onwards. Patenting by UK inventors showed a rapid increase from 1998 to 2001, while
nanotechnology patents from France peaked in 2003. In recent years, applications from
European countries that are not among the eight countries with the largest number of
nanotechnology patents increased markedly, indicating stronger efforts in nanotechnology in
these countries.
Figure 3-9: Nanotechnology patents (EPO/PCT) in Europe 1981-2005, by eight largest
countries (based on location of inventors)
0
20
40
60
80
100
120
140
160
180
200
220
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
The economic significance of nanotechnology patenting differs substantially by country
(Figure 3-10). Nanotechnology patent intensity -that is the ratio of the number of
nanotechnology patents to GDP- is highest in Switzerland and clearly above the European
average in the Netherlands, Sweden and Germany. France produces somewhat more
Chapter 3 Nanotechnology
EN 61Error! Unknown document property name. EN
nanotechnology patents per GDP than the European average whereas the UK and Belgium
report average patent intensities. Italy and the total of all other European countries show low
nanotechnology patent intensities.
Figure 3-10: Patent intensity in nanotechnology 1991-2005 of European countries (EPO/PCT
patents)
0
20
40
60
80
100
DE FR UK IT NL SE CH BE RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
The differences in the absolute number of nanotechnology patents and in patent intensities
have to be kept in mind when looking at patenting dynamics since countries with low patent
activities can more easily generate high growth rates. Among the eight countries that produce
the largest number of nanotechnology patents, Belgium and the Netherlands could increase
their patent output at an annual growth rate of 22 and 20 percent, respectively, between the
first half of the 1990s (1991-95) and the first half of the 2000s (2001-05) (Figure 3-11). A
similarly high growth rate was experienced by the group of European countries not qualifying
for the eight largest patent producers in nanotechnology and by Italy. Nanotechnology
patenting increased at the average European rate in Germany and Sweden. In France, the UK
and Switzerland nanotechnology patenting grew slower compared to the European average.
In most countries, growth rates were higher in the most recent period (1996/00 to 2001/05)
than in the previous period (1991/95 to 1996/00), indicating an acceleration in patenting
output. Sweden and Switzerland do not follow this pattern, however. High growth rates in the
1990s were followed by rate low growth rates in the early 2000s (though still impressive at an
annual rate of 10 to 12 percent).
Figure 3-11: Change in the number of nanotechnology patents between 1991/95 to 1996/00 and
1996/00 to 2001/05, by country (EPO/PCT patents; compound annual growth
rate in percent)
European Competitiveness in KETs ZEW and TNO
EN 62Error! Unknown document property name. EN
0
5
10
15
20
25
30
DE FR UK IT NL SE CH BE RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
The composition of nanotechnology patent applications by subfields markedly differs by
country of inventor (see Figure 3-12). Patents from Germany and Belgium show a very high
share in nanomaterials. France and Italy are both specialised on nanobiotechnology and the
Netherlands on nanoelectronics and nanomagnetics. UK reports a high share in nanooptics
while Switzerland is specialised on nanoanalytics and Sweden on nanostructures.
Figure 3-12: Composition of nanotechnology patents in Europe, by subfield and country
(percent)
0 10 20 30 40 50 60 70 80 90 100
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Europe total
nanobiotechnology nanoelectronics nanomaterials nanoanalytics
nanooptics nanomagnetics nanostructures
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
Chapter 3 Nanotechnology
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Figure 3-13 provides a more detailed picture of country-specific specialisation by subfield
within nanotechnology. The specialisation pattern of Germany in nanotechnology patenting
does not differ a lot from the one of Europe as a whole, reflecting the high share of patents
from Germany for nanotechnology patenting in Europe. Also the group of countries not
belonging to the eight largest nanotechnology patent producers in Europe shows a
specialisation by subfield that is much alike the one of Europe in total. The other large
nanotechnology patent producing countries show rather peculiar specialisation patterns.
Figure 3-13: Specialisation patterns of nanotechnology patenting in Europe, by subfield and
country of inventor (percent)
-15 -12 -9 -6 -3 0 3 6 9 12 15 18 21
DE
FR
UK
IT
NL
SE
CH
BE
RoE
nanobiotechnology
nanoelectronics
nanomaterials
nanoanalytics
nanooptics
nanomagnetics
nanostructures
Difference between the share of a subfield in a country’s total nanotechnology patents and the respective share for Europe total (excluding
the country under consideration).
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
European countries show different trends in nanotechnology patenting (Table 3-2). When
comparing the growth in the number of patents applied by subfield for the 1990s (i.e. between
the number of patents over the 1991-95 and the 1996-2000 periods) and the early 2000s (i.e.
between 1996-00 and 2001-05), one can see a strong increase in nanoelectronics and
nanostructures in both periods while nanomaterials patenting grew particularly strong in the
European Competitiveness in KETs ZEW and TNO
EN 64Error! Unknown document property name. EN
more recent period. Most countries do follow this pattern, except for Switzerland and
Belgium (early growth in nanomaterials, strong increase in nanoelectronics in the 2000s).
Patenting in nanoanalytics, nanooptics and nanomagnetics grew at a slower pace in the early
2000s compared to the 1990s except for the Netherlands ajnd Belgium which report a strong
growth in nanooptics and nanoanalytics patenting in the 2000s. The Netherlands also
increased their output in nanobiotechnology patents in the 2000s considerably. The countries
forming the “rest of Europe” show a high growth in nanotechnology patenting in all subfields
in the 2000s, indicating a catching-up strategy.
Table 3-2: Change in the number of nanotechnology patents between 1991/95 to 1996/00 and
1996/00 to 2001/05 by subfield and country(EPO/PCT patents, compound annual
growth rate in percent)
DE FR UK IT NL SE CH BE RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Nanobiotechnology 16 9 4 8 3 7 0 23 -13 29 3 -4 0 15 -2 14 -2 10 5 10
Nanoelectronics 27 22 21 19 13 24 45 36 46 18 81 12 19 15 18 46 47 30 27 21
Nanomaterials 8 28 18 25 10 31 7 33 31 37 9 25 49 21 35 27 39 29 15 28
Nanoanalytics 11 -1 17 7 14 11 15 18 -3 29 22 10 7 2 11 24 34 28 12 7
Nanooptics 12 9 7 0 17 6 35 4 -8 32 14 -3 27 -2 ∞ 42 86 20 15 8
Nanomagnetics 18 8 5 0 21 -2 0 25 22 9 ∞ 7 25 -10 25 11 -6 44 16 7
Nanostructures 49 34 63 55 23 19 ∞ 94 ∞ 44 ∞ 22 ∞ 14 0 ∞ 38 40 45 36
Nanotechnology total 15 18 8 16 10 18 11 27 19 21 19 13 15 11 18 26 18 26 13 18
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
“∞“: not available due to zero value in base period.
Eight European countries with the largest number of nanotechnology patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
3.2.2. Links to Sectors and other Fields of Technologies
Technological links to sectors
When linking nanotechnology patents to industrial sectors based on the IPC classes a patent
was assigned to (so-called “technological sector links”), we find a broad sector relevance of
nanotechnology. 31 percent of all nanotechnology patents are linked to the electronics
industry, 19 percent to the chemical industry, also 19 percent to the manufacture of
instruments (optical, medical, measurement, steering instruments) and 9 percent to
pharmaceuticals (Table 3-4). Nanotechnology patents are also technologically linked to the
metals, machinery and glass/ceramics/concrete industry. Nanotechnology patents from
European applicants show stronger links to chemicals and pharmaceuticals while patents from
East Asia are much more linked to the electronics industry which is reflecting the higher
significance of nanoelectronics in this region.
Chapter 3 Nanotechnology
EN 65Error! Unknown document property name. EN
Table 3-3: Technological sector affiliation of nanotechnology patents (EPO/PCT), by region
(1981-2007 applications, percent)
Europe North America East Asia Nanotechnology
total
Food 0 0 0 0
Textiles 0 0 0 0
Wood/Paper 1 0 0 1
Chemicals 20 17 12 19
Pharmaceuticals 12 9 2 9
Rubber/Plastics 1 1 1 1
Glass/Ceramics/Concrete 4 3 3 4
Metals 7 6 8 8
Machinery 7 6 5 6
Electronics 28 36 47 31
Instruments 19 21 20 19
Vehicles 1 1 0 0
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Patents in the field of nanobiotechnology are primarily linked to the pharmaceutical industry
as well as to chemicals and instruments (Table 3-4). Nanoelectronics show strong
technological links to the electronics industry and important one to the instruments industry.
Most nanomaterial patents are related to the chemical industry, but a significant fraction is
also linked to electronics, metals, instruments and machinery. Nanodevices are mostly linked
to the manufacture of instruments as well as to electronics. Nanooptics are both linked to the
electronics and instruments industry while the vast majority of nanomagnetics patents show a
link to the electronics industry. Nanostructures relate to the metals industry as well as to
chemicals and electronics.
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Table 3-4: Technological sector affiliation of nanotechnology patents (EPO/PCT), by
subfield (1981-2007 applications, percent)
Sector
Nano-
biotech-
nology
Nano-
electro-
nics
Nano-
mate-
rials
Nano-
devices
Nano-
optics
Nano-
magne-
tics
Nano-
struc-
tures
Nano-
techno-
logy
total
Food 1 0 0 0 0 0 0 0
Textiles 0 0 1 0 0 0 0 0
Wood/Paper 0 1 1 0 0 0 0 1
Chemicals 19 9 36 12 5 4 20 19
Pharmaceuticals 49 3 7 7 1 2 4 9
Rubber/plastics 0 2 1 0 1 0 2 1
Glass/ceramics 1 2 7 2 2 2 4 4
Metals 3 7 11 5 4 6 32 8
Machinery 4 5 10 5 3 3 8 6
Electronics 7 54 16 26 43 69 20 31
Instruments 14 17 11 41 42 14 10 19
Vehicles 0 0 0 1 0 0 0 0
Total 100 100 100 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
If one looks at the sector affiliation of nanotechnology applicants, i.e. if one assigns industry
sectors to nanotechnology patents based on the main market an applicant is present, the
picture becomes more disperse.4 The largest share of applicants from Europe and North
America are public research institutions (universities and governmental laboratories,
including government agencies). In Europe, the share of applicants from the chemical
industry is significantly higher than in North America or East Asia. Applicants from East Asia
have a very strong industry focus on electronics (incl. computer, semiconductor and
telecommunication) and instruments (optical, medical, measurement). North American
applicants comprise to a significant extent young enterprises in the fields of biotechnology
and nanotechnology, including a number of research companies.
4
This analysis is based on the full sample of 18,294 nanotechnology patents (EPO/PCT).
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Figure 3-14: Sector affiliation of nanotechnology patent applicants, by region (EPO/PCT,
1981-2007 applications, percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Public Research* Computer/Semiconductor Telecommunication Other Electronics
Instruments Chemicals Pharmaceuticals Nanotech
Biotech Materials Equipment
*ERROR - FlateFilter: stop reading corrupt stream due to a DataFormatException
including patents by government authorities and by private individuals.
Source: EPO: Patstat. ZEW calculations.
Comparing the sector affiliation of nanotechnology patent applications before and after the
end of 1999 reveals a strong shift of nanotechnology patenting towards public research. The
public research sector was able to increase its share in the total number of nanotechnology
patents from 17 to 31 percent. Significantly decreasing shares in total nanotechnology
patenting (of around 5 percentage points between the two periods 1981-1999 and 2000-2007)
are reported for the electronics industry (particularly telecommunication), the instruments
industry and the pharmaceutical industry. While all three regions experienced a gain in
relative importance for the research sector, the increase was particularly strong in East Asia
(+17 percentage points) and Europe (+16 percentage points), but less in North America. This
development implies a converging trend in the significance of public research for
nanotechnology patenting in the three regions.
Another trend is the growing importance of young dedicated nanotechnology companies as
producers of patents. Their share in total patenting increased from 4 to 8 percent. Both Europe
and North America experienced a growing importance of nanotechnology start-ups as a
source of new technological knowledge while their importance remained low in East Asia.
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Figure 3-15: Change in the sector affiliation of nanotechnology patent applicants before and
after the end of 2001, by region (EPO/PCT, percentage points)
-15
-10
-5
0
5
10
15
20
Europe North America East Asia RoW Total
Public Research* Computer/Semiconductor Telecommunication Other Electronics
Instruments Chemicals Pharmaceuticals Nanotech
Biotech Materials Equipment
* including patents by government authorities and by private individuals.
Source: EPO: Patstat. ZEW calculations.
Among the sectors that lost in relative importance, trends are different among the three
regions. In Europe, the chemical and pharmaceutical industry experienced a marked decrease
in their share in total nanotechnology patenting while electronics and instruments show about
the same shares in both periods. In North America, sector shares are more stable. The increase
of the public research sector’s share by 9 percentage points stands vis-à-vis a small decrease
in telecommunication, instruments and pharmaceuticals, while the chemical industry gained
in relative importance. In East Asia, the strong gain in importance of public research was
opposed by a significant loss in the shares of the electronics and instrument industries.
Public research is the most important applicant sector for most subfields in nanotechnology.
45 percent of all nanostructure patents (EPO/PCT applications, sum of all regions) were filed
by public research organisations (Table 3-5). High shares are reported also for nanoanalytics
(39 percent), nanomaterials (33 percent) and nanobiotechnology (31 percent). The electronics
industry (sum of computer, semiconductor, telecommunication and other electronics) is the
largest applicant sector for nanoelectronics, nanooptics and nanomagnetics. The chemical
industry is an important source for nanomaterials and nanobiotechnology patents. A
substantial share of nanobiotechnology patents originates from the pharmaceutical industry.
Dedicated nanotechnology firms are active in all seven subfields of nanotechnology. Their
share in the total number of patents ranges from 3 percent (nanooptics) to 12 percent
(nanostructures). Dedicated biotechnology firms are an important producer of
nanobiotechnology patents and are relevant for nanomaterials and nanoanalytics.
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Table 3-5: Sector affiliation of applicants of nanotechnology patents, by subfield (EPO/PCT,
1981-2007 applications, percent)
Nano-
biotech-
nology
Nano-
electro-
nics
Nano-
materials
Nano-
analytics
Nano-
optics
Nano-
magne-
tics
Nano-
structure
Public research 31 25 33 39 25 22 45
Computer/semiconductor 1 18 3 8 8 19 6
Telecommunication 0 4 2 2 12 3 2
Other electronics 2 23 9 10 24 30 12
Instruments 4 12 6 21 11 4 4
Chemicals 24 5 25 5 8 4 13
Pharmaceuticals 21 0 1 2 0 0 1
Nanotechnology firms* 7 7 7 6 3 5 12
Biotechnology firms* 10 2 5 3 1 1 1
Materials 2 1 5 1 2 4 1
Equipment 0 2 4 2 5 6 3
Total 100 100 100 100 100 100 100
* Dedicated nanotechnology and biotechnology firms, typically younger firms founded in the 1980s or later.
Source: EPO: Patstat. ZEW calculations.
The list of the 15 largest current nanotechnology applicants by region (in terms of the number
of patents applied since 2000) is given in Table 3-6 for information purposes. Applications by
subsidiaries are assigned to the parent company. Patents applied by firms that later have been
acquired by other companies are assigned to the latter. For patent applications by more than
one applicant fractional accounting applies.
The three largest nanotechnology applicants in Europe all come from France, including a
government agency and a large public research centre. The largest applicant in North America
is a computer company, followed by a university and a diversified materials producer largely
based on chemical technologies. In East Asia, the largest applicant is a diversified electronics
producer, followed by a producer of optical instruments and a public research agency.
In all three regions, each applicant applied less than 200 nanotechnology patents within the
past eight years. Applicants at the bottom end of the top 15 applicants by region applied less
than 30 patents within this period.
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Table 3-6: 15 main patent applicants in nanotechnology by region (EPO/PCT, 2000-2007
applications)
Europe North America
Rank Name Country Sector # pat. Rank Name Country Sector # pat.
1 Comm. à l'energie atom. FR government 111 1 Hewlett-Packard US computer 107
2 L'Oreal FR chemicals 57 2 Univ. of California US research 90
3 CNRS FR research 56 3 3M US chemicals 80
4 Infineon DE electronics 51 4 Agilent Technologies US electronics 77
5 Siemens DE electronics 45 5 Du Pont US chemicals 52
6 Evonik Degussa DE chemicals 45 6 Molecular Imprints US nanotech 49
7 BASF DE chemicals 36 7 MIT US research 45
8 Alcatel Lucent FR telecommunication 35 8 General Electric US chemicals 42
9 Philips NL electronics 33 9 IBM US computer 37
10 Arkema FR chemicals 31 10 Univ. of Illinois US research 33
11 Carl Zeiss DE instruments 27 11 Eastman Kodak US instruments 32
12 Interuniv. Microelektr. C. BE research 27 12 Motorola US telecommunication 31
13 Fraunhofer DE research 26 13 U.S. Government US government 29
14 ASML NL semiconductor 24 14 Intel US semiconductor 27
15 Sabic Innovative Plastics NL chemicals 23 15 Freescale Semiconductor US semiconductor 27
East Asia
Rank Name Country Sector # pat.
1 Samsung KR electronics 169
2 Canon JP instruments 81
3 JSTA JP research 70
4 Hitachi JP electronics 70
5 Sony JP electronics 67
6 Matsushita Electric JP electronics 66
7 NEC JP telecommunication 56
8 Fujitsu JP computer 52
9 Fujifilm JP chemicals 47
10 Seiko JP instruments 40
11 Pioneer JP electronics 35
12 Toshiba JP computer 32
13 Showa Denko JP chemicals 29
14 TDK JP electronics 27
15 Sumitomo Electric JP electronics 27
Source: EPO: Patstat. ZEW calculations.
The small number of patents by applicant implies a low level of concentration of
nanotechnology patenting. In the reference period 1981-2007, the five largest applicants from
Europe have produced just 10 percent of the total number of nanotechnology patents filed by
European applicants. In North America, this CR5 concentration ratio is even smaller (9
percent) while it is higher in East Asia (17 percent). Compared to other KETs, concentration
ratios in nanotechnology are extremely low. This implies that new technology is spread across
many different actors, putting the issue of exchanging technology among nanotechnology
producers on the agenda. In addition, policy has to approach a large number of different actors
in order to exert significant impact on the industry.
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Figure 3-16: Concentration of applicants in nanotechnology patenting 1981-2007, by region
(EPO/PCT patents 1981-2007, percent)
0
10
20
30
40
Europe North America East Asia
CR5 CR10 CR15
CR5 is the number of patents applied by the 5 largest patent applicants in the total number of patent applications. CR10 and CR15 are
calculated accordingly.
Source: EPO: Patstat. ZEW calculations.
Links to other KETs
Related to the issue of sector links is the degree to which nanotechnology patents are linked to
other KETs. One way to assess likely direct technological relations is to determine the share
of nanotechnology patents that are also assigned to other KETs (because some IPC classes
assigned to a nanotechnology patent are classified under other KETs). The degree of overlap
of nanotechnology patents with other KET patents by subfields is shown Figure 3-17. Two
out of three nanotechnology patents have been assigned to other KETs, too. The highest share
is reported for nanomaterials, followed by nanostructures and nanooptics. Overlaps are lower
for nanoanalytics while nanobiotechnology patents are rarely linked to other KETs.
Figure 3-17: Share of nanotechnology patents linked to other KETs by subfield (EPO/PCT
patents 1981-2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Nanobiotechnology
Nanoelectronics
Nanomaterials
Nanoanalytics
Nanooptics
Nanomagnetics
Nanostructures
Nanotechnology total
Source: EPO: Patstat. ZEW calculations.
European Competitiveness in KETs ZEW and TNO
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For those nanotechnology patents that are linked to other KETs, one can see that the largest
overlap is with the field of advanced materials (particularly nanomaterials, nanostructures and
nanobiotechnology) (Figure 3-18). Nanoelectronics naturally is closely linked to
microelectronics, as is nanomagnetics and a significant fraction of nanostructures patents.
Nanooptics patents often also fall under the field of photonics. Out of the 40 percent of
nanoanalytics patents that overlap with other KETs, most are linked to advanced materials
while a smaller part overlap with microelectronics and some relate to advanced manufacturing
technologies.
Figure 3-18: Links of nanotechnology patents to other KETs by subfields (EPO/PCT patents
1981-2007, only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Nanobiotechnology
Nanoelectronics
Nanomaterials
Nanoanalytics
Nanooptics
Nanomagnetics
Nanostructures
Nanotechnology total
Micro-/nanoelectronics Industrial Biotechnology
Photonics Advanced materials
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
3.2.3. Market Potentials
Nanotechnology is receiving particular interest from policy and businesses because of the
huge market that this technology is expected to generate in future. First forecasts of market
potentials date back to the early 2000s (Roco and Bainbridge, 2001). In recent years, a
number of market forecasts from consultancy companies have provided market figures for
different subsectors of the nanotechnology market for different time horizons.
What is common to all these forecasts is the methodological challenge of how to delineate the
nanotechnology market. On the one hand, one could restrict this market to nanoscaled raw
materials and components (such as nanocoatings, nanotubes, quantum dots, fullerenes,
piezoelectric devices). On the other hand, one could consider all end products that are using
nanoscale raw materials and components as well as all products produced by using, at least
partially, nanotechnology production methods. Moreover, one could also add tools, equipment
and devices that are needed for producing nanoscaled products (e.g. microscopes, lithography
Chapter 3 Nanotechnology
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steppers, PVD and CVD equipment) to the nanotechnology market. Depending on the
nanotechnology market definition, market potentials vary significantly.
Following a narrow definition which focuses on the market for nanomaterials, the global
market volume in 2007 was assessed to about $1.1 billion (see BCC, 2007; see also
Freedonia, 2007) and is expected to grow to about $3 billion in 2012. This estimate was made
prior to the current economic crises and is likely to overrate the actual development since
2007. These estimates show that nanomaterials still play a minor role in the global market for
materials, and the market is growing at a rather moderate rate.
Applying a very broad definition of the nanotechnology market, some industry analysts came
up with huge current market volumes of up to $150 billion in 2008 (see LuxResearch, 2006)
and exponentially increasing market potentials in the near future. The most optimistic
forecasts suggest a market potential for 2015 of $1 trillion (NSF, 2001) up to $3.1 trillion
(LuxResearch, 2006, 2009). The latter figure would equal to 5 percent of the projected global
GDP in that year, and to 15 percent of the global manufacturing output in 2015. This would
imply that a significant part of manufactured goods will be based -at least partially on
nanoscaled products or by applying nanotechnology techniques or devices in the production
process.
Comparing different market forecasts for nanotechnology shows a wide variety of estimated
current market sizes (Table 3-7) which reflects the absence of a commonly accepted definition
of nanotechnology markets. A common feature of all forecasts is that they expect a strong
increase in market size for nanotechnology products. The most conservative forecasts for
specific product groups based on nanotechnology applications (radiation-cured coatings,
lithium ion batteries) estimate an average annual growth rate (at current prices) of about 5
percent, which is still above the average growth rate for global total manufacturing. The most
optimistic forecasts assume an expansion of nanotechnology markets at annual rates of up to
50 percent. Forecasts that that relate to the total nanotechnology market tend assume higher
growth rates (34 percent in average) compared to forecasts for specific subfields and market
segments (20 percent in average). This may mirror the general enthusiasm for the prospects of
nanotechnology, while a more detailed look at production opportunities and market demands
for certain applications leads to less euphoric, and presumably more realistic assessments of
market potentials. Projections made in the early 2000s for the year 2010 (see Evolution
Capital, 2001; MRI, 2002) have proved to overestimate the actual development considerably.
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Table 3-7: Estimates and forecasts for the size of the global nanotechnology market (billion
US-$)
Subfield Source1) 2005/
06
2007/
08
2010/
11
2012/
13
~2015 ~2020 CAGR*
Nanomaterials
Total BBC (2007) 1.1 3.1 23
Total Freedonia (2007) 1.0 4.0 32
Sol-gel based mat. BBC (2006) 1.0 1.4 7
Carbon nanotubes Electronics et al. (2007) 0.37 5.6 72
Biomarkers BBC (2007) 5.6 12.8 18
Rad.-cured coatings Chemark (2007) 1.4 1.8 5
Nanoelectronics
Total BBC (2007) 20.1 33.6 11
Lithography steppers Frost (2007) 7.8 10.0 6
Piezoel. actuators Innoresearch (2007) 10.6 19.5 13
Organic electronics IDTechEX (2008) 1.2 48.2 45
Solar energy applic. Solarbuzz (2008) 17.2 30.0 20
Lithium ion batteries BCC (2007) 4.6 6.3
5
Nanooptics
Total BBC (2007) 4.9 7.9 10
Microscopy Frost (2007) 1.9 3.5 9
LED BCC (2006) 3.8 6.8 30
OLED LEDs Magazine (2005) 0.6 2.9 30
Nanobiotechnology
Nanomedicine Ernst & Young (2007) 6.0 70.0 18
Nanomedicine Freedonia (2007) 18.0
39.0 17
Nanodiagnostics Ernst & Young (2007) 1.9 6.0 8
Nanodiagnostics Freedonia (2007) 3.1 8.4 22
Total market
NSF (2001) 54 1,000 34
Evolution Cap. (2001) 105 700 46
MRI (2002) 66 148 18
BCC (2008) 12 27 16
Cientifica (2008) 167 1,500 37
LuxResearch (2006) 147 3,100 46
1) For references on the sources, see Palmberg et al. (2009) and Luther and Bachmann (2009).
* Compound annual growth rate in nominal terms (percent).
Source: Palmberg et al. (2009: 22), Luther and Bachmann (2009: 10f).
LuxResearch (2009) estimates the United States to be the largest market for nanotechnology
with a current market share of 40 percent, followed by Europe (31 percent). Both regions are
expected to amount to 35 percent of the worldwide market in 2015, closely followed by Asia.
3.3 Success Factors, Barriers and Challenges: Cluster Analysis
Nanotechnology has the potential to impact and shape many other industries through its
multiple application possibilities. Advanced and novel materials can greatly benefit from the
integration of biotechnology and nanotechnology, e.g. for coating/surface engineering.
Chapter 3 Nanotechnology
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Furthermore, electronic and optic equipment, healthcare and life science, energy and
environment, communication and computing, scientific tools and industrial manufacturing
will be largely affected by this emerging technology (Miyazaki and Islam, 2007).
However, commercialising nanotechnology research efforts is proving difficult in Europe.
Private R&D investments amounts to only $1.7 billion in Europe compared to $2.7 billion in
the US and $2.8 billion in Asia (LuxResearch, 2009). Moreover, EU nanotechnology
patenting lags well behind the US where most of the significant developments in the creation
and activity of nanotechnology companies and related jobs can be observed. Despite the
potential interest from key EU industries such as aeronautics and space or automotive, a lack
of engineering expertise seems to have held back adoption (BMBF, 2006). The EU market is
fragmented, resulting in a lack of critical mass that reduces the effectiveness of the
commercialisation of nanotechnology. Considering the state of technology maturity, issues
related to environmental, health and safety (EHS) concerns, standardisation and public
opinion needs to be addressed to ensure market acceptance and the deployment of
nanotechnology.5
In Europe, over 240 research centres and 800 companies dedicated to the R&D of
nanotechnology have been identified (Conseil Economique et Social, 2008; AFSSET, 2008).
The most successful nanotechnology clusters (according to their international patenting
activity) are located in the United States, Germany and Japan. Examples are Albany, Boston,
Houston (US)6, Northrhine Westphalia, Berlin, Munich (Germany)7, Kyoto, Aichi, and
Nagano (Japan)8.
The two chosen cases for nanotechnology are Northrhine Westphalia and Kyoto. One reason
for this choice is that, besides the United States, Germany and Japan are the strongest
international players in this technology in terms of patenting and commercial activities.
Furthermore, the distribution of nanotechnology research in Germany and Japan is different
among actors (see Figure 3-19). Public research institutions play a much bigger role in
Germany, while the industry in Japan contributes more to nanotechnology research.
5
The European Commission adopted in February 2008 the Code of Conduct for Responsible Nanosciences and
Nanotechnologies Research.
6
http://www.areadevelopment.com/HighTechNanoElectronics/oct08/nano-tech-centers-clusters.shtml
7
http://www.nano-map.de
8
http://www.japan-cluster.net/index.php?id=480
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Figure 3-19: Shares of nanotechnology research in Germany and Japan by actors (2004)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Germany Japan
Industry
Public research
institutes
Universities
Source: modified from Miyazaki and Islam (2007).
In addition to this, the composition of public and private funding is also different.
Nanotechnology research in Germany is highly dependent on public funding from the EU and
the state, while R&D in Japan is to 2/3 financed through venture capital (see Figure 3-20).
Finally, these cases build a nice contrast between Germany’s (and Europe’s) academic and
government-dominated research and Japan’s commercial orientation (Miyazaki and Islam,
2007).
Figure 3-20: Estimated public and private funding for nanotechnology R&D in 2005 by world
regions (million €)
Source: http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
3.3.1. Nanotechnology cluster Europe: Northrhine Westphalia (Germany)
Northrhine Westphalia (NRW) has a long economic history with significant structural
changes. Until 1960, NRW (and the Ruhr area) was one of the main economic centres in the
coal and mining industry in Europe and the motor of reconstruction after World War II. The
coal crisis (1960s) and the oil crisis (1970s) made it necessary to refocus on education and
Chapter 3 Nanotechnology
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traffic to overcome the structural crisis and to make economic adjustments to stimulate
growth in new technologies, such as biotech, ICT, and nanotechnology.9
Today, Northrhine Westphalia has several years of experience in developing interdisciplinary
research programmes in the field of nanotechnology. The nanotechnology research in NRW
was so broad and covered so many different scientific fields that it was necessary to create an
actually network of three clusters. One cluster is located in Aachen and focuses on the
combination of nanotechnology and information technology. The second cluster in Muenster
concentrates on the interface between nanotechnology and biotechnology. The field of
nanobiotechnology has a large potential to be applied in many different industries. This
opportunity is reflected in the high number of involved universities/research centres and
interdisciplinary projects (more than 100). The third cluster in Duisburg/Essen conducts R&D
in nanotechnology linked with energy systems.10
Figure 3-21: Network of nanotechnology clusters in Northrhine-Westphalia
All together, the NRW nanotechnology cluster network encompasses 30 university institutes,
four research centres, six networks, 16 SMEs and six major enterprises. Main corporate
players in this area include Philips GmbH, ThyssenKrupp Stainless AG and BASF coatings
AG.
9
http://www.icn-project.org/fileadmin/ressourcen/Dokumente/3_RIS/Regional_Profiles/NRW.pdf
10
http://www.nanobio-nrw.de/index.php?Script=1&Lang=de&SW=1024
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Short history of the cluster
The NRW nanotechnology cluster started in 2003 by implementing the first research cluster
in Aachen for ‘nanotechnology for information technology’. In 2004, the other two pillars of
the cluster network were founded in Muenster (nanobiotechnology) and Duisburg/Essen
(nanotechnology for power engineering). Each cluster is linked to universities and research
institutions in the surrounding area.11 Over time, the ties between the three excellence centres
grew stronger, resulting in regional research collaborations. In addition to this, also links to
other German nanotechnology organisation were established and the clusters became
members of national and international nanotechnology networks.
System failures and system drivers for growth
Infrastructure
Each cluster is embedded in a strong infrastructure of universities and research centres, which
builds the scientific foundation for downstream nanotechnology activities. A few large
multinational enterprises act as anchor companies to stimulate economic growth, while
network organisations are in place to nurture academia-industry collaborations.
Table 3-8: Overview of nanotechnology institutions in the NRW nanotechnology cluster
network
Networks Research
centres
University
institutes
SMEs Large
enterprises
Finance
Aachen 1 3 10 6 2 0
Muenster 3 1 7 8 1 1
Duisburg/Essen 2 0 13 2 3 0
Source: http://www.innovations-report.de/html/berichte/informationstechnologie/bericht-32232.html
Rules and regulations: The federal government increasingly supports nanotechnology
projects, which aim on the standardisation of nanotechnology manufacturing processes and
characteristic values of nanotechnology products. Standardisation procedures in
nanotechnology became highly important in the diffusion process of the technology, because
international competitiveness is largely determined by the ability to compare between product
characteristics. The Ministry for Education and Research also has strong patent laws in place
to ensure that utilisation opportunities are realised.12
Norms and values: Because of the very nature of nanotechnology and its environmental,
health and safety concerns, cluster network organisation have to establish a certain work ethic
to address these issues. Furthermore, external communication and public relation of these
11
http://www.innovations-report.de/html/berichte/informationstechnologie/bericht-32232.html
12
http://www.bmbf.de/pub/nanotechnology_conquers_markets.pdf
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organisations have to be clear to ensure market acceptance and the deployment of
nanotechnology.
Public policy and funding: The German Federal Ministry for Education and Research
supports the development of nanotechnology competence centres by installing sufficient
supporting infrastructure.13 AgeNT-D (Arbeitsgemeinschaft der Nanotechnologie-
Kompetenzzentren in Deutschland) is a consortium of all nine German nanotechnology
clusters with the goal of increasing operational efficiency by setting R&D and commercial
priorities.14 In addition to this, several federal ministries agreed to harmonise funding
procedures. The goal is to synchronise different funding policies to increase the transparency
for universities and nanotechnology firms which seek for funding opportunities on a federal
level.15 A consortium of seven federal ministries developed a ‘Nano-Initiative – Action Plan
2010’, aiming on the acceleration of dissemination of nanotechnology R&D result into
marketable products, recognizing socioeconomic implications and removing obstacles to
innovation, supporting spin-offs and start-ups, and mobilising public funding and private
venture capital.16
Regarding R&D investment from the government, Germany is the number one concerning
public funding of nanotechnology in Europe, followed by France and the United Kingdom.17
From 1998 to 2004, the volume of funded joint projects in nanotechnology quadrupled to
about 120 million Euro.18 Concerning the NRW nanotechnology cluster, it received over €9
million of direct public funding from the German government for nanotechnology and nano-
related research in the period 2003-2008. In the same time period, the cluster attracted
approximately €40 million of funding from the Sixth Framework Programme from the
European Commission.19
Venture capital: Venture capital is not easily available in Germany for nanotechnology
research and development. In Germany, only one third of the total research funding stems
from private sources, compared to 54 percent in the US and almost two thirds in Japan.
Therefore, research is highly dependent on public funding.
13
http://www.bmbf.de/en/nanotechnologie.php
14
http://www.gtai.com/homepage/info-service/publications/our-publications/germany-investment-magazine/vol-2008/vol-
032008/cover-story1/size-isn-t everything3/?backlink=Back percent20to percent20Cover percent20Story
15
http://www.bmbf.de/pub/nano_initiative_action_plan_2010.pdf
16
http://www.bmbf.de/pub/nano_initiative_action_plan_2010.pdf
17
http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
18
http://www.nanoforum.org/dateien/temp/European percent20Nanotechnology percent20Infrastructures percent20and
percent20Networks percent20July percent202005.pdf?05082005163735
19
http://www.innovations-report.de/html/berichte/informationstechnologie/bericht-32232.html
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Interactions
Each cluster in the network is coordinated through a separate organisation (Aachen: AMO,
Muenster: CeNTech, Duisburg/Essen: CeNIDE). These organisations foster knowledge
transfer, stimulate the formation of start-ups and the expansion of established nanotechnology
companies with the aim to improve the utilisation of academic nanotechnology research. An
example is the NETZ (NanoEnergieTechnikZentrum), which is an application-oriented
research project with the aim to develop materials and processes to support the
commercialisation and mass production of nanotechnologies for the industry.20 Furthermore,
they participate in other national and international networks and platforms to nurture
interdisciplinary exchange.21
On top of this, the regional cluster organisation ‘NanoMicro+InnovativeMaterials.NRW’
represents and supports universities and firms in their research and development activities. Its
goal is to create a competitive and dynamic R&D environment and to boost the knowledge-
intensive industry on a national and international level. The cluster organisation nurtures the
integration and networking of all actors to create synergy effects between research institutions
and companies. The focus is to intensify the dialogue and cooperation between universities
and industry, to identify markets and technological priorities, and to develop new marketing
strategies and instruments.22
The NRW nanotechnology cluster is organised in a network structure, with strong ties
between the three centres of excellence. In more detail, there is strong knowledge transfer and
experience sharing among the centres to stimulate innovations on a scientific level.
Furthermore, there are also joint efforts to create links to the commercial nanotechnology
industry. This dynamic network is also important regarding the competitiveness for public
funding on a European level, since it requires more and more to have a sophisticated and well
developed research infrastructure system in place.23
Figure 3-22: Knowledge transfer in the NRW nanotechnology cluster (example Muenster)
20
http://www.uni-due.de/cenide/netz.shtml
21
http://www.centech.de/index.php?Script=1&Lang=en&SW=1024
22
http://www.nmw.nrw.de/index.php?__lang=en&catalog=/cluster
23
http://www.innovations-report.de/html/berichte/informationstechnologie/bericht-32232.html
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Source: http://www.mondiac.nl/presentations/Weltring.ppt
Capabilities:
The NRW nanotechnology cluster network excels in their basic research activities.
Universities and research institutions building an elaborate research landscape with regional
and national networks, focusing on knowledge creation and generation. This is reflected in the
large number of patents the cluster is issuing. Through this state-of-the-art research, they can
compete with other excellence centres around the world.
Market failures and drivers for growth
Market structure:
In general, the European market for nanotechnology is fragmented, resulting in a lack of
critical mass. This makes the commercialisation of nanotechnology less effective compared to
markets in the US, which are more unified and less fragmented.
All of the three clusters in the network are dominated by the scientific research of universities
and the high number of university institutions. There are a few large nanotechnology
enterprises, such as Philips and BASF, which are located within the cluster network to
stimulate economic growth. This market structure of a scientific base with MNEs acting as
anchor companies offers start-ups a good opportunity to settle down on the interface between
them in an intermediary role. But the lack of business angels and venture capital makes it
difficult to create academic spin-offs to commercialise scientific results.
Market demand:
The nanotechnology cluster network in NRW consists of three geographically separated
clusters, each with a different focus of nanotechnology (nanotech-IT, nanotech-biotech,
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nanotech-energy). This research specialisation makes it easier to get the major enterprises as
lead customers or to establish more applied research collaborations.
Conclusion
Although the cluster network in NRW is relatively young, efforts in nanotechnology R&D
have been made for years by individual university institutions and nanotechnology
companies. In total, there are 30 university institutes, four research centres, 16 SMEs, and six
large enterprises present. In addition to this, six different networks and one venture capital
firm accompany cluster activities. The cluster is highly research-oriented with an excellence
knowledge base, but it misses the market focus. It develops relatively little of the research
results into marketable products and processes.
System and market failures and drivers
What this cluster lacks is a higher utilisation of knowledge for practical applications. Next to
information deficits of companies, which do not see the potential of nanotechnology, there are
also obstacles for building start-ups, which is due to insufficient risk capital and bureaucratic
overload. This lack of private funding gives Germany a large disadvantage in the global
market.24
Public funding: The public funding system is built on two pillars; the national government
sponsors R&D project through its federal ministry of education and research, and on an
European level, the European Commission funds nanotechnology research through its
Seventh Framework Programme from the European Commission. This funding system proved
to be successful in the past regarding excellence in basic and explorative research activities. In
contrast to this, public funding related to the creation of nanotechnology start-ups is still not
sufficient (although growing).
Tax incentives & Public procurement and lead markets: On the topic of tax incentives and
public procurement we have not found specific information for this cluster.
3.3.2. Technology cluster Non-Europe: Kyoto (Japan)
Kyoto has determined that nanotechnology is one of the fundamental technology for the
future development of its region. The Kyoto nanotechnology cluster combines nano-related
research and engineering with market-oriented nanotechnology products, systems and
services. Their main research focus covers nano sciences, new nano materials, nano devices,
24
http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
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and nano biochemicals.25 The cluster established partnerships with local nanotechnology
firms to create new businesses, also in other industries such as electronic devices, medical and
biotechnology, textiles, mechatronics, and information technologies. The core of the cluster
consists of the Kyoto University Katsura Campus and the Katsura Innovation Park, which
promote and create several university-industry research activities.26
The Kyoto nanotechnology cluster is further embedded in a system of many other clusters,
which also conduct R&D in nanotechnology or material science (see Figure 3-23).
Figure 3-23: Knowledge clusters in Japan
Source: http://www.japan-cluster.net/index.php?id=480
Short history of the cluster
The development of the Kyoto nanotechnology cluster was policy-driven. It started in 2002
with the knowledge cluster initiative from MEXT (Japan’s Ministry of education, culture,
sports, science and technology) to support universities and research institutions in their
research and innovation efforts.27 More recently (in 2008), the Kyoto Environmental
Nanotechnology Cluster was created to solve environmental problems through the application
of advanced nanotechnology.
25
http://www.mext.go.jp/a_menu/kagaku/chiiki/cluster/h16_pamphlet_e/13.pdf
26
http://www.jetro.go.jp/en/invest/region/kyoto/
27
http://www.clusterplast.eu/fileadmin/user/pdf/dissemination_event/BENCHMARKING.pdf
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System failures and system drivers for growth
Infrastructure
As stated in the previous chapter, the cluster consists of the Kyoto University Katsura
Campus and the Katsura Innovation Park which promote and create several university-
industry research activities and provide space for nine universities, three research institutions
and 43 industrial and venture companies. The core organisation of the cluster is ASTEMRI
(Advanced Software Technology & Mechatronics Research Institute of Kyoto). Next to the
academic knowledge institutes, such as the Kyoto University, the Kyoto Institute of
Technology, and the Ritsumeikan University there are many industrial players present, e.g.
Murata Manufacturing, Shimadzu Corporation, Kyocera Corporation, Omron Corporation,
etc. Furthermore, the government is also represented in the cluster with the Kyoto Municipal
Industrial Research Institute.28
Norms and values: The cluster initiated several programmes to support cluster development.
Examples are the ‘KYO-NANO outreach’, which facilitates the exchange of researchers
between academia and firms by matching each others interests. Another example is ‘KYO-
NANO society’, where joint seminars for industries and universities are organised.
Public policy and funding: Nanotechnology in Japan receives major attention from the
government. Public policies support the development of this emerging technology through the
‘Japanese Strategic Technology Roadmap’ (2005) and the ‘Third Science and Technology
Basic Plan’ (2006-2011). It is stated there that nanotechnology is one of the top priorities in
Japan’s National Growth Strategy. In 2002, the ‘National Nanotechnology Research Network
Center’ was put in place, in order to coordinate the large number of initiatives within and
between universities, national labs, and regions.29 MEXT (education, culture, sports, science
and technology) and METI (economy, trade and industry) are the main funding ministries,
and JSPS (Japan Society for the Promotion of Science), JST (Japan Science and Technology
Agency), NIMS (National Institute for Materials Science), RIKEN (Institute of Physical and
Chemical Research), NEDO (New Energy and Industrial Technology Development
Organisation) and AIST (National Institute of Advanced Industrial Science and Technology)
are their organisations to promote the research programmes.
Figure 3-24: Institutes for nanotechnology research, development and assessment
28
http://www.mext.go.jp/a_menu/kagaku/chiiki/cluster/h16_pamphlet_e/13.pdf
29
http://www.czech-in.org/enf2009/ppt/E4_Johnson_Y.pdf
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Source: http://utsusemi.nims.go.jp/english/info/policy/20060602_1.pdf
MEXT (Japan’s Ministry of education, culture, sports, science and technology) implemented
several measures to promote basic nanotechnology research and the development of practical
nanotechnology application, including building a cooperative research system between
industry-academia-government, conducting R&D in universities and independent institutions,
and providing cross-sectional support.30 Two MEXT actions are worth mentioning regarding
technological cluster development: The ‘knowledge cluster initiative’ and the ‘cooperation for
innovative technology and advanced research in evolutional area’ programme act as network
interface between industry, university and government.
METI (Japan’s Ministry of economy, trade and industry) accompanies cluster development in
two ways. There are divisions in place to support self-sustaining development of regional
(cluster) economies (regional technology division, business environment promotion division),
and there are divisions to nurture technological development (research and development
division, academia-industry cooperation promotion division).31
On a local level, the Kyoto municipality is in charge of the cluster organisation and
development and promotes collaborative research activities between academia and industry.32
The government also supports nanotechnology through public funding ($900 million in
2004).33 Public funding originates mainly from MEXT through three programmes; ‘Special
coordination funds for promoting Science and Technology’, ‘Grant-in aid for scientific
research’, and ‘the 21st century center-of-excellence programme’.34
30
http://www.mext.go.jp/english/org/struct/029.htm
31
http://www.meti.go.jp/english/aboutmeti/data/aOrganizatione/pdf/chart2009.pdf
32
http://www.kansai.meti.go.jp/english/politics/kyoto-municipal.pdf
33
http://www.czech-in.org/enf2009/ppt/E4_Johnson_Y.pdf
34
https://utsusemi.nims.go.jp/english/info/nanoproject.html?org=2080
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Table 3-9: Government funding categorised as nanotechnology & materials (billion Yen)
2001 2002 2003 2004 2005
MEXT 65 72 75 78 81
Others 20 19 19 16 16
Total 85 91 94 94 97
Source: http://utsusemi.nims.go.jp/english/info/policy/20060602_1.pdf
On a local level, the Kyoto municipality actively fosters the development of the
nanotechnology cluster by providing funds for locating or relocating firms and R&D
laboratories within the Katsura Innovation Park, which is the core of the nanotechnology
cluster. In addition to this, it stimulates university-industry collaborations by implementing
business incubators and university-industry liaison facilities.35
Venture capital: In Japan, R&D in nanotechnology is also largely supported by private
funding. Venture capital funding accounted for $2.8 billion in 2004. Overall, Japan has an
advantage over Europe and US regarding private funding. Almost two thirds of the total
funding originates from private sources. This is an indication for their strong market
orientation.36 Venture capital was not always available in the past. In the early 2000s, the
Japanese government started to create programmes and incentives for firms to invest in
nanotechnology start-ups, because there was a lack of entrepreneurship. Furthermore, large
corporations got involved in several nanotechnologies, stimulating the mass to follow this
direction. Finally, the growth of venture capital in the US also influenced the development of
VC investment in Japan.37
Interactions
Scientists are supported by capital intensive equipment through spin-in operations, which
allows them to share high-tech equipment in the Nano-Fabrication Center. Furthermore,
research and development collaborations with the private sector are in place. The Kyoto
Industry-Academia-Government Cooperative Organisation is a partnership platform of local
universities, research institutions, economic organisation, industrial support groups and the
local government in 2003, promoting the technology transfer and commercialisation of
knowledge and creating spin-off venture business.38 In addition to this, there are many
informal links to other high-tech clusters, public sector programmes, and private sector
programmes.39
35
http://www.kansai.meti.go.jp/english/politics/kyoto-municipal.pdf
36
http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
37
http://unit.aist.go.jp/nanotech/apnw/articles/library3/pdf/3-34.pdf
38
http://www.jetro.go.jp/en/invest/region/kyoto
39
http://www.mext.go.jp/a_menu/kagaku/chiiki/cluster/h16_pamphlet_e/13.pdf
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Capabilities
The cluster combines scientific excellence with market orientation. The strong academic base
generates knowledge, while the Innovation Park acts as an industrial incubator to stimulate
business creation within the cluster and thus achieves a smooth transition to market.
Market failures and drivers for growth
Because large amounts of venture capital are available, new nanotechnology start-ups can
easily be established. In this way, entrepreneurs do not face the obstacle of finding sufficient
financial resources, but can apply their academic research results quickly to market needs.
The large share of private funding in Japan for nanotechnology is an indicator for the strong
market demand, since these funds aim on supporting academic spin-offs and nanotechnology
start-ups, which contributes to the economic success of the cluster by transforming research
results into practical applications.40 Furthermore, the Kyoto Environmental Nanotechnology
Cluster has specific research topics involving ‘conserving water environment’, ‘biodiesel
through green sustainable methods’ and ‘pyroelectric infrared sensors’.41 This focus on
special (niche) markets and customers also shows the cluster’s strong market orientation.
Conclusion
The Kyoto nanotech cluster is a relatively young cluster, with a development that was highly
policy-driven. The government initiated the cluster and supported its further development
through several public programmes. There are also certain public divisions within the
ministries of technology and economy that combine technological development with regional
(cluster) development. This synergy could be seen as one of the success factors of this cluster.
In addition to this, the government nurtured the market orientation of the cluster by given
financial incentives to private nanotech firms to locate within the cluster and by attracting
venture capital to support academic spin-offs and nanotech start-ups. The combination of
strong government support with large private funding is the second success factor of the
Kyoto nanotech cluster.
40
http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
41
http://eco-pro.biz/ecopro2009/events/E1000.php?tp=1&id=10760
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System and market failures and drivers
Overall, Japan has an advantage over Europe and US regarding private funding. Almost two
thirds of the total funding originates from private sources. This is an indication for their strong
market orientation.42
Public funding
Nanotechnology in Japan receives major attention from the government. MEXT (Japan’s
Ministry of education, culture, sports, science and technology) and METI Japan’s Ministry of
economy, trade and industry) are the main funding ministries, which initiated several
governmental organisations to promote research programmes. On the municipality level,
Kyoto nurtures the development of the nanotech cluster by providing financial incentives for
locating or relocating firms and R&D laboratories within the nanotech cluster.
3.3.3. Conclusion on nanotechnology cluster benchmark between Germany and Japan
Strengths and weaknesses
The nanotechnology clusters in Northrhine Westfalia and Kyoto are both clusters with
relatively recently established cluster platforms. However, they both build upon a long
established tradition of knowledge intensive industries that have evolved over many decades
in these geographical areas. Characteristical for both areas is a strong knowledge
infrastructure (universities, labs, etc.) and a good connection between the knowledge
infrastructure and industry. The cluster platforms have an important function in supporting
these collaborations and extending the cluster’s connections both nationally and
internationally. Both clusters concentrate on the integration of nanotechnology with other
sciences (ICT, biotechnology, energy, etc.).
Both clusters are successful in the sense that they are steadily growing. However, Germany
seems to have several weaknesses compared to the Kyoto cluster:
There are relatively many small firms and the cluster lacks a ‘lead’ or ‘anchor’ firm with the
capacity for large-scale production and distribution.
The area seems to lack entrepreneurial spirit and financing of entrepreneurial activity, i.e.
there is a lack of venture capital, business angels, etc.
There is a strong focus on basic research and a lack of commercialisation activity.
42
http://hesa.etui-rehs.org/uk/dossiers/files/Nano-economics.pdf
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Kyoto, on the other hand, has a very strong private funding infrastructure, with private
funding consisting of 2/3 of all investments. The Japanese government has played an active
role in promoting the VC market. This is combined with a very strong focus on
commercialisation and with a variety of tax incentives to attract larger and international firms
to the Kyoto area.
Public policy, funding and tax incentives
With the establishment of the cluster platforms just after 2002, there is also a strong signal
from both the German and Japanese government that there is a desire to build new enabling
technologies in these areas. The national and regional governments do have different
strategies to do this though.
The involvement of the German government in the NRW nanotechnology cluster is focused
on public funding for research activities: Germany is the largest public investor in
nanotechnology in Europe. Also, they give generous funding for the cluster platform to
stimulate this development. Furthermore, they harmonise their funding schemes to increase
the transparency and accessibility of the funds.
The Japanese government takes a more pro-active role in the development of the cluster and
takes a more directive role in the technology’s application fields. Nanotechnology is a top
priority in Japans national strategy. The government’s actions do not focus only on
knowledge development (through funding of R&D), but also on commercialisation (through
incubators and liaison activities), private funding and financial/tax incentives for start-ups and
(re)location to create greater cluster density and hence critical mass.
All in all we conclude that whereas the German government mainly takes the role of an
investor in basic research, the Japanese government takes more the role of the orchestrator.
The latter tries to motivate private actors to invest in nanotechnology by promoting the VC
market, giving tax-incentives, and steering companies in the direction of commercialisation
by indicating desired application areas (water, bio-fuels, sensors). In this way they make the
chances for international commercialisation of developed technologies larger.
Lead markets: The role of lead actors / anchor firms
Whereas the question for lead markets cannot be answered for any of the KETs as the
technologies are still in a too early stage of development and the fields of application are too
divers, we see very different roles, in the different clusters, for lead firms in the cluster, which
are often referred to as anchor firms.
As remarked earlier, the NRW cluster is mainly characterised by smaller firms. The Kyoto
cluster –in contrast– has several large companies which are important for several reasons:
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They invest in new development (private funding for development and commercialisation)
They act as lead customers for the smaller specialist companies in the cluster
They provide the international connections for new knowledge inflows
They are a platform for international marketing, sales and distribution
In other words, whereas lead markets do not play an identifiable role in the cluster, lead firms
do, and they play an important role for clusters to grow and prosper.
Table 3-10 summarises the most important findings of the cluster comparison.
Table 3-10: Summary of findings from nanotechnology cluster comparison
Nanotechnology
Northrhine Westfalia - Germany
Nanotechnology
Kyoto - Japan
History Cluster platform young, established in
2003/04
Cluster grows though on strong foundations
of Northrhine Westfalia’s industrial area
‘Knowledge cluster platform’ established in
2002
‘Kyoto Environmental Nanotechnology
cluster platform’ established 2008
Cluster embedded in strong industrial history
of Kyoto area
Size 3 universities (with 30 institutes), 4 research
centres, 16 SMEs, 6 MNEs, 1 VC firm
9 universities, 3 research centres, 43
industrial and venture firms
Classification Developing Developing
Infrastructure Strong knowledge infrastructure: mainly
publicly funded
Good mix between large firms and academia
(but firms do not act as anchor companies)
Strong knowledge infrastructure
Large companies have strong R&D and fund
further development
Institutions Rules and regulations
Standardisation procedures highly important
in the diffusion process of the technology
(internat. competitiveness is largely
determined by the ability to compare
between product characteristics)
Norms and values / culture
Public acceptance is good, but has to be more
developed at the interface/ intersection
between biotechnology and nanotech.
Nanotechnology cluster has a strong identity
among the research community, but is not
highly visible in the private economy.
Lack of entrepreneurial spirit, strong research
focus
Rules and regulations
The Japanese government defines rules and
regulations to optimise the alignment of
cluster activities according to the overall
strategy.
Norms and values / culture
The Japanese collective society makes it
possible that the strong government
involvement is not rejected and proofs to be
successful. It is questionable if the same
government strategy would work in a more
individualistic cultural environment.
Public policy /
funding /
taxation
Cluster dependent on public funding because
of venture capital scarcity
Germany nr.1 for public funding of nanotech
Harmonised funding schemes for
transparency and ease of access.
Public and cluster platform support for start-
ups en commercialisation
Cluster platform initiated by MEXT
(ministry) to support research and
innovation.
Strong focus on Katsura Innovation Park,
incubators, and liaison
Private funding strong point: 2/3 of funding
from private sources.
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Lack of business angels and venture capital Government has actively stimulated
development of VC market
Nanotechnology top-priority in national
strategy
Many agencies to support research and
commercialisation
Tax incentives to stimulate investments and
stimulate (re)location to cluster area
Interactions Cluster platforms play important role in
stimulating collaboration
Platforms organised per city area:
AMO-Aachen,
CENTech-Munster
CeNIDE-Duisburg/ Essen
Platforms stimulate PPP partnerships,
collaborative research
Geographically concentrated cluster
High density of companies and research
facilities facilitate collaboration
Connections to large firms in the area
facilitate international linkages
Capabilities Strong scientific basis, focus on basic
research
Combination of excellent scientific research
with commercialisation abilities
Market demand 3 subclusters focus on:
Munster: nanobiotech
Aachen: nanotechnology for information
technology
Duisburg/Essen: nanotechnology for power
engineering
Strong market orientation
Strong focus on application areas water, bio-
fuel and sensors
Large companies play big role in funding
new developments and acting as lead
customers
Market
structure
There are relative many small companies
which is a potential weakness
Cluster open to new start-ups but relative
lack of dynamics
Good mix of smaller firm, with large
international companies
Cluster
specificities
Cluster is dispersed: compositions of three
cores, focusing on different knowledge &
application fields
Lack of commercialisation and consequently
lack of private funding
Cluster strongly managed by government
Unique in the strong market focus and strong
funding infrastructure – both public and
private
Source: TNO compilation.
3.3.4. Factors influencing the future development of nanotechnology
Factors influencing future market potentials
Nanotechnology promises a great variety of new products in diverse fields of applications. So
far, only a few of these potential innovations have been put to commercial use. While
nanotechnology is currently applied on an industrial scale in microelectronics
(semiconductors, nanowires, lithography), coatings and paints, some specific defence-related
applications, telecommunication (displays, optoelectronics) and in some areas of advanced
materials (e.g. carbon nanotubes), most innovation ideas based on nanotechnology still wait
for their commercial exploitation. A number of studies have dealt with the factors that can
drive or impede the commercialisation of nanotechnology (see EC, 2009d; PCAST, 2008;
Palmberg et al., 2009 for an overview).
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Maybe the single most important barrier to developing new markets for nanotechnology
products is to clearly identify the commercial opportunities that may result from new research
findings. Basic research constantly produces new ideas for new applications. Commercial
benefits of these ideas are often unfavourable, however, owing to the fact that nanotechnology
applications often constitute radical innovations, i.e. innovations that promise substantially
higher user benefits or address entirely new needs, but also demand considerable changes in
producing and using these innovations and may induce concerns about long-term benefits
(including environment, healt and safety issues). As for all radical innovations, demand is
highly uncertain and tends to be very low in the first years after an innovation has been
successfully introduced to the market. As a consequence, production costs are very high due
to small output volumes whereas willingness to pay by users will be low due to uncertainty
over the real benefits of the innovation. Consequently, many firms engaged in developing
nanotechnology-based innovations complain about high costs, a lack of scale economies and a
lack of consumer acceptance (see Palmberg et al., 74ff; PCAST, 2008).
Developing nanotechnology innovations often requires long and costly R&D activities. Time
to market is typically much longer than for other innovations. As a consequence, firms need
substantial external capital to finance product development. Many nanotechnology firms
report a lack of public funding and a lack of venture capital as main barriers to
commercialisation.
In addition to fiancial capital, human capital tends to be a restricting factor, too.
Nanotechnology R&D and commercialisation requires skilled people with a background in a
variety of disciplines and business practices. The need for complex human capital makes
nanotechnology particularly vulnerable to shortages in labour markets for qualified personnel.
A lack of skilled labout is therefore one of the highest ranked barriers in the nanotechnology
industry.
Since technological advance in nanotechnology is by and large driven by basic research
typically performed at public research institutions, technology transfer between academia and
the business world is particularly important for this KET. The main challenge here is to
balance undirected basic research aiming at pure scientific progress with a view on
commercialisation prospects and the specific needs of users and markets. Direct collaboration
between science and industry often helps to in this respect, but raises the issue of how
intellectual property is assigned to the individual partners.
A main issue in commercialising nanotechnology is the impacts of nanomaterials on
environment, health and safety (EHS). There is a widespread concern of potential negative
effects from nanostructures on the human organism as well as on other creatures. As a
consequence, an increasing amount of nanotechnology research is devoted to EHS issues. In
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order to enhance commercialisation prospects of new nanotechnology applications
measurement and testing methods have to be developed and validated. Based on this,
standards have to be implemented and an effective regulatory framework should be put in
place that takes into account EHS concerns while at the same time acknowledges the progress
that nanotechnology innovations can have for the environment and health. An open dialogue
between governments, industry, research and the wider society should address EHS concerns
and how these ar dealt with.
The role of public support
Being a young field of technology that is still very much driven by advance in basic research,
nanotechnology R&D relies on public funding more than any other KET. In 2005 to 2008, it
is estimated that about €42 billion have been spent on nanotechnology R&D on a global scale.
51 percent of this investment was funded from government sources while only 49 percent
came from private sources, i.e. industry (see EC, 2009d; LuxResearch, 2009; Palmberg et al.,
2009). In Europe, the share of government funding of nanotechnology R&D is significantly
higher (62 percent) than in the USA (43 percent) and Japan (38 percent) (Figure 3-25). One
should bear in mind, however, that identifying the volume of private R&D funding for
nanotechnology R&D is extremely difficult since enterprise R&D surveys rarely collect data
on R&D expenditure devoted to nanotechnology.
Figure 3-25: Public and private funding of nanotechnology research 2005-2008 (annual
average, billion Euro)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
EU US Japan Others
private
public
Source: EC (2009d: 9f), ZEW calculations.
Public R&D funding of nanotechnology largely focusses on research performed at public
institutions (universities, government labs) and on collaborative research linking science and
industry. In addition to R&D funding, governments promote advance in nanotechnology
through a number of other activities. Many governments have established national
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nanotechnology strategies that aim at coordinating various actors from public agencies,
industry and science and provide a long-term view of the likely role of nanotechnology for
economy and society. The most prominent example is the U.S. National Nanotechnology
Initiative (NNI; see Box below). By 2008, another 16 OECD countries have published
dedicated nanotechnology strategies (OECD, 2009c).
Box: The U.S. National Nanotechnology Initiative (NNI)
The NNI was established in 2001 and is the major federal R&D policy mechanism in nanotechnology in the US.
The NNI is not a programme for funding R&D but it informs and influences the federal budget and planning
processes through its member agencies. It offers all federal agencies a locus for communication and
collaboration. NNI also provides a vision of the long-term opportunities and benefits of nanotechnlogy by
producing Strategic Plans. The most recent one was published in December 2007 and defines four goals:
advance a world-class R&D programme; foster the transfer of new technologies into products for commercial and
public benefit; develop and sustain educaitonal resources, a skilled workforce, and the supporting infrastructure
and tools to advance nanotechnology; support responsible development of nanotechnology.
NNI promotes policy deliberation and, most importantly, coordinates federal R&D investment in nanotechnology.
R&D investment by agencies under the NNI between 2001 and 2010 was $11.9 billion. More than 25 federal
agencies participate in the initiative, including 13 agencies that provided R&D funding for nanotechnology. So far,
the highest investment under NNI (2001-2010) was made by the Department of Defence ($3.4 billion), the
National Science Foundation ( $3.3 billion), the Department of Energy ($2.1 billion) and the Department of Health
and Human Services (incl. the National Institutes of Health, $1.8 billion). The Department of Commerce (incl. the
National Institute of Standards and Technology) which mostly funds more application oriented, civil R&D, invested
$0.8 billion.
The NNI has been subject to evaluations by the President’s Council of Advisors on Science and Technology
(PCAST) in 2004 and 2008. The evaluations were highly positive, stressing the NNI’s important role in providing
an effective coordination across agencies, with industry and with other nations; facilitating the expansion of
technology transfer efforts and building connections across the the unparalleled innovation ecosystem in the U.S.;
and prioritising encironmental, health and safety (EHS) research that facilitates appropriate risk analysis and risk
management in step with technological innovation. PCAST recommended to expand outreach efforts to the wider
public, particularly with respect to real and perceived benefits and risks; to develop and implement standards
critical for nanomaterial identification, characterisation and risk assessment; and to coordinate strategically-guided
research on nanotechnology related EHS issues, including a balanced assessment of risks and benefits.
NNI is a policy initiative within a wider framework of policy activities to promote nanotechnology in the USA,
including dedicated nanotechnology funding as well as general R&D programmes which are also open to
nanoscale research at the federal and state level; a specific legislative framework (21st Century Nanotechnology
R&D Act); specific nanotechnology human capital initiatives; federal investments of nanotechnology centres and
infrastructure for nanotechnology research and education networks; and support the consideration of
environmental, health and safety issues associated with nanotechnology.
Imortant elements of nanotechnology support in the USA are nanotechnology initiatives at the state level. In 2008,
17 states run a total of 24 initiatives. While federal programmes are primarily focused on R&D and infrastructure
development, state and regional programmes are active in facilitating nanotechnology commercialisation.
Sources: Shapira and Wang (2007), PCAST (2008), NNI (2007, 2010)
Contribution of nanotechnology to social wealth
Nanotechnology promises great advance in many areas linked to social wealth (see EC,
2008c, 2009d). Nanomedicine offers substantial progress in true preventive medicine and
precisely targeted intervention as well as regenerative therapy. Nanomedicine develops man-
made functional structures that match the typical size of natural biological elements and allow
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for more effective and specific interactions. As a consequence, diagnosis, treatment, and
monitoring of a number of diseases will be more efficient and targeted, including cancer,
diabetes, cardiovascular, immunological, inflammatory, musculoskeletal and
neurodegenerative disorders, and infectious diseases.
Another area for wealth enhancing effects of nanotechnology is energy and environment.
Nanotechnology could contribute to a more efficient and less harmful production of energy
through advancing photovoltaics, wind energy generation and thermoelectric conversion
systems. One promising field, for instance, is solar cells based on dye-sensitised
nanocrystalline titanium dioxide. Nanotechnology can also help to develop new generations
of more effective accumulators to store electric energy. Further promising concepts are micro
reactors and novel reactive media, such as ionic liquids. Nanomaterials can contribute to
improving energy efficiency of buildings and thus lowering energy consumption.
Nanotechnology can also help to increase efficiency in various fields of manufacturing and
thus increasing productivity and lowering environmental impacts.
3.4 Conclusions and Policy Implications
State of technology
Nanotechnology is a rapidly emerging field of technology that is currently at its uptake in
terms of unlocking commercial applications. While substantial scientific nanotechnology
research started in the 1980s, application oriented R&D at a larger scale began not earlier than
in the mid 1990s. The number of patent applications started to increase exponentially in the
late 1990s and still has not reached its peak. While there is a large number of promising
technologies in the development pipeline, the number of commercial products that have been
successfully marketed is rather limited. Nanotechnology markets today mainly refer to a few
application areas such as semiconductors and a limited number of nanomaterials. While the
actual market size is rather small (about one billion US-$), prospects are expected to be
tremendous.
Europe’s technological position
Nanotechnology development is concentrated on three global regions, Europe, North America
and East Asia. North America holds the highest market share, followed by East Asia. Europe
contributes about 25 percent to total nanotechnology patenting. In terms of patents per GDP,
Europe has a significantly lower nanotechnology patenting intensity than the other three
regions. While East Asia was able to improve its technological competitiveness in terms of
patent applications, Europe’s market share remained stable over the past ten years.
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The largest subfield in terms of patents is nanomaterials (about a third of all nanotechnology
patents), followed by nanoelectronics, nanooptics and nanobiotechnology. Europe has a rather
high market share in nanobiotechnology (though still below the one of North America and
rapidly decreasing) while Europe could improve its position in nanomaterials. Europe’s
market share in nanoelectronics, nanoanalytics and nanooptics is constantly low.
Within Europe, most countries show a focus on nanomaterials (particularly Germany and the
smaller EU countries) while France and Italy are specialised in nanobiotechnology and the
Netherlands in nanoelectronics and nanomagnetics.
Links to disciplines, sectors and other KETs
Nanotechnology is a cross-disciplinary field of research that affects a multitude of industries.
At the science side, main links go to chemistry, physics and -increasingly- biology, but also
engineering sciences have been making important contributions to the development of this
KET. In contrast to other KETs, public research plays a very prominent role in patenting,
accounting for about 30 per cent of all nanotechnology patents. In recent years, patenting by
public research has increased more rapidly than in the business sector. Sector links of
nanotechnology are broad as well.
Nanotechnology patents are technologically linked to electronics (especially semiconductors),
the chemical industry, manufacturing of instruments, pharmaceuticals, machinery and
vehicles, and manufacture of metals. In East Asia, most nanotechnology patent applicants
from the business enterprise sector belong to the electronics industry while public research is
less important. In North America, universities and other research institutions are the most
important group of nanotechnology applicants. Within the business sector, the electronics
industry is leading. In Europe, the chemical industry plays an equally important role as the
electronics industry does, though the largest group of nanotechnology applicants are public
research institutions. In North America, nanotechnology and biotechnology start-ups
contribute significantly to nanotechnology patenting, while in Europe and East Asia this
segment is of minor importance.
Nanotechnology is closely linked to other KETs, particularly to advanced materials,
microelectronics and industrial biotechnology. Several subfields are also part of other KETs,
such as nanomaterials (advanced materials), nanoelectronics and nanomagnetics
(microelectronics), nanobiotechnology (industrial biotechnology) and nanooptics (photonics).
Nanodevices can play an increasingly important role in advanced manufacturing technologies.
These close links imply that nanotechnology development is highly relevant to other KETs,
which calls for joint initiatives.
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Market prospects and growth impacts
All existing market forecasts for nanotechnology and the various submarkets suggest a strong
increase in sales in the next decade. Market potentials vary considerably, however, reflecting
different definitions of the nanotechnology market. The most optimistic and broadly defined
forecasts expect global sales in 2015 to 2020 of more than one trillion US-$, making the
nanotechnology industry to one of the key industrial sectors in terms of sales. So far, many of
the forecasts have proved to be too optimistic, however. But there is no doubt that demand for
nanotechnology products will increase clearly above the total market expansion.
Above average growth of nanotechnology products originates from two sources. On the one
hand, nanotechnology is substituting other technologies, e.g. in the field of materials or
microelectronics. On the other hand, nanotechnology has a strong potential to open up new
markets not explored yet (particularly through product innovations), thus serving needs not
met by conventional products yet.
Success factors, market and system failures
Nanotechnology is a young, research-driven field of technology which is still in its infant
stage. Most commercial applications of nanotechnology are at their concept stages and will
have yet to be developed. Consequently, many activities of today’s nanotechnology industry
still focus on R&D and exploring the commercial prospects of new research findings. Public
research institutions and research-based start-ups play a prominent role in developing the new
nanotechnology industry. Under this environment, future growth of this industry depends on a
multitude of factors.
The perhaps most important success factor is funding. Financing nanotechnology R&D and
commercialisation in young firms is challenging since huge amounts of capital is needed
while technological and market risks are high and future returns not yet known. Public
funding as well as a viable venture capital industry is critical to overcome financial barriers.
Another critical factor is to successfully link technological opportunities with user demand.
Many product developments in nanotechnology tend to be research-driven, i.e. focusing on
exploring the potentials of new research results. However, users typically do not adopt new
technology solely based on their technical superiority but rather on a price-cost advantage
over established technologies, taking into account issues such as safety, compatibility to other
products and existing production processes, and acceptance by their own clients (including
adjustment costs to adopt nanotechnology products).
As for any newly emerging technology, potential impacts of nanotechnology on health, safety
and the environment have been discussed widely. Commercialising nanotechnology products
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broadly will require acceptance by users and all other parties that may be concerned by
nanotechnology product. Assessing and minimising (e.g. through regulation and information)
perceived risk potentials are important activities here. Certainty about regulatory issues is also
critical for nanotechnology producers to decide about investment and directions of future
research.
Nanotechnology is currently promoted by many governments. Most governments set up
national nanotechnology programmes or strategies (see OECD, 2009c). Most of these
programmes focus on strengthening the national research base for nanotechnology and link
(national) actors from industry and science to advance commercialisation of nanotechnology
products. While regional or national clustering has certainly its merits and can be an
important driver for advance in nanotechnology, a too strong national focus may understate
the value of international co-operation in a field of technology that is characterised by global
research networks and global markets.
Many nanotechnology firms complain about scarcity in skilled personnel (see Palmberg et al.,
2009: 74ff). As a cross section technology that combines findings from various scientific
disciplines and develops technologies that can be applied across many different industries,
skill demands are particularly high. Since education typically focuses on imparting knowledge
from specific and established scientific or business fields, people who integrate skills from
different disciplines and industries are rare, as are people who have the skills to form a
productive team of experts from different backgrounds.
Policy options
Advancing the commercialisation of nanotechnology in Europe requires a variety of activities
by industry, public research and policy. As for any newly emerging field of technology,
linking industry and science and smoothly transferring scientific findings into commercial
applications is perhaps the single most important element. Scientific research is still the most
important knowledge source in this KET, and it is most likely that the industry’s development
in the next decade will critically depend on the ability of firms to identify and evaluate new
research findings, transfer them into business models and develop new products and processes
that leverage the potentials of nanotechnology while at the same time fit to the needs of
customers in terms of performance and costs. Doing this requires a close interaction between
firms and public research, including joint R&D activities. Cluster initiatives have proved to
facilitate this exchange significantly.
Closely related to better linking industry and science is the emergence of a viable community
of start-up firms. In newly emerging fields of technology, many of these start-ups originate
from public research. Typically, they concentrate on very specific nanotechnology
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applications and explore the business prospects of new research results. In order to establish a
dynamic sector of nanotechnology companies, venture capital funding as well as public
support to R&D conducted by these firms is essential. Compared to other fields of technology
such as biotechnology, the community of nanotechnology start-ups is still small, particularly
in Europe. One reason is certainly the reluctance of the private venture capital business in
recent years to provide large amounts of risk capital for these firms. While biotechnology
start-ups could profit from a generous venture capital industry in the 1990s, the situation has
changed. Today private venture capital companies very carefully evaluate the business
prospects of young firms and most often provide only limited funding, focussing on close-to-
market-introduction projects. This situation is disadvantageous for nanotechnology since a
large number of potential applications are still in the research and concept stage, with high
uncertainty over the technological feasibility, the time of market introduction and the sales
volumes that may be generated. In order to advance the commercialisation of nanotechnology,
huge investment in R&D, pilot plants and marketing are required. Today, only large
companies can shoulder the needed long-term financial commitment, resulting in a low share
of start-ups in global nanotechnology business.
In this situation, policy will have to compensate for this “market failure” in the financial
market which results from a certain risk aversion and a rather short-term time horizon of the
venture capital business. A promising starting point for public policy in Europe can be start-
ups form public research. On the one hand, public research institutions hold a strong position
in nanotechnology patenting, indicating a wealth of knowledge relevant to commercialisation.
This potential has to be used more effectively. First, financial support for spin-offs from
public research can help to enlarge the community of nanotechnology start-ups. Secondly,
programmes to actively commercialise public research patents though out-licensing is another
promising option. Thirdly, nanotechnology research programmes at public research should be
designed in a way that combines basic research with more application-oriented development,
involving partners from the business enterprises sector. Competence centres and R&D co-
operation programmes have proved to be helpful in this respect.
Further policy actions should relate to providing a stable regulatory environment, particularly
with respect to likely safety, health and environment impacts of nanotechnology. Informing
the general public about the prospects and potential dangers of nanotechnology and how one
can deal with these is important to achieve a broad acceptance of nanotechnology. Public
programmes for risk assessment and risk control can reduce uncertainty about likely future
impacts of nanotechnology and thus stimulate investment and demand.
Since R&D in nanotechnology involves very long time horizons, stable networks among
actors from industry, science and government are needed. Cluster initiatives can help to
establish and maintain such networks.
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Chapter 4 Micro- and nanoelectronics
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4 MICRO- AND NANOELECTRONICS
4.1 Definition and State of Technology
The technology field of micro- and nanoelectronics refers to semiconductor components as
well as highly miniaturised electronic subsystems and their integration in larger products and
systems. The term nanoelectronics is rather broadly defined, which means that it can be
applied to all areas of electronics where fine structures on the level of nanometres are used. In
this sense, today’s microelectronics could also be referred to as a kind of nanoelectronics as
the control electrodes of modern chips are usually only a few layers of atoms thick. In a
narrow sense, nanoelectronics can be limited to a technique based on silicon, which is still
one of the most important semiconductor materials, and to a structural width – the smallest
dimension which can be achieved with lithography, the patterning method for integrated
circuits – of less than 100 nanometres. Nanoelectronics often refer to transistor devices that
are so small that inter-atomic interactions and quantum mechanical properties need to be
studied extensively (BMBF, 2002a).
By the year 2010, microelectronics has already crossed the verge of nanoelectronics in the
above sense with structural widths for chips of the latest generation of only 32 nanometres.
Only five years ago, a number of 55 million transistors placed on an area of 1 cm2 was
classified as more than excellent in the chip industry. Contemporary processors have a three
to ten times higher number of transistors on the same area (Fraunhofer CNT, 2008). The
benefits of miniaturisation are clear. On the one hand costs for chip manufacturing can be
reduced. On the other hand, smaller chips are much faster because the propagation delay on a
chip is dependent on its size. Technical progress is expected to result in a further reduction of
structural widths (BMBF, 2005).
Nevertheless, there are considerable technological barriers in the transition from micro- to
nanoelectronics, and this transition cannot be expected to happen almost automatically.
Decreasing structural widths lead to leakage currents and quantum effects. The latter refer to
the properties and behaviour of single atoms or molecules which are the key to modern
quantum physics. To cope with these, new concepts and materials need to be integrated into
the manufacturing process such that the enduring trend of the industry (increasing
performance at decreasing costs) can be continued. In order to achieve success and continued
growth of the industry, a cost reduction of about 30 percent per year is required, while
functionality needs to double every two years. This development, referred to as “Moore’s
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Law”, has already been anticipated by Gordon Moore at the beginning of the 1960s
(Fraunhofer CNT, 2008).
Over the last 20 years, an end to this trend has often been propagated. But technical progress
has constantly resolved the upcoming obstacles and has even overcome physical limits that
had previously been thought of as insurmountable. However, “conventional” concepts will
presumably be fully exploited in the future, which raises a need for new concepts. An
example for this might by extreme ultraviolet lithography which is a next-generation
lithography using a special wavelength. For the next decade, further miniaturisation can be
expected up to 23 nanometres. This corresponds to a width of only 100 silicon atoms. Optical
lithography will then have reached a physical limit. At the same time, necessary changes in
plant engineering will presumably not be sufficient to support further miniaturisation. Instead,
new developments will be required which creates considerable investment requirements for
the manufacturers (Fraunhofer CNT, 2008).
In the following we will use the term “microelectronics” for simplification, though this term
will always refer to both micro- and nanoelectronics.
4.2 Technological Competitiveness, Industry Links and Market Potentials
4.2.1. Technological Competitiveness
In the following, technological competitiveness of Europe is analysed in comparison to that of
North America (USA, Canada, Mexico) and East Asia (Japan, China incl. Hong Kong, Korea,
Taiwan, Singapore). In order to account for “home office” effects in patenting (i.e. the
propensity for applicants from a particular region to use predominantly that regional patent
office for applications), patent applications from the EPO (incl. PCT), USPTO, JPO, as well
as triadic patent applications are analysed.
Market Shares
Figure 4-1 shows the number of microelectronics patents applied for at the EPO or through
PCT by region of the applicant. In the period from 1981 to 2005 around 100,000 patents were
applied for. The majority of applicants comes from East Asia (more than 40,000), closely
followed by North America (almost 36,000) and Europe (23,000). Patenting activities by East
Asian applicants are steadily increasing at an almost constant rate since 1994 while the
number of patents from North America and Europe did not grow much after the year 2000.
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Figure 4-1: Number of microelectronics patents (EPO/PCT) 1981-2005, by region of
applicant
0
500
1000
1500
2000
2500
3000
3500
4000
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
In 2005, European applicants had a share of 22 percent in total microelectronics patent
applications at the EPO/PCT, compared to 30 percent for North American applicants and 46
percent for East Asian applicants (see Figure 4-2). Over the past 15 years, market shares of
European applicants have remained relatively constant while North American applicants lost
shares in favour of East Asia.
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Figure 4-2: Market shares of microelectronics patents (EPO/PCT) 1991-2005, by regions
(percent)
0
10
20
30
40
50
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
Figure 4-3 shows the shares in microelectronics patents for national patent applications at the
EPO, USPTO and JPO as well as for triadic patents. At the European market for
microelectronic technology, European applicants slightly gained market shares over the past
15 years. In 2005, their share in the total number of EPO patent applications was 32 percent,
being now second behind East Asian (39 percent) and North American (28 percent). Among
USPTO patents, East Asian applicants are also dominating with a market share of 58 percent,
followed by North American applicants (30 percent) and European applicants with only 11
percent. Europe’s position is likewise weak when patent applications in microelectronics at
the JPO are considered. East Asian applicants lead with 71 percent, followed by North
American applicants (17 percent) and European applicants (12 percent). However, European
applicants were able to increase their shares both at the USPTO and the JPO since the mid
1990s to some extent. When looking at triadic patents, it turns out that Europe’s position has
improved up to a market share of 25 percent in 2003. North American applicants report
sharply falling shares down to 30 percent in 2004 while East Asian applicants were able to
gain shares in the global output of triadic patents in microelectronics, reaching 45 percent in
2004.
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Figure 4-3: Market shares in microelectronics patents 1991-2005 for national applications
and triadic patents (percent)
a. Europe1)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. North America2)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
c. East Asia3)
0
10
20
30
40
50
60
70
80
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies (including PCT applications transferred to national patent offices from all three regions).
Source: EPO: Patstat, ZEW calculations.
Patent intensities can be calculated in order to determine the relative importance of
microelectronics patents for a region. They relate the number of patents per year by applicants
from a certain region to the GDP of that region. Both graphs in Figure 4-4 show that East
Asian applicants clearly exhibit highest patent intensities while North American and
European applications have considerably lower patent intensities.
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Figure 4-4: Microelectronics patent intensity 1991-2005 for EPO/PCT and triadic patents
(number of patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT patents
0
50
100
150
200
250
300
350
400
450
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
50
100
150
200
250
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by Subfields
Based on the IPC classification, microelectronics can be broadly separated into six subclasses
which will be analysed in the following (IPC classes in parantheses):
Semiconductors in general (H01L 21, H01L 23, H01L 27, H01J)
Computing (all microelectronics patents with co-assignment to IPC classes G06, G11, G12)
Measurement (all microelectronics patents with co-assignment to IPC classes G01, G05, G07,
G08, A61B)
X-ray (all microelectronics patents with co-assignment to IPC classes G02, G03, G09, G21)
Bonds, electrolytes, crystals (all microelectronics patents with co-assignment to IPC classes
C23, C30, C40, C01C)
Devices (all microelectronics patents with co-assignment to IPC classes B01, B05, F)
The largest subfield by far is semiconductors, accounting for more than half of all
microelectronics patents (Figure 4-5). All three main regions show similar shares for this
subfield. The remaining subfields account for about 10 percent each.
East Asia reports well above average shares for x-ray while Europe’s share is relatively
highest in measurement. North American applicants are particularly strong in bonds and
crystals.
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Figure 4-5: Composition of microelectronics patents (EPO/PCT) by subfields (percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Semiconductors Computing Measurement X-ray Bonds/crystals Devices
Source: EPO: Patstat. ZEW calculations.
When looking at the development of market shares across subfields over time (Figure 4-6), it
turns out that European applicants have improved their position predominantly in the fields of
measurement, x-ray and devices while the position remained rather static in the fields of
semiconductors and bonds/crystals. Interestingly, North American applicants have lost market
share in all subfields over time while East Asian applicants have generally gained over time.
Figure 4-6: Market shares for EPO/PCT microelectronics patents by subfields 1991-2005
(percent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Semiconductor
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Computing
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Measurement
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0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
X-ray
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Bonds/crystals
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Devices
Source: EPO: Patstat, ZEW calculations.
Patent application in microelectronics by European applicants is more focused on
measurement and devices than the one of North American and East Asian applicants. In East
Asia, the specialisation on semiconductors has been continuously decreasing while x-ray
increased. In North America, shares of specialisation remained relatively stable (Figure 4-7).
Figure 4-7: Composition of microelectronics patents (applications at home patent offices), by
region, subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
No
rth
Am
er
ic
a
Ea
st
As
ia
Semiconductors Computing Measurement X-ray Bonds/crystals Devices
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
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98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Dynamics in microelectronics patent applications at the regional home offices significantly
differ by subfield and region. In the most recent period (1998/01 to 2002/05), Europe
increased the number of annual patents in microelectronics by around 6 percent which closely
follows growth East Asia of around 9 percent (Figure 4-8). In contrast to this, the rate of
change in North America has even been slightly negative. In all three regions, growth has
been highest in the subfield of devices, followed by x-ray and bonds/crystals.
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Figure 4-8: Average annual rate of change in the number of microelectronics patents
(applications at home patent offices), by region, subfield and period (percent)
-5
0
5
10
15
20
25
30
35
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
Semiconductors Computing Measurement X-ray
Bonds/crystals Devices Total
Europe
-5
0
5
10
15
20
25
30
35
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-5
0
5
10
15
20
25
30
35
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Patenting at the country level in Europe
Chapter 4 Micro- and nanoelectronics
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Shedding light on the microelectronics patenting within Europe, applicants from Germany
represent the largest group of microelectronics patents (Figure 4-9). From 1981 to 2005, 41
percent of all microelectronics patents at the EPO from European applicants stem from
German inventors, followed by France (16 percent), the Netherlands (12 percent) and the
United Kingdom (11 percent). There has been a particularly fast growth of German patent
applications from 1993 to 2000 after which, however, patent output did not grow anymore.
Applications by applicants from other European countries further grew in the 2000s,
particularly in France, the UK and the Netherlands.
Figure 4-9: Number of microelectronics patent applications (EPO and PCT) 1981-2005 by
European applicants, by country
0
100
200
300
400
500
600
700
800
900
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE FR
UK IT
NL SE
CH BE
RoE
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
The economic significance of microelectronics patenting differs substantially by country
(Figure 4-10). Microelectronics patent intensity -that is the ratio of the number of
microelectronics patents to GDP- is highest in the Netherlands and clearly above the
European average in Switzerland and Germany. Sweden produces somewhat more
microelectronics patents per GDP than the European average whereas France and Belgium
report average patent intensities. UK, Italy and the total of all other European countries show
low microelectronics patent intensities.
Figure 4-10: Patent intensity in microelectronics 1991-2005 of European countries (EPO/PCT
patents)
European Competitiveness in KETs ZEW and TNO
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0
50
100
150
200
250
300
350
400
450
DE FR UK IT NL SE CH BE RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
Growth rates in microelectronics patenting also differ considerably among European
countries. Out of the eight countries that produce the largest number of microelectronics
patents, Belgium, the Netherlands and Italy could increase their patent output between the
first half of the 1990s (1991-95) and the first half of the 2000s (2001-05) above the European
average at compound annual rates between 20 and 25 percent (Figure 4-12). A very high
growth rate was also experienced by the group of European countries not qualifying for the
eight largest patent producers in microelectronics.
Figure 4-11: Change in the number of microelectronics patents between 1991/95 to 1996/00
and 1996/00 to 2001/05, by country (EPO/PCT patents; compound annual growth
rate in percent)
-5
0
5
10
15
20
25
30
35
DE FR UK IT NL SE CH BE RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
Chapter 4 Micro- and nanoelectronics
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Microelectronics patenting increased slightly above the average European rate in UK whereas
Germany, France, Switzerland and Sweden report growth rates somewhat below the European
average. In almost all countries, growth rates were higher in the 1990s (i.e. between 1991/95
and 1996/00) than in the recent period (1996/00 to 2001/05). Belgium is the only country
among the eight largest microelectronics patents producers that could increase its output in
the latter period at a higher rate.
The composition of microelectronics patent applications by subfields differs only slightly by
country of inventor (see Figure 4-12). Patents from Italy show a very high share in
semiconductors while this share is below average for the Netherlands. The Netzerlands show
a higher share in X-ray patenting. All other countries exhibit shares around the European
average.
Figure 4-12: Composition of microelectronics patents in Europe, by subfield and country
(percent)
0 10 20 30 40 50 60 70 80 90 100
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Europe total
Semiconductors Computing Measurement X-ray Bonds/crystals Devices
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
Figure 4-13 provides a more detailed picture of country-specific specialisation by subfield
within microelectronics. It emerges that Italy is largely specialised on semiconductors while
the Netherlands exhibit a strong focus on x-ray which is where Italy is least specialised in.
Moreover, a specialisation of Germany on microelectronic devices becomes apparent while
patenting by Frech inventors is specialised on semiconductors, bonds/crystals and computing
applications, whereas UK inventors are specialised on x-ray.
Figure 4-13: Specialisation patterns of microelectronics patenting in Europe, by subfield and
country of inventor (percent)
European Competitiveness in KETs ZEW and TNO
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-8 -4 0 4 8 12 16
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Semiconductors
Computing
Measurement
X-ray
Bonds/crystals
Devices
Difference between the share of a subfield in a country’s total microelectronics patents and the respective share for Europe total (excluding
the country under consideration).
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
European countries show different trends in microelectronics patenting by subfield (Table
4-1). When comparing the growth in the number of patents applied by subfield for the 1990s
(i.e. between the number of patents over the 1991-95 and the 1996-2000 periods) and the
early 2000s (i.e. between 1996-00 and 2001-05), one can see high growth rates for x-ray and
devices in both periods while patenting in semiconductors clearly slowed down. Belgium, the
UK and the Netherlands could sustain high growth rates in semiconductors during the early
2000s, however. France increased its patent output in the microelectronic devices in the 2000s
substantially while Italy reports high growth rates for x-ray and devices. Belgium and the
Netherlands show high growth rates in the 2000s in all subfileds of microelectronics whereas
Germany’s recent growth rates in microelectronics patenting are rather low, except for
devices and x-ray. The “rest of Europe” increased microelectronics patent output at a high
pace in all subfields during in the 1990s but growth rates fell somewhat in the early 2000s.
Chapter 4 Micro- and nanoelectronics
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Table 4-1: Change in the number of microelectronics patents between 1991/95 to 1996/00
and 1996/00 to 2001/05 by subfield and country (EPO/PCT patents, compound
annual growth rate in percent)
DE FR UK IT NL SE CH BE RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Semiconductors 23 4 16 8 17 14 7 -1 21 18 26 -4 17 6 26 27 34 16 20 8
Computing 33 2 10 12 22 10 1 4 22 23 43 23 19 11 18 35 42 23 23 10
Measurement 14 9 5 12 15 11 14 5 36 20 23 3 8 15 14 25 33 14 15 12
X-ray 16 15 7 17 20 14 10 34 32 31 20 16 15 -1 14 25 33 23 19 20
Bonds/crystals 17 8 12 16 25 15 14 19 8 17 8 18 7 15 18 20 29 15 16 13
Devices 28 18 5 32 35 23 25 35 29 27 25 2 19 12 50 36 39 18 26 21
Microelectronics tot. 22 5 14 10 17 15 8 3 21 18 25 -3 16 7 24 27 33 17 20 9
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
Eight European countries with the largest number of microelectronics patents (based on inventors’ locations) from 1981-2005. “RoE”: all
other European countries.
Source: EPO: Patstat, ZEW calculations.
4.2.2. Links to Sectors and Fields of Technologies
Technological links to sectors
When microelectronics patents are linked to industrial sectors based on the IPC classes to
which a patent was assigned (so-called “technological sector links”), we find a rather focused
sector relevance of microelectronics (Table 4-2). 58 percent of all microelectronics patents are
linked to the electronics sector, followed by machinery and instruments (12 percent each).
The remaining sectors are only of minor importance. There is an even stronger link between
microelectronics patents and the electronics sector for North American patent applicants while
the affiliation with the instruments sector is somewhat lower.
Table 4-2: Technological sector affiliation of microelectronics patents (EPO/PCT), by region
(average of 1981-2007 applications, percent)
Europe North America East Asia Microelectronics
total
Food 0 0 0 0
Textiles 0 0 0 0
Wood/Paper 1 0 0 0
Chemicals 5 5 5 6
Pharmaceuticals 1 0 0 1
Rubber/Plastics 1 1 1 1
Glass/Ceramics/Concrete 2 2 2 3
Metals 5 4 4 5
Machinery 9 11 11 12
Electronics 60 67 61 58
Instruments 13 9 14 12
Vehicles 3 1 1 2
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
European Competitiveness in KETs ZEW and TNO
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The importance of patenting in microelectronics for sectors can also be analysed with respect
to the subfields of microelectronics. It turns out that –again– electronics industry is the most
important sector across all subfields. About half of the microelectronics patents can be
technologically attributed to this industry (Table 4-3). It is followed by instruments as well as
machinery with 12 percent of the patents each.
Table 4-3: Technological sector affiliation of microelectronics patent applications (EPO/PCT),
by subfield (average of 1981-2007 applications, percent)
Sector
Semicon-
ductors
Compu-
ting
Measure-
ment
X-ray Bonds/
crystals
Devices Total
Food 0 0 0 0 0 0 0
Textiles 0 0 0 0 0 0 0
Wood/Paper 0 2 0 0 0 1 0
Chemicals 6 2 3 7 13 10 6
Pharma 0 0 1 1 1 1 1
Rubber/Plastics 1 1 0 1 1 1 1
Glass/Ceramics 2 1 1 2 4 4 3
Metals 5 2 3 2 15 8 5
Machinery 12 5 5 8 24 22 12
Electronics 60 73 47 49 37 41 58
Instruments 12 12 34 30 4 7 12
Vehicles 1 2 5 1 1 4 2
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
Moreover, it is possible to analyse the applicants of microelectronics patents and their
industry affiliation. Adopting a rather high level of aggregation, these industry sectors are
semiconductors, computer, telecommunication, instruments, chemicals, automotive, defence,
machinery, other materials, research, and other electronics. Figure 4-14 shows the sector
shares in the production of microelectronic patents at the EPO and through PCT. It has to be
kept in mind that these figures do not refer to absolute numbers of patents that were generated
in the respective sectors. Instead, Figure 4-14 rather gives insights on the industrial structure
in the three regions with respect to microelectronics.
Chapter 4 Micro- and nanoelectronics
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Figure 4-14: Sector affiliation of microelectronics patent applicants (EPO/PCT), by region
(average of 1981-2007 applications, percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
Total
Other Electronics Semiconductors Computer Telecommunication
Instruments Chemicals Automotive Defence
Machinery Other Materials Research
Source: EPO: Patstat, ZEW calculations.
Interesting differences between the three world regions under study emerge. In East Asia,
most microelectronics patents are applied for by electronics firms while this share is
considerably lower in Europe and North America where specialised semiconductor firms
dominate. Europe also has a focus on the automotive sector which has a higher share in total
European microelectronics patents than the other two regions. Moreover, East Asian firms
from the instruments sector produce a relatively higher number of patents than firms from
these sectors in Europe and North America. Another interesting finding is that
microelectronics patenting in Europe is to a higher extent a result of public research efforts.
This finding might serve as an indication of an excellent public research infrastructure in
Europe. The public research share is lowest in East Asia.
Comparing the sector affiliation of microelectronics patent applications before and after the
end of 2001 – which splits the total sample of microelectronics patents in two subsamples of
similar size – reveals a shift of microelectronics patenting toward specialised semiconductor
firms. This trend is particularly pronounced in Europe and reflects the strategy of the largest
European electronic companies -Siemens and Philips- to spinoff their microelectronics
businesses in separate companies (Infineon and Epcos as Siemens spinoffs, ASML and NXP
as Philips spinoffs). In all three regions, public research gained market shares in
microelectronics patenting. In Europe, automotive manufacturers become increasingly
engaged in this field of technology. In North America and East Asia, the chemical and
materials industries increased their share in total microelectronic patenting. Decreasing shares
are reported for the electronics industry (i.e. integrated electronic companies) in Europe and
Japan, for telecommunication companies in all three regions, and for computer manufacturers
in North America and East Asia.
European Competitiveness in KETs ZEW and TNO
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Figure 4-15: Change in the sector affiliation of microelectronics patent applicants before and
after the end of 2001 (EPO/PCT), by region (percentage points)
-12
-8
-4
0
4
8
12
16
Europe North America East Asia Total
Other Electronics Semiconductors Computer Telecommunication
Instruments Chemicals Automotive Defence
Machinery Other Materials Research
Source: EPO: Patstat. ZEW calculations.
Microelectronic patenting is typically concentrated among a few applicants, mostly from the
business and enterprise sector. Table 4-4 shows the list of top-ten patent applicants in the
three regions.
Chapter 4 Micro- and nanoelectronics
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Table 4-4: 25 main patent applicants in microelectronics by region (EPO/PCT patents,
2000-2007 applications)
Europe North America
Rank Name Country Sector No. of patents Rank Name Country Sector No. of patents
1 Infineon DE semiconductor 1525 1 Applied Materials US semiconductor 1051
2 STMicroelectronics IT semiconductor 724 2 IBM US computer 645
3 ASML NL semiconductor 568 3 Intel US semiconductor 615
4 Philips NL electronics 506 4 Freescale Semicond. US semiconductor 540
5 Comm. à l'energie atom. FR government 450 5 AMD US semiconductor 531
6 Robert Bosch DE automotive 442 6 Micron Technology US electronics 519
7 Siemens DE electronics 441 7 Texas Instruments US instruments 473
8 OSRAM Opto Semicond. DE semiconductor 248 8 LAM Research Corporation US research 461
9 Carl Zeiss SMT DE instruments 237 9 Eastman Kodak US instruments 423
10 NXP NL semiconductor 193 10 Hewlett-Packard US computer 395
11 S.O.I. Tec FR semiconductor 153 11 Motorola US telecommunication 326
12 IMEC BE research 150 12 Honeywell International US machinery 324
13 Fraunhofer-Gesellschaft DE research 133 13 Du Pont US chemicals 269
14 Continental Automotive DE automotive 115 14 3M US chemicals 266
15 THOMSON-CSF FR defence 105 15 CREE US electronics 247
16 CNRS FR research 95 16 Advanced Technology M. US materials 227
17 L'Air Liquide FR chemicals 83 17 University of California US research 203
18 SEMIKRON Elektronik DE electronics 79 18 ATMEL US automotive 190
19 Schott AG DE materials 71 19 Delphi Technologies US automotive 173
20 Saint-Gobain Glass FR materials 70 20 General Electric US electronics 170
21 X-FAB Semic. Foundries DE semiconductor 66 21 ASM America US semiconductor 168
22 ALCATEL FR telecommunication 62 22 SanDisk US machinery 167
23 Merck Patent GmbH DE chemicals 60 23 Air Products and Chemic. US chemicals 136
24 Cambridge Display Tech. GB electronics 59 24 Dow Corning US chemicals 134
25 EPCOS DE semiconductor 58 25 Axcelis Technologies US semiconductor 126
East Asia
Rank Name Country Sector No. of patents
1 Tokyo Electron JP electronics 1498
2 Matsushita Electric Indust. JP electronics 1392
3 Samsung Electronics KR electronics 1077
4 Fujitsu JP computer 903
5 Nikon JP instruments 736
6 NEC JP telecommunication 675
7 Canon JP instruments 659
8 Sharp JP electronics 646
9 Hitachi JP electronics 620
10 Sony JP electronics 605
11 Semicond. Energy Lab. JP semiconductor 554
12 Fujifilm JP chemicals 471
13 Toshiba JP electronics 437
14 Sumitomo Electric JP electronics 430
15 Seiko Epson JP instruments 407
16 Tokyo Ohka Kogyo JP semiconductor 305
17 Shin-Etsu Handotai JP semiconductor 271
18 JSR JP electronics 270
19 SANYO Electric JP electronics 269
20 Shin-Etsu Chemical JP chemicals 256
21 LG Electronics KR electronics 235
22 Nitto Denko JP electronics 230
23 Ebara JP machinery 215
24 Rohm JP semiconductor 209
25 Showa Denko JP research 206
Source: EPO: Patstat. ZEW calculations.
Infineon from Germany, followed by STMicroelectronics from Italy and ASML from the
Netherlands, lead the list in Europe. Philips and the Commissariat à l'energie atomique follow.
The top patenting firm in North America is Applied Materials. In East Asia, Tokyo Electron
leads the list, followed closely by Matsushita Electric Industries.
The concentration of patent applications on a few applicants can be quantified by using
concentration measures. Figure 4-16 shows the concentration of patenting activity in
microelectronics on the basis of five concentration measures indicating the share of patents
for which the 5 percent (CR5), 10 percent (CR10), 15 percent (CR15), 20 percent (CR20),
and 25 percent (CR25) most patenting active firms account for.
European Competitiveness in KETs ZEW and TNO
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Figure 4-16: Concentration of patenting activity in microelectronics (EPO/PCT patents, 2000-
2007 applications)
0
10
20
30
40
50
60
70
Europe North America East Asia
CR5 CR10 CR15 CR20 CR25
Source: EPO: Patstat. ZEW calculations.
Regarding CR5, it turns out that concentration is highest in Europe (37 percent), followed by
East Asia (25 percent) and North America (23 percent). However, East Asia shows a higher
number of firms with substantial patenting activity than Europe, leading to an overall higher
concentration when CR25 is applied. Concentration in North America is generally lower.
Links to other KETs
Related to the issue of sector links is the degree to which microelectronics patents are linked
to other KETs. One way to assess likely direct technological relations is to determine the
share of microelectronics patents that are also assigned to other KETs (because some IPC
classes assigned to a microelectronics patent are classified under other KETs). The degree of
overlap of microelectronics patents with other KET patents by subfields is shown in Figure
3-18. Almost a quarter of all microelectronics patents has been assigned to other KETs too.
High share of overlaps can be found for devices, measurement and x-ray (36 to 37 percent of
all patents) while overlaps to other KETs are lower for bonds/crystals, computing and
semiconductors.
Chapter 4 Micro- and nanoelectronics
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Figure 4-17: Share of microelectronics patents linked to other KETs by subfield (EPO/PCT
patents 1981-2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Semiconductors
Computing
Measurement
X-ray
Bonds/crystals
Devices
Microelectronics total
Source: EPO: Patstat. ZEW calculations.
For those microelectronics patents that are linked to other KETs, one can see that many of
these patents overlap with the field of photonics (particularly x-ray, devices, semiconductors
and measurement), indicating the increasing importance of photonics for technological
advance in microelectronics (Figure 4-18). Microelectronics patenting is also linked to
nanotechnology, advanced materials and advanced manufacturing technologies. The subfield
of computing is strongly linked to nanotechnology while measurement has strong ties to
advanced manufacturing technologies. Patents in the subfield of bonds and crystals often
overlap with advanced materials. There is no overlap between microelectronics and industrial
biotechnology.
Figure 4-18: Links of microelectronics patents to other KETs by subfields (EPO/PCT patents
1981-2007, only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Semiconductors
Computing
Measurement
X-ray
Bonds/crystals
Devices
Microelectronics total
Nanotechnology Industrial Biotechnology
Photonics Advanced materials
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
4.2.3. Market Potentials
The market potential of microelectronics becomes predominantly manifest in the
semiconductor industry. Semiconductors are an intermediate input for a variety of sectors but
European Competitiveness in KETs ZEW and TNO
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they are particularly important for information and communication technology (ICT)
equipment and embedded systems. In this respect, semiconductor production and shipments
can be characterised as leading indicators of ICT product market trends.
Semiconductor production is a highly cyclical industry. During economic downturns
production drops sharply but when the economy recovers, semiconductor production does so
as well. Nevertheless, long-term growth prospects are very positive, given the general societal
trend towards digital appliances, media, and mobile communication which is supported by
strong consumer demand. Moreover, this trend is expected to be fuelled by higher
semiconductor content per installed system, leading to a “digital upgrading” of the economic
and social infrastructure. In this respect, semiconductor sales worldwide in current prices have
increased by 10 percent annually since 1990. Between 1990 and 2000 the world market for
semiconductors quadrupled from $50 billion to more than $200 billion, which was however
followed by a collapse of the market in 2001 to less than $140 billion. Since then, sales have
recovered and reached the original growth pattern. In 2008, the OECD reports a moderate
growth of the semiconductor industry, the most recent data available, of 2.2 percent to $260
billion in current prices (OECD, 2008). With that market size, semiconductors amount to
around one fourth of the total worldwide electronics industry which is estimated at €800
billion (BMBF, 2005). Earlier projections had, however, anticipated a total semiconductor
market size of $280 billion. Owing to the recent economic downturn, sales had declined by
5.9 percent in 2009.
Regarding the market size in different world regions, Asia dominates with 68 percent of
worldwide sales (2007) whereas Europe and North and South America each account for
around 16 percent. Market growth in Asia except Japan has been more than 13 percent
annually between 2000 and 2007 while Japan grew slightly and Europe and the Americas
declined (OECD, 2008). Figure 4-19 shows the worldwide semiconductor market by region in
the period from 1990 to 2009.
Chapter 4 Micro- and nanoelectronics
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Figure 4-19: Global semiconductor market 1990-2009, by region (billion US-$, current prices)
0
20
40
60
80
100
120
140
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09
Europe Americas Asia Pacif ic Japan
Figures for 2008 are preliminary and for 2009 are forecast.
Source: OECD, partly estimated, based on World Semiconductor Trade Statistics (WSTS).
Regarding the final use of semiconductors, patterns have changed over the last years,
reflecting shifts in final consumption and technological advances. While the final use in
consumer electronics and all other products has increased in relation to the total final use, the
use in computers has relatively decreased. Nevertheless, Figure 4-20 shows that with a share
of almost 40 percent of total sales (2007), computers still dominate the final use for
semiconductors, followed by the telecom market segment with around 25 percent.
Figure 4-20: Worldwide semiconductor sales 2007, by market segment (percent)
Industrial and military
8.2%
Consumer
20.5%
Automotive
6.3%
Telecom
25.5%
Computer
39.6%
Source: OECD, based on Semiconductor Industry Association (SIA).
European Competitiveness in KETs ZEW and TNO
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Semiconductor components also rapidly diffuse into other sectors like automotive or medical
instruments. Europe is a particularly important market for semiconductors in automotive with
a share of sales of 19 percent in 2008 compared with 8 percent worldwide (European
Commission, 2009). Furthermore, microelectronic components are essential in civil and
military aerospace in which Europe sustains a dominant position.
The prospects for the semiconductor industry can be differentiated into a short-, medium- and
long-term horizon. Regarding the short-term perspectives, the financial markets and economic
crisis has severely impacted business and consumer confidence worldwide. In the past, the
semiconductor market has closely followed the development of GDP growth. As a
consequence, less favourable conditions can be expected for the short-term development of
microelectronics. In contrast to this, the medium-term global performance of the industry is
seems as much more promising. In a survey of industry executives, KPMG predicts
increasing sales of 6 to 10 percent over the next three years (KPMG, 2009). Wireless
consumer electronics and computing together with a focus on green technology are identified
as the most rapidly growing market segments. The expected growth rate is confirmed by the
World Semiconductor Trade Statistics, projecting a market size of $270 billion in 2011 and a
similar growth for the following three years (WSTS, 2009). Long-term growth projections are
rare owing to the cyclical nature of the industry. However, there are indications of a long-term
annual growth of 8 to 10 percent (WSTS, 2009). These long-term growth prospects, however,
critically depend on a successful solution of the technical problems associated with the
increased miniaturisation of semiconductors. Table 4-5 summarises available estimates and
forecasts on the market potential in microelectronics and selected subfields.
Table 4-5: Estimates and forecasts for the size of the global microelectronics market and
selected subfields (billion US-$)
Subfield Source 2005/
06
2007/
08
2010/
11
2012/
13
~2015 ~2020 Cagr*
Semiconductors
Total OECD (2008) 260 8.8
Total KPMG (2009) 6-10
Total WSTS (2009) 227 248 270 3-7
Analog/mixed signal devices BCC (2005) 31.7 67.6 13.5
Advanced electronic
packaging BCC (2006) 39.5 57.6 7.8
Memory products (DRAM,
NAND flash, etc.) BCC (2010) 27 41 7.2
Sputtering targets and
sputtered films BCC (2007) 2.8 5.9 16.1
Thin-layer deposition BCC (2007) 9.6 16.7 9.6
Thermal mgmt. technologies BCC (2007) 6.2 11.1 10.2
Displays BCC (2008) 0.1 0.2 6.5
Microelectro-mechanic
systems (MEMS) BCC (2008) 7.2 13.2 10.6
Atomic layer deposition BCC (2008) 0.3 1.0 10.6
Chapter 4 Micro- and nanoelectronics
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ASIC BCC (2009) 18.5 22.3 3.8
Bonds, electrolytes, crystals
Microfluids technology BCC (2005) 2.9 6.2 13.5
Chemicals/materials BCC (2006) 22.7 34.8 8.9
Dielectrics/substrates BCC (2009) 14.5 13.5 18.3 6.2
Total market
Electronics BMBF (2005) 800
Electronics BCC (2007) 2,000 3,200 12.6
* Compound annual growth rate in nominal terms (percent).
Source: Compilation by ZEW based on the sources quoted.
4.3 Success Factors, Barriers and Challenges: Cluster Analysis
Clustering can be viewed from three angles: production locations, research activity and
investments indicating future (production) location. In terms of production output Asia is the
largest geographical agglomeration with China accounting for 27 percent of production in
2007, South East Asia and Australia for 15 percent, Japan for 13 percent, North America for
20 percent and Europe for 21 percent (Innova, 2008). This trend towards clustering of
production in Asia is likely to continue with share of worldwide investment in
microelectronics in Europe declining. In 2007, 10 percent of global investments of €28
billionin microelectronics were in Europe, compared to 48 percent in Asia. In 2009, China led
the world last year in new semiconductor factory construction, with six semiconductor
fabrication plants (further referred to as fabs), followed by Taiwan with five, and Korea,
Japan, the European Union, the USA and Southeast Asia, all with one a piece (McCormack,
2010). Global semiconductor production is hence dominated by China in Asia, while
European production is comparable in level to America and Japan (OECD, 2009).
However, in terms of semiconductor design (R&D) the global distribution looks much more
favorable for Europe. In 200643, Europe’s share in global semiconductor design was 35
percent compared to 22 percent of production. This specialisation is even more apparent in
automotive (46 percent design and 30 percent production), industrial (43 percent design and
30 percent production) and telecommunications (40 percent design and 35 percent
production) (Innova, 2008). This specialisation is also documented in the literature by so-
called fabless semiconductor firms, which only design and market semiconductor
components, primarily in advanced economies. At the same time, they rely on specialised
manufacturers, so called semiconductor foundries, to make the products in locations with low
labour costs, such as Asian countries (Mowery, et al, 2007).
43
The most recent R&D data of the OECD Technology Outlook 2008 does not go beyond 2006.
European Competitiveness in KETs ZEW and TNO
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This strength in design is also reflected in a number of European clusters with particular
semiconductor competencies which are recognised world-wide. These clusters address all
application fields and have access to the most advanced technologies globally. Examples of
recognised European clusters in the field are the Grenoble cluster in France, the Eindhoven cluster
in the Netherlands, the Dresden cluster in Germany and the Leuven cluster in Belgium.
For this analysis we have chosen to compare one European cluster with one international
counterpart. With the Grenoble cluster being one of the worlds best known regions for micro-
and nanoelectronics, we chose to compare this cluster with the Ontario region (Canada),
which exists since the 1970s and is a leader on microelectronics application markets.
Comparing cluster however is not without pitfalls. Microelectronics cluster are heterogeneous
in their activities. For example the difference in business models focusing on continued
miniaturisation versus a diversification of new functionalities makes a comparison along
number of employees or levels of investment little meaningful. However, one shared
commonality across clusters is the excellence of their applied research (Collet, 2007). This
will be hence the prime focus of our comparison including how policy can support to achieve
this ‘global excellence’.
4.3.1. Micro- and Nanoelectronics Europe: The Grenoble cluster
Introduction
The Grenoble cluster has one of the highest concentrations of scientists and high-tech
companies in the world and its activity is targeting many industrial sectors, ranging from
industrial process automation to consumer electronics, via energy consumption optimisation,
to the world of connectivity and mobility (Nanomicro, 2010). What is particularly recognised
about the cluster is its market driven focus and coordinated effort at all administrative levels
(Innova, 2008). In the field of micro- and nanoelectronics 3,000 people are employed by
research and 21,700 by business, while 1,200 graduates leave higher education per year. In
comparison, the closely related sector of IT and software employs 14,000 people with 2,200
graduates annually (Innova, 2008).
The micro- and nanoelectronic field as one activity in the Grenoble cluster is also related to a
broad field of applications44, focusing on the communications segment while in the last years
shifting more and more to industrial applications. Design activities in the cluster are very high
compared to production, representing half of the output (Innova, 2008).
44
Communications 38 percent, cards 20 percent, military and aeronautics (20 percent), automotive (20 percent) to home
applications (2 percent).
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Some 500 companies work in the field of micro- and nanoelectronics, including the leader ST
Microelectronics, Freescale (Motorola) and NXP, but also several start-ups like Soitec,
designing and producing silicon on insulators being a successful flagship. Research in the area
is led by ST Microelectronics and Soitec, and the national research organisation CEA
(Commissariat à l'énergie atomique). The LETI, a CEA centre focused on electronics and IT,
hosts some 1,500 researchers.45 In 2006, LETI has created a collaborative research
environment called Minatec bringing together researchers from its centre with partners from
industry and university located on the central campus. 18 joint laboratories have been setup
with manufacturers since.46 The cluster can hence be characterised as a global centre of
excellence in its field with a very interdisciplinary and collaborative research environment.
Furthermore, the Grenoble cluster also benefits from a strong research environment in the
wider region and the Rhône-Alpes region enjoys easy access to major industrial hubs in
northern and southern Europe (Innova, 2008).
Short history of the Grenoble cluster
The high-tech cluster around Grenoble dates back to the activity of the French nuclear
research organisation CEA, founded in 1945. Since its existence it has been addressing major
scientific challenges in various fields, including nuclear energy, but also micro- and
nanotechnology, astrophysics, medical imaging, toxicology, biotechnologies, etc. The
decreasing French defence budget after the cold war period resulted in an increased focus
towards private sector applications. The micro- and nanoelectronics activities have benefitted
from substantial investment and partnership programmes between industrial firms and
publicly funded laboratories in the semiconductor industry in France since the early 1990s.
This has fostered a network of expertise in France, centred on major players and laboratories
such as ST Microelectronics, LETI, etc. with Grenoble as one of the major geographical
centres (Innova, 2008). This has made Grenoble one of Europe’s leading centres for
microelectronics.47 Cluster development can be characterised by several important events in
the last two decades. In 1992, STMicroelectronics, Léti-CEA and France Telecom R&D
joined forces for research in submicronic technologies, with STMicroelectronics handling
production. This resulted in leveraging public and private R&D but also production
knowledge to improve innovative output. Secondly, with semiconductor fabrication facilities
becoming more and more expensive48, Freescale (Motorola) NXP Semiconductors and
STMicroelectronics set-up a joint facility called Crolles 2 in 2002. Lastly, in 2006 the CEA-
45
http://www-leti.cea.fr/en/Discover-Leti/About-us
46
http://www-leti.cea.fr/en/Discover-Leti/About-us/History
47
http://www.minalogic.com/en/environnement-grenoble.htm
48
The cost of a state of the art semiconductor production fab is continuously increasing over time. Estimates vary between $3
and $8 billion making such investment for very few companies possible to finance. But also costs for designing system-on-
chips are increasing ranging between $20 to $50 million (Scott, 2007)
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Leti research centre and the Grenoble Institute of Technology set up a new centre innovation
in micro- and nanotechnologies (Minatec) bringing together partners from industry,
universities and research in a collaborative, open innovation environment. This impressively
shows the historic development of the cluster not only showing a high concentration of actors
in the field of micro- and nanotechnology but also fostering intensive collaboration between
industry, research and public authorities.
System failures and system drivers for growth
Infrastructure
As outlined in the previous section the cluster goes back to research infrastructure of CEA
after World War II. The cluster infrastructure has hence a strong evolutionary component.
Next to the wider research infrastructure outlined in the introduction, the Grenoble cluster
benefits from a very well organised and integrated infrastructure combining four core
elements: 1) several leading research laboratories (including CEA-Leti, INRIA, CNRS, and
Verimag), 2) a number of prestigious universities and engineering schools including the
Grenoble Institute of Technology, 3) unique scientific facilities including the Minatec
research campus and the Synchrotron facility, and 4) a strong eco-system of innovative firms.
Leading firms in the micro- and nanoelectronics field from large to small, including
STMicroelectronics, NXP Semiconductors, Freescale, France Telecom, Schneider Electric,
Bull, Soitec, Atmel, Trixell, Sofradir, Sofileta , Ulis, Silicomp, and Teamlog are combined
with highly innovative start-ups. All these actors together represent a diverse scientific
community of 38,500 people (Minalogic, 2010). Lastly, the local government plays an
important role coordinating activities and promoting the cluster to attract firms but also
generate financial support from French and European authorities.
Institutions
Rules and regulations: microelectronics, in contrast with bio- or nanotechnology, is not a
radically new technology with potential health risks in need for regulation. Also the
nanoelectronics field does not seem to pose new health risks with production contained in
highly controlled environments and output comprising solid electronic components. However,
recycling of electronic goods is increasingly regulated with electronics waste representing an
increasing share of total waste and miniaturisation making recycling more difficult.
Regulation has not affected the formation of the Grenoble cluster.
Norms and values: affect the cluster initiative at several levels. On the one hand a global trend
in research towards centres of excellence can be observed. Grenoble as one of the European
centres of excellence in the field of microelectronics has the scale and expertise to attract
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global research activities of firms and financial support from national and European
authorities.
On the other hand also at the cluster level, norms and values of members seem to make a
difference. Grenoble is an example of coordinated efforts. Firms collaborate with universities
and research centres institutionally in the form of Minatec but also informally. Furthermore,
regional authorities, branch organisations, together with universities and research centres join
efforts promoting the cluster using the same ‘pitch’ in developing and organizing support for
the cluster. Secondly, advised by industry and through continuous benchmarking efforts, CEA
is actively setting strategies that combine the increasing capabilities, fostering new ones and
converging them with future trends (Innova, 2008). These activities characterise a cluster
culture that plays an important role in the success over the last decades.
Public policy: plays a critical role in enforcing the underlying research infrastructure trough
public investments. Since the beginning of the 1990s, the semiconductor industry in France
has benefited from significant investments and partnership programmes between industrial
companies and public laboratories. CEA-Leti being often the leader behind new initiatives
and activities in the cluster is a public research centre. The Minatec innovation pole being one
of the examples of new LETI initiatives, with investments of around €193 million was for
example financed half by local authorities. And also the Minalogic partnership brining
together research partners from industry, university and public research is hence partly
publicly funded. (Innova, 2008) Next to that the cluster also benefits from national funds in
support of nanoelectronics. France subsidises the alliance between STMicroelectronics NV,
IBM Corp. and the CEA, commonly referred to as ‘Crolles 3’. Total investments are expected
to be around €3.6 billion, with national and local government funding exceeding €500
million. The rationale of these subsidies is to create the conditions for an exceptional
ecosystem and keep the micro and nanotechnology industry in Grenoble-Isre at the top of the
global ranking.49
Interactions
Interactions play a critical role in cluster success. Interactions play at two levels: 1) between
actors in the cluster, and 2) between the cluster and the world.
Two organisations play a critical role for interactions in the cluster: Minalogic and Minatec.
Minalogic is the ‘pole de competititve’ being part of the national cluster strategy. Minalogic
consists of a management board with representatives from across public and private actors
from the cluster region with high influence also in their ‘own’ organisation. This ensures that
49
http://www.eetasia.com/ART_8800534241_480200_NT_120af4d9.HTM
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ideas and decisions of the cluster board can readily be executed. Minalogic’s role is to bring
together major corporations, small and mid-sized businesses with public organisations and
government agencies and to identify new activities for the cluster to develop (Gibney and
Murie, 2008). Minatec on the other hand is a research campus focused on micro and
nanotechnologies at the heart of the Grenoble cluster that aims to create spillovers between
public and private research actors bundling efforts through co-location. The campus is home
to 2,400 researchers, 1,200 students, and 600 technology transfer. Minatec campus staff (9)
identifies new synergies, organises meetings for residents, develops communication tools, and
promotes the campus and cluster internationally.50 Next to the cluster motors of interaction
outlined above, firms also extensively collaborate informally and bilaterally. One example of
such bilateral collaboration is t the globally-recognised Crolles 2 Alliance.
The high visibility and status of the cluster also generates high levels of interaction with the
outside world. Each year some 6,000 students and 400 academics and researchers from
abroad study or work in Grenoble-Isère. At the same time many of the Grenoble scientists and
engineers can be seen around the globe (Innova, 2008).
Capabilities
Capabilities of actors can be best described by strong, collaborative technological capabilities.
The strength lies in the interaction of (public) research actors (CEA-LETI, etc.) interacting
very goal oriented with a number of leading firms (ST Microelectronics, Freescale, NXP etc.).
This creates an innovative environment that attracts scientists and firms globally to come and
work at the Grenoble cluster. Furthermore, with more than 50 percent design output the
cluster is very much focused on a high value added segment (specific chips for specific clients
that cannot be applied to different products) that allows to financing the costly infrastructure
and environment.
Market failures and drivers for growth
Market structure
The cluster is research focused and strongly supported by public research actors. The public
research organisation CEA-LETI also plays an important role to identify future activity areas.
The cluster is very open to new players, aiming to attract firms globally to locate at Grenoble.
There are many large international firms with research activities located at the cluster.
Furthermore, there are many SMEs and increasingly more start-ups founded at the cluster.
50
http://www.minatec.com/en
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Market demand
The Grenoble cluster is very market focused in its activities and has identified a market niche.
Its activities are focused on design output, with Asia having a competitive advantage in
microelectronics production and focuses on specific chips for specific clients, which will be
produced by (Asian) foundries. This is in contrast to other clusters in Europe such as Dresden,
Germany, that have large manufacturing capabilities, which compete directly with Asian
activities.
Conclusion
Compared to other clusters that are built on an industrial heritage going back to the 19th
century, the cluster is relatively young being founded after World War II with the founding of
the French national research centre CEA. Especially in the first decades this was the key actor
at the cluster. However, with military spending decreasing strongly with the end of the Cold
War the cluster had to restructure taking a much more market oriented focus towards
commercializing research. Particularly in the last two decades the cluster has developed very
dynamically being frequently named as a success example in Europe. Key events have been
the joint industry initiative Crolles, currently in its third stage (Crolles 3), and the Minatec
campus where public research, university researchers and industry researchers work jointly
together creating sufficient scale to work at world leading level.
One of the key strengths of the Grenoble cluster is its strong research base. Several leading
research laboratories and prestigious universities provide a rich pool of leading knowledge
and high skill labour supply that innovative firms thrive on. CEA-LETI through its Minatec
initiative takes a special role of a anchor organisation at the cluster that at other cluster a large
MNE plays (e.g. Philips at the Eindhoven cluster). Next to the scientific base the cluster is
very well organised and coordinated. This means that scale is created by aligning the actions
of the different actors and the coordination board comprises representatives from all important
actors that can directly put ideas into action. This strong coordination also means that the
cluster is very effective at lobbying for resources at local, national and European level
allowing it to attract world leading firms also using financial incentives.
Public funding
Public funding of basic research activities and infrastructure are a key element for the eco-
system of the Grenoble cluster. The cluster also has very strong coordination power being
able to lobby effectively for national and European resources.
Tax incentives
Tax incentives are not known to play a role for the cluster development. However, public
authorities have subsidised the joint initiative of called Crolles.
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Public procurement and lead markets
Public procurement and lead markets have essentially played no role for the Grenoble cluster.
Many high-tech firms are located at the Grenoble cluster for the research environment. While
the cluster is very ‘demand’ driven customers are not directly co-located. Instead Grenoble
concentrates on one aspect of the value chain, namely micro- and nanoelectronics design, with
customers of end-products globally dispersed across several industries. While work in the past
was focused on ‘demand pull’ activities such as improved mobile phone functionality, the
decisions for these functions were external to the cluster. Today, “idea labs” at the cluster aim
to develop solutions for the products of tomorrow (Innova, 2008).
4.3.2. Micro- and Nanoelectronics Canada: The Ontario region
The Ontario province is located in east-central Canada, comprising the largest population of
any Canadian province and being the second largest after Quebec in territory. It is bordering
with the Quebec province in the East, also making up part of the photonics corridor as
outlined in the Photonics chapter. There is a strong link between microelectronics and
photonics.
The Ontario province comprises several ICT clusters, with different specialisations. These are
the Greater Toronto Area, Ottawa and Kitchener/Waterloo. While Toronto is the largest
agglomeration, it is also the most diverse. The Ottawa cluster on the other hand is much more
specialised in telecommunications equipment, microelectronics, photonics and software
(Wolfe, 2002). Consequently, the Ottawa cluster will be focused upon in this analysis.
The Ottawa microelectronics cluster includes semiconductor and electronic component
design, computer hardware design, and manufacturing and applications for defence and
private industry. There were over 100 microelectronics companies, including over 40 fables
semiconductor companies in 2003. The semiconductor activities are more diversified and
resistant to slowdown compared to computer hardware (Ottawa, 2003). Large firms that play
an important role for the cluster include MDS Nordion, Mitel Networks, Mosaid, Nortel
Networks (R&D), Hewlett-Packard (Canada) Ltd., Alcatel Canada, Cisco, and semiconductor
firms such as Freescale Semiconductor Canada, Tundra Semiconductor, and Chipworks Inc.
(OCRI, 2006).51
The Ottawa cluster is supported by two key national actors in semiconductors: 1) the Strategic
Microelectronics Council (SMC) part of the Information Technology Association of Canada,
and 2) the Canadian Microelectronics Corporation (CMC). Located in Ottawa, the SMC is a
51
http://www.ottawaregion.com/Business_in_Ottawa/Industry_Overview/semiconductor.php
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not-for-profit national industry association that works to articulate a national strategy for the
cluster. The CMC, also a not-for-profit organisation, is dedicated to facilitating strategic
alliances between the semiconductor industry and Canadian universities and educational
institutions helping to ensure the production of well-trained graduates (OCRI, 2006).
Short history of micro- and nanoelectronics in the Ontario region
The Ontario region has a long tradition in microelectronics with the first firm, Microsystems
International Ltd. (MIL), founded in Ottawa in 1969 as a joint venture between Nortel
Networks and the Federal Government to attract highly qualified experts, notably from the
United Kingdom. In the 1970s and 1980s a vibrant cluster emerged around the quickly
developing market for telecommunications equipment driven by a number of spin-offs from
large firms in the region. At this time also the first firms in the Toronto and southern Ontario
clusters emerged, fuelled by public investments and research capabilities of the University of
Toronto.
By the 1990s, Ontario was a significant player in the global silicon chip business, with several
world-leading centres of excellence in the industry. However, with the burst of the dotcom
bubble the industry had to diversify beyond telecommunications equipment. In spite of this
nascent diversification the global downturn in demand for telecommunications equipment
around 2001 and the closure of Nortel’s semiconductor factory in Ottawa dramatically stalled
the growth of Ontario’s microelectronics industry. The aftermath of these developments
lingers until today. Together with the relatively small size and weakness compared to other
microelectronics cluster around the world, this led to efforts to revitalise the microelectronics
industry in the region. It is proposed to develop four centres of excellence for
microelectronics in 1) health care technology, 2) automotive, 3) broadband and 4) multi-
media applications (Scott, 2007).
Nevertheless, Ontario remains an important microelectronics region with many international
firms still located there, and 65 percent of survey respondents stating that the presence of the
cluster is the reason for them to be located there (Scott, 2007). One of the recent famous
success examples are Research in Motion and its Blackberry products located at the Waterloo
cluster.
System failures and system drivers for growth
Infrastructure
The Ontario province has a strong research infrastructure with a number of leading public
research institutes, universities but also research centres of large corporations. These are the
Communications Research Centre (CRC), which is the federal government’s leading
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communications research facility (for details see introduction). The National Research
Council (NRC) Institute for Information Technology located in Ottawa and Atlantic Canada.
Its mission is, in contrast to the CRC, to support industry through collaborative R&D
programmes. At the Ottawa cluster the microelectronics sector further benefits from the NRC
institute for microstructural sciences that through its research enables future hardware
development. Lastly, in 1995 the NRC founded the Regional Innovation Centre in Ottawa to
link NRC resources with industry, academic research and government. Part of its activity is to
assist NRC scientist with commercialising ideas through spin-offs. (Wolfe, 2002). The Ottawa
cluster further benefits from a number of universities, including the University of Ottawa,
Carleton University, Algonquin College, and Université du Québec en Outaouaistd (Ontario,
2009).
This public research infrastructure is complemented by a number research centres of large
multinationals that also act as anchor firms in the cluster providing an attractive eco-system
for SME. Three firms are particularly relevant in this context: 1) Nortel Networks, 2) Alcatel
(formerly Netbridge Networks), and 3) Mitel that spun-off its semiconductor activities (now
Zarlink semiconductors) (Wolfe, 2002). These anchor firms play a crucial role as they
contribute to the home grown success of the microelectronics cluster of Ottawa that attracts
research activities of international firms again re-enforcing the quality of the cluster. In their
view the strong anchor firms, combined with a strong local pool of talent, and high growth
rates have made it very attractive for MNEs and venture capitalists to invest in Ontario (e.g.
Cisco, Nokia) (Wolfe, 2002).
There are two notable institutional factors that have affected the evolution of the Ontario
microelectronics cluster: 1) the highly skilled labour pool and commercial talent, 2) a strong
cluster policy supported by federal and regional funds, aiming to coordinate efforts between
industry, academia and government.
High skilled labour pool and commercial talent
Generally, Canada has a highly skilled workforce and several world leading microelectronics
researchers have contributed to the success of the cluster’s evolution (CMC, 2009). Also
regional organisations praise Canada’s industrial culture as concentrating on commercializing
new technologies for the global market. (FAITC, 2009). However, some also point to
problems in the high skilled labour supply in the late 1990s contributing to the problems the
cluster has and issues with the local culture. Scott (2007) points to concerns of local actors
that there is a general lack of desire to excel in Ontario’s microelectronics industry by both
public and private players. Also experienced research and business people that have founded
companies in the early years of the cluster are retiring and leaving the industry. (Scott, 2007)
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What is the role of public policy?
Cluster policy plays an important role for the Ontario cluster, with 65 percent of firms
participating in a survey stating that they are located in Ontario owing to the existence of the
cluster (Scott, 2007). Also the birth of the cluster was a direct result of policy intervention with a
public private joint venture founding the first microelectronics firm in Canada, Microsystems
International Ltd, in 1969. The role of public policy focuses on three main components: 1)
supporting a sound public research base 2) attracting corporate research activities, and 3)
facilitating the commercialisation of research by linking different type of actors (Wolfe,
2002). Since the burst of the dotcom bubble public policy focuses on revitalizing
microelectronic activities in the region. Funding research and collaboration plays a key role
on this.
Financing of Research
The Canadian government claims that it leads the OECD as the largest active funder in
science and technology research and development. Canada also operates a R&D tax-credit
programme under which foreign companies can access 35 percent tax credit by creating a
Canadian-controlled private corporation and can access 25 percent tax credit by building a
Canadian subsidiary that carries out qualifying SR&ED activities in Canada (FAITIC, 2009).
This is complemented with provincial tax programmes, in the case of Ontario’s R&D super
allowance amounting in 2002 to $100 million in tax credits. (Wolfe, 2002). In practice this
results in companies investing $49 net for $100 R&D output.
In addition to tax credits, a number of direct federal and provincial funding initiatives
strengthen the microelectronics sector. These largely take the form of supporting networks
and (collaborative) research programmes. Examples of these are the Ontario S&T programme
supporting R&D, a number of centres of excellence both federally and provincially funded,
including important actors such as the Canadian Institute for Telecommunications Research,
Micronet but also linking excellent university research with industry. In addition Ontario
province operates a Research and Development Challenge Fund (ORDCF), the Ontario
Innovation Trust, the Ontario Research Performance Fund next to a number of technology
specific initiatives (Wolfe, 2002).
Venture capital
While availability of capital for start-ups is an issue in Canada generally, the Ottawa
microelectronics cluster does particularly well. According to Ontario (2009) two-thirds of
U.S. venture capital investment in Canada goes to Ottawa tech firms. This is also supported
with examples from Wolfe (2002) who describes the takeover of Skystone System by Cisco
as a breakthrough for the Ottawa cluster with many local firms grown before sold to
multinationals.
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One particularly important actor in the context of venture capital is the Ontario Centre of
Excellence for Communications that has spun off about 25 companies in the period 2002-
2007. The Centre co-invests in R&D and commercialisation for leading-edge technologies,
and helps move the results to market through existing companies or spin-off enterprises. It is
hence not confined to microelectronics and also plays a role in developing new activities. One
example is Distil Ineractive, that was a fledgling start-up initially supported with an
investment of $50,000 to create a partnership with researchers at the University of Ottawa.
After promising results Distil was further supported with $250,000 through the Accelerator
Investment Program. This helped Distil to attract a $700,000 investment from GrowthWorks
Canadian Fund. Distil Interactive has received follow up funding of $2.2 million by
GrowthWorks in 2007 employing 25 people. The Centre is funded through the Ministry of
Research and Innovation. Staff expertise and experience have produced a consistent track
record of successful commercialisations and built strong partnerships with the research
community, investors, and industry (Ontario, 2007).
However, despite the comparatively good access to venture capital there are other barriers for
start-ups perceived. Scott (2007) reports that the loss of the LSIP programme in Ontario left a
large in early stage funding and that cash-refunds from the SR&ED tax credit system are paid
with delay creating cash-flow issues particularly relevant to start-ups. Also the focus of the
tax credit system on early stage research, not including later stages of ‘development’, are seen
as a desirable extension by local start-ups (Scott, 2007)
Intellectual Property Rights
One of the issues related to public funding of technology developments is that Intellectual
Property (IP) is shared or owned outright by the university or government agency involved in
the project. According to some local actors this potentially inhibits corporate growth since the
companies involved cannot directly commercially exploit the IP. This issues is currently
addressed by the Ontario Ministry of Research and Innovation (Scott, 2007).
Interactions
Compared to other clusters there seems to be no dedicated microelectronics cluster
organisation or network for the Ontario region, nor the Ottawa cluster. Instead the two earlier
outlined organisations SCM and CMC, both located in Ottawa are dedicated to the
development of the microelectronics sector more broadly in Canada, although located in
Ottawa.
Interaction at the cluster level comprises two aspects: 1) interaction between cluster actors,
and 2) interactions with actors of related economic activities. Several initiatives support
collaborative research efforts between industry and academia and firms (as outlined in the
financial support section). However, it was noted in the past that interaction at the provincial
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level (Ontario) is hindered by the large geographical spread, necessarily limiting interaction to
the senior level between organisations (Scott, 2007). Interactions at working level hence take
place within the three Ontario microelectronics clusters Ottawa, Toronto, and Waterloo.
Secondly, the microelectronics sector in the Ottawa sector has strong interaction with the
telecommunications equipment, software, and emerging photonics sector.
Capabilities
Compared to other global microelectronics clusters the Ottawa cluster shows a strong
concentration on R&D activities. Its strength is based on the national Communications
Research Centre (CRC), two other NRC institutes and a number of universities. These often
collaborate with local firms, having produced many key innovations in the field. This is
complemented by strong capabilities of firms, both in research and marketing. Nortel alone
accounts for almost 20 percent of all industrial R&D expenditures in Canada and hires one
third of all Masters and Ph.D. graduates in electrical engineering and computer science from
Canadian universities. This concentration is even more visible in the telecommunications
sector, with 90 percent of Canada’s R&D in industrial telecommunications conducted in the
region (Wolfe, 2002). However, what is also emphasised is the drive in the region to
commercialise and to take a global focus. A number of successful niche companies have been
set-up by (university) researchers in the past indicating a conducive climate to
commercialisation.
Market failures and drivers for growth
Anchor firms, which are large firms surrounded by many smaller firms (e.g. suppliers), have
played a key role in the cluster’s evolution. They represent an important source of demand for
many smaller firms. The first anchor firm being Nortel Networks, but in the meantime these
are complemented by (research) facilities of a number of large multinationals (Cisco, Alcatel
etc.). The cluster is very open to attract outsiders with preferential tax credits to attract foreign
firms.
But Ontario is also the most populous province in Canada and also the largest consumer of
ICT products in Canada. This can be attributed to the high number of corporate headquarters
located in the province, more specifically in Ontario’s three high-tech clusters, (Toronto,
Ottawa and Waterloo). In addition to this strong home market, microelectronics is a global
industry sector. Access to the US market is facilitated through geographic proximity as well
as the NAFTA free trade agreement, a common language and cultural and business
similarities (DoC, 2007). Next to the US Canadian microelectronics firms primarily invest in
China, India and Europe (Scott, 2007).
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Lastly, public procurement is identified as a means to promote economic development,
innovation and investment in the microelectronics sector by the Ontario government (Ontario,
2007).
Conclusion
The Ontario, and particular Ottawa, cluster are a relatively old microelectronics cluster dating
back to the late 1960s. It is located in the most populous province of Canada with many firm
headquarters representing a lead customer base. It is located close the US markets and part of
a larger microelectronics / photonics corridor across Ontario and Quebec. Industry benefits
from a strong research infrastructure including national research institutes and a number of
Universities. The Ottawa cluster has a strong specialisation in telecommunications equipment,
which led to a state of crisis after the dotcom bubble resulted in the closing of a number of
production plants. Consequently, the cluster is in a state of re-vitalisation identifying new
opportunities, aiming to found new centre’s of excellence in: 1) health care technology, 2)
automotive, 3) broadband and 4) multi-media applications
System and market failures and drivers
There are two key components for the evolution of the microelectronics cluster in Ontario
going beyond the specific aspects highlighted below. This is a sound research base
comprising key national research institutes and universities producing high level knowledge.
However, they also provide stable employment for highly skilled people in the field that can
take the risk to start own commercial ventures. Secondly, the culture of the people in the
region with their commercial focus is an important component having contributed to the
evolution of the cluster.
Public funding
Canada claims to be the largest R&D spender in the OECD. This is invested in a strong
research base including specific research institutes as well as universities. Furthermore,
national as well as provincial funds are targeted at specific technology development
initiatives, funding for industry-university collaborations as well as supporting start-up
companies. However, no dedicated cluster organisation seems to exist or receive funding. In
that sense public funding is essential for the research base of the cluster as well as fostering
collaboration between cluster actors.
Tax incentives
Tax incentives play a very important role to attract international firms to locate their research
facilities in the region. The tax credits are to a large extent nationally and not restricted to a
specific cluster but are complemented in the case of Ontario with provincial tax credits.
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However, tax credits alone are not sufficient to attract firms. High quality labour supply, a
commercial environment and a well functioning cluster are at least as important.
Public procurement and lead markets
No role of public procurement was identified. However, in the plans for re-vitalisation of the
microelectronics industry public procurement is named as a tool for development.
4.3.3. Conclusion on microelectronics cluster benchmark between France and Canada
Strengths and weaknesses
One of the key strengths of the Grenoble cluster is its strong research base comprising several
leading research laboratories and prestigious universities providing a strong high skill labour
pool. Its key asset in this respect is the Minatec campus where public researchers, university
researchers and industry researchers work jointly together. A central role for development of
the cluster plays CEA-LETI through its Minatec initiative taking the role of anchor
organisation. Furthermore, a cluster board with representatives from all important actors that
can directly put ideas into action ensures that plans can be put into practice effectively. This
strong coordination also means that the cluster is very effective at lobbying for resources at
local, national and European level allowing it to attract world leading firms also using
financial incentives.
Particular strengths of the Ontario microelectronics region are a strong research infrastructure
comprising key national research institutes and universities, an entrepreneurial culture, a
slightly skilled and stable labour pool, a local lead customer base with many corporate
headquarters located in the province, and its close location to the large US market. A
particular weakness of the region after the dot-com bubble is the strong specialisation in
telecommunications equipment requiring ongoing revitalisation efforts.
Public policy, funding and tax incentives
Both the Ontario and Grenoble cluster have been supported in their development with public
funds both from national and regional actors. The infrastructure is supported in both cases by
strong public efforts to coordinate cluster development and by providing public funding to
stimulate R&D, collaboration and start-ups. In contrast to the Grenoble cluster there seems to
be no strong cluster identity developed in Ontario. However, this can be explained with a
much larger geographical spread and a number of sub-clusters.
Differences in policy emphasis:
Whereas there cluster development in Grenoble is very research led, in Ontario
microelectronics activities started with the founding of a public-private joint venture, now
known as the microelectronics firm Nortel.
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Furthermore, the local government in Grenoble took the lead in cluster development, while in
Ontario it was driven by a number of spin-offs from large firms in the region.
Also, the development of the Grenoble cluster is pre-dominantly led by regional actors,
whereas most microelectronics initiatives in Canada are nationally oriented (SCM, CMC).
However, most of the Canadian national activities are based on Ontario with strong
regional impact.
A large difference lies in the exceptional tax incentives and other incentives the Canadian
government provides for companies to locate their research activities in Canada. The tax
incentives significantly alter the cost structure for firms. Every $100 investment in R&D,
comes at a net cost of $49 because of several national and regional tax incentives. This makes
the area particularly attractive for R&D activities of large foreign corporations that have the
scale and capability to benefit from such incentives.
Lead markets: The role of lead actors / anchor firms
Both clusters have strong anchor organisations that have played an important role in the
development of the cluster. In case of Grenoble, the national nuclear agency CEA occupies
this role, while in the case of Ontario it is the company Nortel. These lead actors provide
A very strong science base that in contrast to universities is very application oriented;
A critical scale of employment having positive effects for the local labour markets by
attracting and retaining highly skilled labour;
Significant numbers of and spin-offs creating a dynamic business environment;
International linkages and visibility strengthening the competitive position of the cluster
globally and acting as an international magnet for high skilled talent.
From these clusters we see how important lead organisations for cluster development can be.
They play an essential role in helping a cluster to develop. Where a number of smaller
companies will find it hard to reach critical mass and international visibility, the larger
companies can provide exactly that. But cluster success relies on the combination of strengths
of large and small firms forming a unique eco-system, where small firms are essential for
creative ideas and exploring new grounds, which can be exploited with the experience and
resources of larger firms.
The Ontario cluster is the only cluster where we have found explicit attention to the role of
public procurement to stimulate microelectronics development. However, this is only stated
as an intention in context of the cluster regeneration. The extent to which this is implemented
is not known. As in the case of other KETs it is difficult to imagine how an effective public
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procurement strategy in the case of microelectronics might look like as many applications
target market segments with industrial customers (B2B).
Table 4-6: Summary of findings from microelectronics cluster comparison
Cluster Microelectronics
Grenoble - France
Microelectronics
Ottowa Canada
History After World War II nuclear research agency
laid basis for cluster development.
Long history of support of research and
R&D collaboration (since 1990)
Two cluster platforms: Minatech and
Minalogic. Both are very active in
promoting collaboration, R&D, marketing
and internationalisation
First dedicated microelectronics firm
founded in 1969. Strong growth with
telecommunications equipment boom in
70s/80s
Large lasting crisis following dotcom burst
� need for regeneration of cluster
Two national platforms: SMC: Strategic
microelectronics council (focus on industry
and strategy), CMC: Canadian
microelectronics corporation (focus on
alliances and PPP)
No dedicated local cluster platform
Size ~500 firms; 38,500 people ~100 firms
Classification Mature Post-mature / regeneration
Infra-structure The cluster claims to have the highest
concentration of scientists and high-tech
companies in the world: research
laboratories, universities/ engineering
schools
Collaborative research environment
stimulated by Minatech (industry-research-
public triangle)
Cluster also has an important joint
semiconductor fabrication plant (Crolles2 &
3)
Strong knowledge infrastructure comprising
public and private research facilities and
universities/ engineering schools.
Many R&D facilities of large
microelectronic firms.
Institutions Rules and regulations
R&R have a minor role, only recycling laws
in electronics play a role, miniaturisation
makes recycling more complex
Norms and values / culture
The cluster has a very strong cluster culture
Well established cluster identity attracting
new entrants because of reputation
Open culture stimulation exploration and
new ideas
Rules and regulations
R&R have a minor role, only recycling laws
in electronics play a role, miniaturisation
makes recycling more complex
Norms and values / culture
Strong commercially focused culture
No strong cluster identity, but generally
open culture.
If IPR rests with research organisations this
is perceived as sometimes blocking path to
commercialisation by companies
Public policy /
funding /
taxation
Generous funding of research and
collaboration since 1990’s, both from
regional and national actors.
Very focused cluster vision and strategy
implemented by key local actors bringing
together industry, research and government
actors.
Also the European Union plays an important
role through their Framework Programmes
and cluster initiatives.
Strong national investments in science and
research.
Support for research collaboration and
commercialisation of research
Canada has most favourable R&D tax
scheme of Western economies ($49 costs
for $100 ´R&D investment)
Network and collaborative research support
2/3 of US VC goes to Ottawa cluster
Many spin-off of large research centres and
large firms
Interactions Collaboration stimulated by Minalogic Industry-science collaboration targeted
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(identifying and orchestrating new
commercial challenges/collaborations) and
Minatec (identifies and organises new
research opportunities)
Strong international exchange culture of
researchers and students
through general programmes (not
technology specific).
No significant role of collaborative ties
mentioned in cluster development
Ontario is a large province with several
industry clusters making collaborations
between clusters difficult.
Capabilities Strong scientific basis
Highly skilled labour force
Strong focus on collaboration between top-
research and leading corporations
Strong focus on design (>50 percent of
output)
Strong scientific basis
Highly skilled labour force
Generation of successful entrepreneurs is
about to retire leaving a gap
Market demand Research activities very application oriented
through central coordination of identification
of market opportunities (Minalogic)
Focus on semiconductor design activities, to
avoid direct competition with Asia
(production focus).
Global production networks with global
demand.
In the past strong focus on
telecommunications equipment. Cluster
regeneration plans aim to focus on health
care, automotive, broadband and multi-
media
Good access US market
Ontario government aims to stimulate
innovation and growth in microelectronics
through public procurement.
Market structure Large companies take active role in cluster
development and leverage public R&D.
Also many smaller firms and start-ups,
providing good balance between large and
small firms.
Cluster open to new entrants
Large companies in cluster such as Hewlett-
Packard and Cisco. Nortel crucial role as
anchor firm!
Anchor firms create critical mass and attract
new MNEs and venture capital
Strong concentration of large MNEs e.g.
Nortel hires 1/3 of all masters and PhDs in
electrical engineering nationally
Cluster features Large and internationally recognised, mature
cluster.
Continuous government support for research
and collaboration, as well as production
activities.
Good mix of large and small firms
Many spin-offs of large companies and
research institutes
Heterogeneous cluster: with different
microelectronics industries, e.g.
telecommunications equipment, software,
etc.
R&D tax credits important role in cluster
strategy.
Regeneration of cluster activity on-going.
Only cluster to mention role of public
procurement (intention of government).
Source: TNO compilation.
4.3.4. Factors influencing the future development of microelectronics
Factors influencing the future market potential of microelectronics
The previous chapters have outlined that microelectronics are a key intermediate input for a
large variety of sectors. These sectors, for example the information and communication
technology sector, are generally characterised by increased technological sophistication which
immediately impacts the market for micro- and nanoelectronics. In this respect, the future
market development critically depends on the market development in the sectors for which
microelectronics are a key input.
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Microelectronics is a continuously evolving field of technology, typified by “Moore’s Law”
which suggests a continuous growth of chip capacity and performance and at the same time
further miniaturisation of the components. Although these steps of improvement can be
characterised as incremental, it is unlikely that microelectronics face a threat of substitution
by another technology. At the same time, technology adoption can even be expected to
increase in the future because increasing performance of microelectronic components enables
the products and processes in which microelectronics form an essential part to become more
user-friendly.
Because of miniaturisation, new generations of semiconductors typically require considerable
investments into the semiconductor fabrication plants (fabs). While this would typically drive
the fixed costs of production, it has become standard industry logic that semiconductors are
basically considered as commodity goods with rather low profit margins. As a consequence,
semiconductor manufacturers are typically reluctant to invest into new plants which resulted
in a concentration of manufacturing sites in a few places worldwide.
The role of public support
Given that production costs particularly in semiconductors are substantial, there are several
opportunities for public support to ameliorate the conditions for microelectronics research,
development and manufacturing in Europe. The potential shall be demonstrated against the
example of Taiwan’s support for the microelectronics industry from which two components
are further analyzed (ITRI, 2010).
Since the 1980s, Taiwan’s government established several high-tech industrial parks, one of
which the Hsinchu Science-based Industrial Park (HSIP), that was established in north-
western Taiwan to create an environment conducive to high-tech research and development,
production, work, life, and entertainment, and which attracts high-tech professionals and
technologies. The park is surrounded by a number of renowned science and engineering
research institutes, such as the Industrial Technology Research Institute (ITRI), National
Tsing Hua University and National Chiao Tung University providing ample human resources
for the firms located in the park. Both the park’s location and the rapid growth of its
companies and products have made it the Silicon Valley of Asia. There are more than 300
high-tech companies located in a 605 hectare business area and employing more than 100,000
people. Total sales amounted to roughly $30 billion with steep growth rates. The park has
made Taiwan a world leader in fields of microelectronics like integrated circuit (IC)
manufacturing and key information industry components.
ITRI is the largest non-profit research organisation in Taiwan, with a total workforce of
around 6,000 and a budget of more than $500 million. It is primarily responsible for
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developing industrial technologies and helping private enterprises enhance their
competitiveness with a focus on the field of IC. ITRI led Taiwan’s developing IC industry,
providing both technology and human resources. The top two IC foundries in the world,
Taiwan Semiconductor Manufacturing Company and United Microelectronics Company,
originated in ITRI. The institute receives about half of its funding from the government and
half from industrial sources. As a result, ITRI engaged heavily in knowledge and technology
transfer activities. More than 30,000 firms received services from ITRI.
To sum up, microelectronics is a technology that critically relies on the interaction between
academia and industry. Co-location of firms and academic institutions therefore seems to be a
promising route to follow, for example in the form of a dedicated science park. Moreover,
because of high costs, especially in manufacturing, (partly) government funded academic
institutions can facilitate industry development by bringing down the costs while at the same
time providing access to qualified human capital and technologies.
Contribution of microelectronics to social wealth
The contributions of microelectronics to social wealth are manifold. First of all, modern
environmental technologies would be unthinkable without the use of sophisticated
microelectronics components that enable the efficient deployment of such technologies.
Microelectronics can make existing technological installations, for example in the energy
production sector, more efficient in that they allow a more precise steering and management
of processes. The same effects can be envisioned in other areas, for example the health care
and medical instruments sectors. Microelectronics may not only lead to significant
technological advances in the diagnostics and therapeutics but also streamline the process
from the patient’s perspective and as a result increase the quality of life. Although medical
progress typically tends to come at increased cost, microelectronics may in principle also be
used for increasing efficiency in the medical sector which should eventually bring down the
associated costs. An example for this is an electronical patient management system that
prevents costly double-diagnostics. This is all the more important given the tight financial
pressure that today’s health systems face.
Importance of sustaining production capabilities
Production capabilities allow for an application of newly developed technologies and as a
result facilitate experimental learning that can be assumed to be valuable in future technology
development efforts. Because of the commoditisation trend in microelectronics and
particularly in semiconductors, new developments need to be quickly scaled up in order to
allow for a cost efficient production. This implies a need for close interaction between R&D
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and production. In this respect, sustaining production capabilities can be regarded as
important.
4.4 Conclusions and Policy Implications
State of technology
Micro- and nanoelectronics refer to semiconductor components as well as highly miniaturised
electronic subsystems and their integration in larger products and systems. By 2010,
microelectronics has already crossed the verge of nanoelectronics. Technical progress is
expected to result in a further reduction of structural widths. In order to achieve success and
continued growth of the industry, a cost reduction of about 30 percent per year is required,
while functionality needs to double every two years. This development has been described as
“Moore’s Law” in the 1960s. Because conventional semiconductor manufacturing concepts
will encounter technical limits, further miniaturisation will require considerable investments
into plant technology.
Europe’s technological position
The development of micro- and nanoelectronics is clearly concentrated on the three global
regions Europe, North America and East Asia. In this respect, East Asian patent applicants
dominate with a market share of more than 45 percent in recent years. Europe contributes
slightly more than 20 percent to total micro- and nanoelectronics patenting. In terms of
patents per GDP, Europe has a significantly lower micro- and nanoelectronics patenting
intensity than East Asia, but a similar intensity to North America. East Asia has been able to
continuously improve its position in terms of patenting while Europe’s market share has
remained rather stable over the past ten years.
The largest subfield in micro- and nanoelectronics is semiconductors, followed by x-ray and
bonds/crystals. When looking at the development of market shares across subfields over time,
it turns out that European applicants have improved their position predominantly in the fields
of measurement, x-ray and devices while the position remained rather static in the fields of
semiconductors and bonds/crystals. North American applicants have lost market share in all
subfields while East Asian applicants have generally gained over time.
The composition of micro- and nanoelectronics patent applications by subfields differs only
slightly by country of applicant. Applicants from Italy show a very high share in
semiconductors while this share is below average for the Netherlands. All other countries
exhibit shares around the European average.
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Links to disciplines and sectors
Micro- and nanoelectronics can be characterised as a cross-cutting technology that not only
affects the electronics industry but a multitude of other industries. Besides electronics,
important micro- and nanoelectronics patent applicants are from the chemicals, machinery
and instruments industry. Public research plays an important role particularly in Europe,
where 10 percent of all micro- and nanoelectronics patents are generated by public research,
compared to an average of around 7 percent worldwide.
Comparing the sector affiliation of micro- and nanoelectronics patent applications before and
after the end of 2001 – which splits the total sample of nanotechnology patents in two
subsamples of similar size – reveals a shift of micro- and nanoelectronics patenting toward
specialised semiconductor firms. This trend is particularly pronounced in Europe and reflects
the strategy of the largest European electronic companies -Siemens and Philips- to spinoff
their microelectronics businesses in separate companies (Infineon and Epcos as Siemens
spinoffs, ASML and NXP as Philips spinoffs). In all three regions, public research gained
market shares in micro- and nanoelectronics patenting. In Europe, automotive manufacturers
become increasingly engaged in this field of technology. In North America and East Asia, the
chemical and materials industries increased their share in total microelectronic patenting.
Decreasing shares are reported for the electronics industry (i.e. integrated electronic
companies) in Europe and Japan, for telecommunication companies in all three regions, and
for computer manufacturers in North America and East Asia.
In Europe, patenting activities are highly concentrated among a few firms compared to North
America and East Asia. However, East Asia shows a higher number of firms with substantial
patenting activity than Europe, leading to an overall higher concentration when a larger
number for firms are considered. Concentration in North America is generally lower.
Market prospects and growth impacts
The market potential of micro-and nanoelectronics becomes predominantly manifest in the
semiconductor industry. Semiconductors are an intermediate input for a variety of sectors but
they are particularly important for information and communication technology (ICT)
equipment and embedded systems. Semiconductor production is a highly cyclical industry.
During economic downturns production drops sharply but when the economy recovers,
semiconductor production does so as well. Nevertheless, long-term growth prospects are
positive, given the general societal trend towards digital appliances, media, and mobile
communication which is supported by strong consumer demand. Moreover, this trend is
expected to be fuelled by a higher semiconductor content per installed system, leading to a
“digital upgrading” of the economic and social infrastructure. In fact, evidence from the
patent analysis suggests robust growth for semiconductors.
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In this respect, semiconductor sales worldwide in current prices have increased by 10 percent
annually since 1990. Between 1990 and 2000 the world market for semiconductors
quadrupled from $50 billion to more than $200 billion. For 2008, a market size of $260
billion is estimated. Long-term growth is expected to show an annual growth rate of 8 to 10
percent. However, the patent analysis has also made clear that recent changes in
microelectronics patenting hint at higher growth dynamics in subfields like devices, x-ray and
measurement which only partially overlap with semiconductors.
There are a couple of factors underlying the forecasts, i.e. factors that determine whether the
growth potentials can actually be realised. As conventional techniques in the optical
lithography will reach their physical limits with increasing miniaturisation, new concepts will
be required that have not yet been developed. Semiconductors have, despite their high-
technology content, almost reached commodity status which further requires that technical
solutions to present physical limits be cost-efficient without raising high investment needs for
the manufacturers. At the same time, benefits from increasing miniaturisation need to warrant
an added value for consumers in order for the industry to recoup costs.
Policy options
Micro- and nanoelectronics are important for policy because of their potential to add value in
a multitude of applications. Europe will therefore only be able to keep and expand its market
position if it succeeds in attracting research, development and manufacturing capabilities in
micro- and nanoelectronics to take place in Europe. Micro- and nanoelectronics allow a broad
spectrum of firms to benefit from the value chain, given that electronic components and
systems have important applications in a multitude of fields. Results from the patent analyses
however indicate that concentration of patenting activities in Europe is considerable. In other
words, only a few firms account for a large share of patents. In contrast to this, East Asia
benefits from a higher number of firms that generate strong technological competences. As a
consequence, chances for Europe to sustain system leadership in a number of fields – like
mobile and stationary telecommunication systems, automotive electronics, smart cards,
environmental technologies, and automation – are lower.
As technical progress in micro- and nanoelectronics is eventually based on further
miniaturisation which allows for an increased complexity of design, higher speed and a
reduction of electric power consumed, it thus seems essential to promote Europe’s industry
and science such that further research efforts are possible. In order to sustain system
leadership that is driven by the fruits of increased miniaturisation, policy should be concerned
with both the promotion of high-end technology development as well as the required breadth.
Another major policy field is to promote design capabilities that serve as the decisive
connection between available technology and application-specific system requirements. After
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all, basic research is required to obtain and secure the basis for all future applications of
micro- and nanoelectronics. Scientific research can still be regarded as the most important
knowledge source in this KET, and therefore the industry’s future development will critically
depend on the ability of firms to identify and evaluate new research findings, transfer them
into business models and develop new products and processes that leverage the potentials of
micro- and nanoelectronics while at the same time fit to the needs of customers in terms of
performance and costs. Doing this requires a close interaction between firms and public
research, including joint R&D activities. Cluster initiatives have proved to facilitate this
exchange significantly. They can be assumed to facilitate the transfer of knowledge and
technology into commercial applications, and they also serve as a instrument to attract a
“critical mass” of qualified people willing to do research and development in micro- and
nanoelectronics.
A critical factor in the promotion of micro- and nanoelectronics is the highly cyclical nature
of the industry. It is therefore all the more important to secure continuous research and
development efforts even in times of economic downturn in order to stay fully operational and
innovative when the economy catches up again. Policy should therefore be concerned with the
smoothing of growth cycles as far as research and development activities are concerned.
Funding instruments of collaborative research with public science should thus in particular be
readily available when industry has to cut down R&D expenses during a downturn.
Further policy actions should relate to providing a stable regulatory environment, particularly
with respect to likely safety, health and environment impacts of micro- and nanoelectronics.
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5 INDUSTRIAL BIOTECHNOLOGY
5.1 Definition and State of Technology
Biotechnology comprises applications of science and technology that use living organisms –
or parts, products and models thereof – to produce knowledge, goods and services (OECD).
Depending on the area of application subgroups are defined. The industrial biotechnology –
also called white biotechnology – refers to industrial applications and uses micro-organisms
like moulds, yeasts or bacteria as well as enzymes in industrial processes to produce
biochemicals, biomaterials and biofuels. Today, already a large number of products are being
manufactured using biotechnological processes; for instance, in the production of chemicals,
plastics, biofuels, detergents, vitamins, enzymes and in the finishing of textiles, leather and
paper (BMBF, 2008).
Biotechnological processes compete with other production methods, in particular with
chemical synthesis, and are chosen rather than chemical processes if it is economically or
ecologically beneficial. Industrial biotechnology tends to consume fewer resources and to be
more environmentally friendly since renewable raw materials such as vegetable oils and
starch are used. Biotechnological processes tend to produce less harmful by-products and
produce higher yields. This also reduces the dependence on fossil resources. However,
biotechnological processes are not always less energy-intensive but instead consume
sometimes considerably more energy. The level of the active agent is for example typically
much lower in the output from biotechnological processes compared with the output of
chemical processes. Nevertheless, industrial biotechnology provides the opportunity to
improve the quality of existing products and to develop completely new products which
cannot be produced by traditional synthetic methods and processes (OECD, 2009a; OECD,
2009b, OECD 2010).
Industrial biotechnology is not a new discipline. Using nature's toolbox for industrial products
has a long tradition. Brewing beer was one of the first applications and already used in
Mesopotamia 6000 BC. The production of wine, cheese and leavened bread has also been
based on living micro-organisms from the beginning on. Although the molecular process
behind it was not explained until Pasteur’s work in the 19th century. Nowadays methods of
molecular biology are used in a targeted manner which was only made possible through
knowledge gained from genome research and microbiology. Examples are the discovery of
enzymes as biocatalysts or of bacteria for producing medical substances (BMBF, 2008).
Enzyme products for the manufacture of detergents, food, textiles, chemical and
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pharmaceutical industry are well established on the market although only about 130 different
enzymes of the thousands of known enzymes are used industrially (BMBF, 2008; OECD,
2009a; OECD, 2010).
Industrial biotechnology related activities such as the development of new enzymes, new bio
materials or biotechnological production processes are not only conducted by dedicated
biotechnology firms but also by the chemical industry. Most chemical firm uses
biotechnology processes.
Biotechnology is a fast developing technology. Current and emerging research comprise the
improvement of enzyme’s characteristics like its substrate specificity, activity and stability
and the creation of new tailormade and high performance enzymes through genetic
manipulation, protein engineering, directed evolution and by advanced selection techniques –
the area of synthetic biology is just emerging; the development of microbial cells as whole
cell catalyst in an industrial process for a specific product in the area of systems biology;
improvements in reactor design to reduce the genetic variability of the production cell
population in order to have continuous product pipeline; creation of biotechnological platform
intermediates based on the use of renewable carbon sources; integrating biotechnological and
chemical technologies and reducing the number of process steps. Becoming more cost-
competitive through the increase of output efficiency is thereby an important goal. Emerging
fields of application with the largest potential are the production of bio-based polymers – to
replace petrochemical plastics, of biofuels such as bioethanol and biodiesel and of fine
chemicals for the pharmaceutical and agro industry (OECD 2009a, OECD 2009b, OECD
2010).
An important driver for the industrial biotechnology sector will be the stronger use of
renewable raw materials and efficient bioprocesses to achieve a sustainable development.
This shift is partly driven by governmental regulation and partly by consumer demand as
consumers increasingly request a smaller environmental footprint. But biotechnology must
compete with alternative production technologies. Along with the rising use of renewable
feedstock for the biofuel and bio raw material production a discussion about land-use for food
or fuel and about increasing food prices has arisen. Therefore, optimising feedstock such as
modifying crops to increase their content of oils and starches is a target for plant breeders.
Alternatives such as switching to the use of meagre land and grow undemanding non-food
plants or to the increasing use of algae as feedstock are discussed.
Sales of products produced by biotechnological processes accounted for €99 billion in 2007
(McKinsey, 2009). Although biotechnology is well established in the chemical industry it is
still a niche there and overall it is in its infancy (OECD 2009b). Estimations for 2007 for the
global annual sales volume of chemical products produced by industrial biotechnology vary
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between €48 billion (Festel Capital, 2009) and €65 billion (McKinsey, 2009). The lower of
the two estimate is equivalent to about 3.5 percent of the worldwide chemical sales (without
pharmaceutical products but including active pharmaceutical ingredients; Festel Capital,
2009). Depending on the application the adoption of biotechnology varies significantly. In
basic chemicals – which accounts for 59 percent of chemical sales, only 1.5 percent are based
on biotechnology. In active pharmaceutical ingredients the share of biotechnology sales
equals 18.7 percent (Festel Capital, 2009). Biotechnology-based polymers are the most
important biomaterials and are produced in substantial quantities – estimations range from
300,000 metric tonnes to nearly 600,000 metric tonnes – but represent less than 1 percent in
polymer production (EC 2007, OECD 2009a). In pulp and paper biotechnological
applications reach 10 percent, in detergents 30 percent and in some food production processes
(e.g. fruit juice) up to 100 percent (EC 2007).
5.2 Technological Competitiveness, Industry Links and Market Potentials
5.2.1. Technological Competitiveness
Analysing technological competitiveness in industrial biotechnology based on patent data
using patent classification systems is challenging. It is even more difficult to identify whether
the inventions belong to industrial biotechnology subfields given above. Only patents related
to enzymes and biochemicals are possible to identify. Since enzymes or biochemicals serve as
a basis for the subfields biomaterials and biofuels but their application area is not given or
even not yet known, it is not possible to determine whether the enzymes or biochemicals are
linked to biomaterials and biofuels.
While patent classification allows to identifying advances in biochemicals (e.g. new enzymes
or enzym-using processes, new protein-based compositions), it is often unknown whether it
will be applied in industrial, medical or agricultural processes. Therefore, the assignment of
patents to the different types of biotechnology is also difficult. If patents have IPC classes
which point to medical or agricultural applications they are dropped. In addition, firms from
the pharmaceutical, diagnostic and crops sector are identified and their patents are left out,
too. This restriction reduces the number of patents by 19 percent. Since dedicated
biotechnology firms are not assignable to a certain application area, patents without an
identified application area and from dedicated biotechnology firms that are active in the field
of medical or agricultural biotechnology might be still in the sample. This caveat also applies
for patents without an assigned application from research institutions.
European Competitiveness in KETs ZEW and TNO
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Market shares
Europe's performance in producing industrial biotechnology patents is compared to that of
applicants from North America (USA, Canada, Mexico) and East Asia (Japan, China incl.
Hong Kong, Korea, Taiwan, Singapore). Measured in terms of patents applied at EPO or
based on PCT (EPO/PCT patents), the number of industrial biotechnology patents applied per
year increased steadily to almost 1,500 patent applications in 2001 and decreased in the
following two years (Figure 5-1). In 2004 the number of applications started to increase,
again. Over the entire period from 1981 to 2005, about 21,000 industrial biotechnology
EPO/PCT patents were applied. The three main regions show a similar application pattern at
the EPO/PCT over the period, except for the temporary decrease after 2001. The downturn
applies only for European and North American applicants. European applicants apply for the
most patents, followed by North American and East Asian applicants. Applicants from other
regions than Europe, North America and East Asia are of little significance, though the
number of patents from the rest of the world has also increased. Their market share is still
below 10 percent.
Figure 5-1: Number of industrial biotechnology patents (EPO/PCT patents) 1981-2005, by
region of applicant
0
100
200
300
400
500
600
700
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
European applicants show the highest market share of EPO/PCT patent applications in 13
years of the 15-year-period from 1991 to 2005 (Figure 5-2). Only in 1997 and 2001 North
American applicants had the highest share. In 2005, the shares of patent applications from
European and North American applicants have narrowed, again. The share of East applicants
has been steadily increasing since 1997. European applicants had a share of 36 percent in total
Chapter 5 Industrial Biotechnology
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industrial biotechnology patent applications at the EPO/PCT in 2005, compared to 34 percent
for North American applicants and 23 percent for East Asian applicants.
Figure 5-2: Market shares of industrial biotechnology patents (EPO/PCT) 1991-2005
(percent)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
In order to account for “home office” effects in patenting (i.e. the propensity for applicants
from a particular region to use predominantly that regional patent office for applications),
patent applications in industrial biotechnology at USPTO and JPO are analysed as well. The
shares of patent applications at EPO, USPTO and JPO are shown in Figure 5-3. While at the
EPO applicants from Europe dominate (51 percent), at the USPTO applicants from North
America clearly dominate although their dominance has diminished since 1995. In 2004
North American applicants are ahead at the USPTO (49 percent), followed by European
applicants (26 percent). At the JPO East Asian applicants show the highest share in 2004 (47
percent), while European applicants contribute 30 percent to the total. North American
applicants account only for 209 percent. When looking at triadic patents, the shares of
European, North American and East Asian patent applicants are close with 35 percent, 34
percent and 27 percent, respectively.
European Competitiveness in KETs ZEW and TNO
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Figure 5-3: Market shares in industrial biotechnology patents 1991-2005 for national
applications and triadic patents (percent)
a. Europe1)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. North America2)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
c. East Asia3)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
70
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies.
Source: EPO: Patstat, ZEW calculations.
In order to determine the relative importance of industrial biotechnology patents for a region,
patent intensities are calculated. The patent intensity is defined as the number of patents per
year form applicants of a certain region to the GDP of that region. This type of specialisation
indicator shows that Europe still produces the highest number of industrial biotechnology
patents per GDP at EPO/PCT (Figure 5-4). Patent intensities grew for Europe and North
America until around the year 2000 and tend to decline since then while East Asia is
increasing its patent intensity unitl the mid 2000s. Considering triadic patents, East Asia
exhibits the highest intensity, followed by Europe and North America. No clear updwards
trend can be seen for triadic patents in industrial biotechnology.
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Figure 5-4: Industrial biotechnology patent intensity 1991-2005 for EPO/PCT and triadic
patents (number of patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT patents
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
5
10
15
20
25
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by subfields
Enzyme-related patents account for the vast majority of identified industrial biotechnology
patents. Therefore, enzyme-related patents are further divided into three classes. Established
biochemicals constitute a fourth subfield. These four subfields of industrial biotechnology are
identified through a set of IPC classes (IPC classes given in parentheses):
Enzymes (C12N)
Fermentation processes (C12P)
Other enzyme-related processes (C02F 3/34, C12M, C12Q, C12S)
Established biochemicals except enzymes, e.g. organic acids, amino acids, vitamins, proteins
except enzymes (C07C 29/00, C07D 475/00, C07H 21/00, C07K 2/00, C08B 3/00, C08B
7/00, C08H 1/00, C08L 89/00, C09D 11/04, C09D 189/02, C09J 189/00, G01N 27/327)
Since several IPC classes can be assigned to each patent, one patent can belong to several
subclasses and are double-counted in these cases.
The two largest subfields within industrial biotechnology are enzymes (33 percent) and other
enzyme processes which comprise organic acids, amino acids, vitamins, proteins except
enzymes (30 percent; Figure 5-5). All three main regions show a similar composition. While
in North America and the Rest of the World patents on enzymes are relatively more
important; in Europe and East Asia fermentation and other established biochemicals are more
pronounced.
European Competitiveness in KETs ZEW and TNO
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Figure 5-5: Composition of industrial biotechnology patents (EPO/PCT) by subfields
(percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Enzymes Fermentation processes
Other enzyme-using processes Established biochemicals
Source: EPO: Patstat, ZEW calculations.
The regional distribution of patent applications at the EPO/PCT for the four subfields shows
the same rankings of the three regions. Europe leads in all four subfields followed by North
America and East Asia, though the lead is very small for enzymes and other enzyme-using
processes (see Figure 5-6). In these two subfields East Asia has caught up in recent years.
Figure 5-6: Market shares for industrial biotechnology patents (EPO/PCT) 1991-2005, by
subfields (percent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Enzymes
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Fermentation
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Other enz.-using pr.
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Establ. biochem.
Source: EPO: Patstat, ZEW calculations.
Technological dynamics by subfields based on EPO/PCT patents may be biased from varying
attractiveness of the European market. For instance, a rise in demand for certain applications
of industrial biotechnology in Europe may stimulate patenting by North American and East
Chapter 5 Industrial Biotechnology
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Asian applicants at EPO, thus raising the number of EPO/PCT patents by applicants from
these regions. A decreased attractiveness of the European market may result in the opposite
effect. In order to avoid such biases from the market environment, we evaluate technological
dynamics by looking at patent applications by European, North American and East Asian
applicants at their respective “home patent office” (EPO, USPTO and JPO, respectively).
Dynamics in industrial biotechnology patent applications at the regional home offices varies
over time (see Figure 5-7). Europe and East Asia were able to increase their patent activities
in most subfields in the three periods. Europe reports high growth in enzymes in the lat 1990s,
following an even stronger increase of patent outpout in North America in this subfield in the
early 1990s. North America shows increasing patenting activities in industrial biotechnology
only in the first period. In the 2000s, industrial biotechnology patenting in North America was
stagnating or even declining (in the field of enzymes). East Asia experienced a strong increase
in industrial biotechnology patenting in the late 1990s and could maintain high growth rates in
otehr enzyme-using processes in the early 2000s. In all three regions, patenting in established
biochemicals did not grow in the 2000s.
Figure 5-7: Average annual rate of change in the number of industrial biotechnology patents
(applications at home patent offices), by region, subfield and period (percent)
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-20
-10
0
10
20
30
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
Enzymes Fermentation processes
Other enzyme-using processes Established biochemicals
Europe
-20
-10
0
10
20
30
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-20
-10
0
10
20
30
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
The composition of industrial biotechnology patents by subfields is rather stable over time
(see Figure 5-8). However, patent applications related to enzymes have gained some
importance in North America until around 2000, but lost shares in total industrial
biotechnology patenting afterwards. In East Asia, patenting in the field of fermentation
Chapter 5 Industrial Biotechnology
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processes lost in importance while patents related to other enzyme-using processes gained
shares.
Figure 5-8: Composition of industrial biotechnology patents (applications at home patent
offices), by region, subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
No
rth
Am
er
ic
a
Ea
st
As
ia
Enzymes Fermentation processes
Other enzyme-using processes Established biochemicals
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Patenting at the country level in Europe
Within Europe, applicants from Germany represent the largest group of producers of
industrial biotechnology patents. From 1981 to 2005, one third of all industrial biotechnology
patents at the EPO/PCT stem from German applicants, followed by the United Kingdom (16
percent), France (13 percent), and the Netherlands (8 percent) (see Figure 5-9). Among the
smaller European economices, Denmark is an important location for generating industrial
biotechnology patents. There has been a particularly fast growth of German patent
applications from 1994 to 2000 after which, however, there was a significant decline to the
level of 1996 in 2002.
Figure 5-9: Industrial biotechnology patents (EPO/PCT) in Europe 1981-2005, by country
European Competitiveness in KETs ZEW and TNO
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0
20
40
60
80
100
120
140
160
180
200
220
240
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE
FR
UK
IT
NL
DK
CH
BE
RoE
Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
The economic significance of industrial biotechnology patenting differs substantially by
country (Figure 5-10). Patent intensity -that is the ratio of the number of industrial
biotechnology patents to GDP- is highest in Switzerland, the Netherlands and Denmark and
clearly above the European average Germany. Belgium produces somewhat more industrial
biotechnology patents per GDP than the European average whereas the UK reports average
patent intensities. Patent intensity in industrial biotechnology is slightly below the European
average in France and very low in Italy and the total of all other European countries.
Figure 5-10: Patent intensity in industrial biotechnology 1991-2005 of European countries
(EPO/PCT patents)
0
20
40
60
80
100
120
DE FR UK IT NL DK CH BE RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Chapter 5 Industrial Biotechnology
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Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
The differences in the absolute number of industrial biotechnology patents and in patent
intensities have to be kept in mind when looking at patenting dynamics since countries with
low patent activities can more easily generate high growth rates. Among the eight countries
that produce the largest number of industrial biotechnology patents, Belgium and Germany
could increase their patent output at an annual growth rate of almost 8 percent between the
first half of the 1990s (1991-95) and the first half of the 2000s (2001-05) (Figure 5-11). An
even higher growth rate was experienced by the group of European countries not qualifying
for the eight largest industrial biotechnology patent producers. Industrial biotechnology
patenting increased at about the average European rate in the Netherlands and Denmark. In
France, the UK, Italy and Switzerland patenting grew slower compared to the European
average.
Figure 5-11: Change in the number of industrial biotechnology patents between 1991/95 to
1996/00 and 1996/00 to 2001/05, by country (EPO/PCT patents; compound
annual growth rate in percent)
-2
0
2
4
6
8
10
12
14
DE FR UK IT NL DK CH BE RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
In most countries, growth rates were significantly higher in the 1990s (1991/95 to 1996/00)
than in the more recent period (1996/00 to 2001/05), indicating a slow down in the production
of new technological knowledge in this KET. Italy is the only country that was able to sustain
a similar though low growth rate in both periods. In the UK and Switzerland, industrial
biotechnology patenting declined in the early 2000s. High average annual growth rates in the
European Competitiveness in KETs ZEW and TNO
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recent period are reported by the rest of Europe (7 percent), the Netzerlands (5 percent) and
Belgium (4 percent).
The composition of industrial biotechnology patent applications by subfields and country of
applicant is depicted in Figure 5-12. The distribution of patent applications by subfield does
not vary to a large extent between the countries of applicants. Exceptions are the strong focus
on enzyme patents in Denmark which is due to the location of the world largest producer of
enzymes (Novozymes) there. Owing to its large chemical industry, Germany is more
specialised in established biochemicals.
Figure 5-12: Composition of industrial biotechnology patents in Europe, by subfield and
country (percent)
0 10 20 30 40 50 60 70 80 90 100
DE
FR
UK
IT
NL
DK
CH
BE
RoE
Europe total
Enzymes Fermentation processes Other enzyme-using processes Established biochemicals
Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
Figure 5-13 provides a more detailed picture of country-specific specialisation by subfield
within industrial biotechnology. The specialisation pattern of Germany is clearly focused on
established biochemicals and underspecialised in enzymes. Enzymes are the clear strength of
Denmark and Belgium. The Netherlands are specialised on fermentation process and
underspecialised in other enzyme-using processes. The UK shows exactly the opposite pattern
of specialisation while France’s and Italy’s composition of industrial biotechnology patents
by subfields is very similar to the Eutropean one.
Figure 5-13: Specialisation patterns of industrial biotechnology patenting in Europe, by
subfield and country of inventor (percent)
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-15 -10 -5 0 5 10 15 20
DE
FR
UK
IT
NL
DK
CH
BE
RoE
Enzymes
Fermentation
processes
Other
enzyme-
using
processes
Established
biochemicals
Difference between the share of a subfield in a country’s total industrial biotechnology patents and the respective share for Europe total
(excluding the country under consideration).
Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
European countries show different trends in industrial biotechnology patenting (Table 5-1).
Comparing the growth in the number of patents applied by subfield for the 1990s (i.e.
between the number of patents over the 1991-95 and the 1996-2000 periods) and the early
2000s (i.e. between 1996-00 and 2001-05) shows that all subfields except other enzyme-using
processes report higher growth rates for the 1990s than for the early 2000s. In the field of
enzymes, patent output increased at a very high rate during the 1990s but almost stagnated in
since about the year 2000. In some countries (UK, Denmark, Switzerland) patent output in the
field of enzymes even declined. In the field of fermentation processes, Germany could sustain
a high growth rate in both periods. Belgium, the Netherlands and Denmark report high growth
in the 1990s, but lower rates in the more recent period. In the field of othe enzyme-using
processes, France, the Netherlands and the “rest of Europe” could increase patent output in
the early 2000s compared to the 1990s while the UK and Belgium experienced a decreasing
patent output in the early 2000s. Trends in established biochemicals are dispers. Germany
reports high growth in the 1990s, but a decline in the early 2000s while the UK, the
Netherlands and Belgium were able to increase annual growth in patent output.
European Competitiveness in KETs ZEW and TNO
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Table 5-1: Change in the number of industrial biotechnology patents between 1991/95 to
1996/00 and 1996/00 to 2001/05 by subfield and country (EPO/PCT patents,
compound annual growth rate in percent)
DE FR UK IT NL DK CH BE RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Enzymes 14 6 12 3 14 -3 13 0 9 1 9 -3 8 -2 10 1 18 6 13 2
Fermentation proc. 11 9 -2 -4 -1 1 7 6 11 0 12 7 4 -8 25 6 -8 1 6 4
Oth. enzyme-us. pr. 9 7 1 8 6 -2 3 1 4 13 9 6 11 5 6 -1 3 9 6 6
Establ. biochemicals 11 -4 6 4 6 8 -8 -1 9 12 49 0 5 -6 6 14 13 10 9 2
Industr. biotechn. tot. 12 3 5 3 8 -1 3 3 7 5 11 0 6 -1 10 5 9 7 9 3
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
“∞“: not available due to zero value in base period.
Eight European countries with the largest number of industrial biotechnology patents (based on inventors’ locations) from 1981-2005.
“RoE”: all other European countries.
Source: EPO: Patstat, ZEW calculations.
5.2.2. Links to Sectors and Fields of Technologies
Technological links to sectors
When linking patents to industrial sector based on the IPC classes a patent was assigned to,
just 3 sectors -chemicals, pharmaceuticals, instruments- account for 85 percent of all
industrial biotechnology patents. Technological links to sectors are thus strongly focused, and
most industrial sectors have no direct technological links to industrial biotechnology. 45
percent of all industrial biotechnology patents are linked to pharmaceuticals, 23 percent to the
chemical industry, 17 percent to the manufacture of instruments (optical, medical,
measurement, steering instruments). 5 percent of industrial biotechnology patents are
technologically linked to the manufacturing of machinery and equipment, 4 percent to the
food industry and 2 percent to electronics (Table 5-2). Industrial biotechnology patenting in
Europe tends to be stronger linked to chemicals and less to pharmaceuticals while for North
America, the opposite is true.
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Table 5-2: Technological sector affiliation of industrial biotechnology patents (EPO/PCT),
by region (average of 1981-2007 applications, percent)
Europe North America East Asia Industrial
biotechnology
total
Food 5 2 4 4
Textiles 1 0 0 1
Wood/Paper 1 1 1 1
Chemicals 26 20 25 23
Pharmaceuticals 41 51 41 45
Rubber/Plastics 1 1 1 1
Glass/Ceramics/Concrete 1 1 1 1
Metals 1 1 1 1
Machinery 6 5 5 5
Electronics 1 2 3 2
Instruments 16 17 18 17
Vehicles 0 0 0 0
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
The importance of pharmaceuticals might be overestimated since patents in the area of
enzymes are difficult to being assigned to the different types of biotechnology (red, green and
white). Enzymes used for the red (medical) biotechnology may still be in the sample of
analysis. This can be seen from the fact that most iIndustril biotechnology patents related to
enzymes (enzymes, fermentation processes and other enzyme-using processes) are more
closely linked to the pharmaceutical industry than to the chemical industry (Table 5-3).
Patents connected to the subfield of established biochemicals are naturally closely linked to
the chemical sector. Patents in the field of other enzyme-using processes often relate to the
instruments industry, pointing to the fact that technological advance in this area has to master
both chemical and process technology challenges.
Table 5-3: Technological sector affiliation of industrial biotechnology patent applications
(EPO/PCT), by subfield (average of 1981-2007 applications, percent)
Enzymes Fermentation
processes
Other enzyme-
using processes
Established
biochemicals
Industrial
biotech
total
Food 6 8 1 1 4
Textiles 1 0 0 1 1
Wood/Paper 1 1 1 1 1
Chemicals 11 21 14 57 23
Pharmaceuticals 66 59 34 18 45
Rubber/Plastics 0 0 1 1 1
Glass/Ceramics 1 0 1 1 1
Metals 0 0 1 1 1
Machinery 3 4 7 7 5
Electronics 1 1 3 2 2
Instruments 10 5 37 9 17
Vehicles 0 0 0 0 0
European Competitiveness in KETs ZEW and TNO
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Total 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
If one looks at the sector affiliation of industrial biotechnology applicants, i.e. if one assigns
industry sectors to industrial biotechnology patents based on the main market an applicant is
present, the picture becomes more disperse. For this purpose the most active applicants were
assigned to one industrial or institutional sector based on their main economic activity. In
Europe and East Asia, applicants from the chemical industry clearly dominate, while in North
America, public research constitutes the largest sector from which industrial biotechnology
patents emerge. The large share of patents from public research in North America can also be
ascribed to a strong patenting related to pharmaceutical applications, but with technological
relevance for industrial biotechnology, too. Patents from chemical firms are the second largest
group in North America whereas research institutions are second in Europe.
Figure 5-14: Sector affiliation of industrial biotechnology patent applicants (EPO/PCT), by
region (average of 1981-2007 applications, percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Chemicals Detergents/cosmetics Oil
Dedicated biotech firms Food Instruments
Electronics Machinery/materials Public research
* Including patents in the fields of red and green biotechnology that are technologically relevant to industrial biotechnology.
Source: EPO: Patstat. ZEW calculations.
The share of dedicated biotechnology firms in industrial biotechnology patenting is rather
pronounced in North America while in Europe and East Asia industrial biotechnology
activities are conducted by larger firms as one line of activity, as for example in chemical
firms.
Comparing the sector affiliation of industrial biotechnology patent applications before and
after the end of 1999 - which splits the total sample of industrial biotechnology patents in two
subsamples of similar size - reveals a shift of industrial biotechnology patenting from the
chemical industry towards public research and biotechnology start-ups. The public research
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sector could increase its share in the total number of industrial biotechnology patents from 23
to 36 percent. Biotechnology start-ups could raise their market share form 7 to 10 percent.
Significantly decreasing shares are reported for the chemical industry (from 47 to 35 percent).
In East Asia, the electronics industry gained in importance as producer of new technological
knowledge in industrial biotechnology which can be associated with an increasing interest in
bioelectronics.
Figure 5-15: Change in the sector affiliation of industrial biotechnology patent applicants
before and after the end of 1999 (EPO/PCT), by region (percentage points)
-20
-10
0
10
20
30
Europe North America East Asia RoW Total
Chemicals Detergents/cosmetics Oil
Dedicated biotech firms Food Instruments
Electronics Machinery/materials Public research
Source: EPO: Patstat. ZEW calculations.
The list of the 15 largest industrial biotechnology applicants of the three regions (in terms of
the number of patents applied since 2000) is given in Table 5-4 for information purposes.
European Competitiveness in KETs ZEW and TNO
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Table 5-4: 15 main patent applicants in industrial biotechnology by region (EPO/PCT
patents, 2000-2007 applications)
Europe
Rank Name Country Sector No. of Patents
1 BASF DE chemicals 235
2 Novozymes DK chemicals 159
3 Evonik Degussa DE chemicals 136
4 Bayer DE chemicals 74
5 Danisco DK chemicals 74
6 DSM NL chemicals 55
7 Cons. Sup. de Invest. Cientif. ES research 51
8 CNRS FR research 49
9 Shell NL oil 41
10 Fraunhofer DE research 38
11 Cognis DE chemicals 36
12 Max-Planck-Gesellschaft DE research 30
13 Henkel DE detergents 26
14 Comm. à l'energie atomique FR government 20
15 Plant Bioscience GB biotech 20
North America
Rank Name Country Sector No. of Patents
1 Du Pont US chemicals 126
2 Univ. of California US research 119
3 Applera US biotech 61
4 Rohm and Haas US chemicals 56
5 Univ. of Wisconsin US research 39
6 ExxonMobil US oil 38
7 Univ. of Florida US research 36
8 Univ. of Texas US research 35
9 North Carolina State Univ. US research 33
10 3M US chemicals 32
11 U.S. Government US government 32
12 Cargill US food 32
13 Johns Hopkins Univ. US research 30
14 MITSUBISHI RAYON CO., LTD. US research 29
15 Univ. of Pennsylvania US research 28
East Asia
Rank Name Country Sector No. of Patents
1 Matsushita Electric JP electronics 69
2 Mitsubishi Chemical JP chemicals 63
3 Sumitomo Chemical JP chemicals 58
4 Ajinomoto JP chemicals 49
5 Kaneka JP chemicals 47
6 JSTA JP research 45
7 Canon JP instruments 40
8 Asahi Kasei JP chemicals 32
9 NIAIST JP research 31
10 Kao JP chemicals 28
11 Daicel Chemical JP chemicals 25
12 Fuji Film JP chemicals 24
13 Olypmus JP instruments 24
14 Toyo Boseki JP chemicals 21
15 Hitachi JP electronics 21
Source: EPO: Patstat. ZEW calculations.
Patent applications in industrial biotechnology are not much concentrated on a few firms but
are rather widespread. Figure 5-16 shows the concentration of patenting activity on the basis
of three concentration measures indicating the share of patents for which the 5 percent (CR5),
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10 percent (CR10) and 15 percent (CR15) most patenting active firms account for. In Europe,
26 percent of all patents were applied by the 15 largest applicants. In North America, this
ratio is significantly lower while patenting is more concentrated in East Asia.
Figure 5-16: Concentration of patenting activity in industrial biotechnology (EPO/PCT
patents, 2000-2007 applications)
0
10
20
30
Europe North America East Asia
CR5 CR10 CR15
Source: EPO: Patstat. ZEW calculations.
Links to other KETs
Related to the issue of sector links is the degree to which industrial biotechnology patents are
linked to other KETs. One way to assess likely direct technological relations is to determine
the share of industrial biotechnology patents that are also assigned to other KETs (because
some IPC classes assigned to an industrial biotechnology patent are classified under other
KETs). The degree of overlap of industrial biotechnology patents with other KET patents by
subfields is shown in Figure 5-17. Except for established biochemicals, for which about 10
percent of all patents are at the same time assigned to other KETs, direct links are very rare.
Only 4 percent of all industrial biotechnology patents have been assigned to another KET.
Figure 5-17: Share of industrial biotechnology patents linked to other KETs by subfield
(EPO/PCT patents 1981-2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Enzymes
Fermentation processes
Other enzyme-using processes
Established biochemicals
Industrial Biotechnology total
Source: EPO: Patstat. ZEW calculations.
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For those industrial biotechnology patents that are linked to other KETs, one can see that most
of them overlap with advanced materials (Figure 3-18). Some industrial biotechnology patents
form the subfields of enzymes and other enzyme-using processes are also linked to
nanotechnology, and some patents in the subfield of enzyme-using processes are also
assigned to advanced manufacturing technologies. Overlaps to microelectronics and photonics
are extremely rare.
Figure 5-18: Links of industrial biotechnology patents to other KETs by subfields (EPO/PCT
patents 1981-2007, only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Enzymes
Fermentation processes
Other enzyme-using processes
Established biochemicals
Industrial Biotechnology total
Nanotechnology Micro-/nanoelectronics
Photonics Advanced materials
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
5.2.3. Market Potentials
One reason for the large future potential is that until now the endless biodiversity is known
only to a small extent. In addition, owing to increasingly scarce resources and rising energy
prices it is expected that the share of biotechnology applications increases in the coming years
(BMBF, 2008).
Biochemicals
While for 2007 on estimation for biotech sales in chemicals were around €48 billion (3.5
percent of total chemical sales), the sales are expected to increase to around €135 billion (7.7
percent of total chemical sales) in 2012 and to around €340 billion (15.4 percent of total
chemical sales) in 2017 (without pharmaceutical products but including active pharmaceutical
ingredients; Festel Capital, 2009). A more conservative estimate for biochemical sales is
announced by McKinsey (2009). They predicted an increase from €65 billion to €88 billion in
2012. The United States Department of Agriculture expects the bio-based share of chemical
production to be around 11 percent in 2010 and to reach one quarter by 2025 (USDA, 2008).
In another study it is expected that the value of biochemicals (other than pharmaceuticals) will
lie between 12 percent and 20 percent by 2015 (OECD, 2009a). Formerly conducted analyses
expected an increase to the range between 15 to 20 percent already by 2010 (Festel, 2006;
Frost & Sullivan, 2003; McKinsey, 2003; BMBF, 2008).
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The segment of active pharmaceutical ingredients is expected to remain the segment with the
highest share of biotech sales. This share is predicted to increase to 34 percent by 2012 and to
50 percent by 2017 (OECD, 2009b). Biotechnological processes are also expected to make up
half of fine chemical production by 2025 (USDA, 2008). Again, former studies expected the
biobased share of fine chemicals to reach 60 percent already by 2015 (Riese and Bachmann,
2004; Festel, 2006; BMBF, 2008).
Industrial enzymes
For the market for enzymes, which is not assignable to a specific application, an annual
growth about 6.5 percent is expected for the next years (OECD, 2009a). About three quarters
of the enzymes are used in food, feed and detergents (ETEPS AISBL, 2007). Global sales
should amount to about $7.4 billion in 2015. Selecting and developing more effective
enzymes contributes to cost savings, to a more environmentally production process through
reduced energy consumption and to the elimination of harmful by-products (OECD, 2009a).
Biomaterials: bioplastics
The production of bioplastics is based on polymers and is expected to experience significant
growth. Thereby the rate of growth will depend on the necessary technological advances and
will be larger if petroleum prices increase. The upper limit for the substitution of bio-based
plastics replacing petroleum-based plastics is seen at 33 percent (USDA, 2008). In 2010/2011
the global production of biopolymers is expected to be between 500 and 1500 kilo tonnes,
which represent between 0.2 and 0.6 percent of the production of all polymers (OECD,
2009a). This share is predicted to increase to between 10 and 20 percent by 2020 (OECD,
2009a) or by 2025 (USDA, 2008).
Biofuels
Besides biochemicals and biomaterials, the field of biofuels is an expanding sector which is
assumed to have the highest growth rates. In the last decade biofuel production increased
considerably. Between 2000 and 2007 the ethanol production tripled to 52 billion litres;
biodiesel increased 11-fold to 11 billion litres (OECD-FAO, 2008). Biofuel sales were about
€34 billion in 2007 (McKinsey, 2009). Biofuel production is predicted to more than double by
2017 (see Figure 5-19). The European Council agreed to the Action Plan 2007-2009 Energy
Policy for Europe (EPE) in which it set a mandatory minimum target to be achieved by all
Member States for biofuels of 10 percent of vehicle fuel by 2020. In 2005, the biofuel share
was about 1 percent in the EU-25 (Council of the European Union, 2007).
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Figure 5-19: World ethanol and biodiesel production: projections to 2017
Source: OECD (2009a: 124).
However, figures on the expected market volume have to be interpreted with care.
Excessively high projections of market sizes in the different subfields of biotechnology made
in the early years of the new century have raised very high expectations. They turned out to be
unrealistic despite the high growth rates that biotechnological products still exhibit. A
potential downside of these high projections is that important investments into biotechnology
might be diverted as a more realistic market assessment becomes apparent. In this respect, it
seems sensible to draw an overall very positive picture of the market potential in industrial
biotechnology but at the same time to hint at general growth trends in the chemicals industry
of which biotechnology cannot be isolated.
Table 5-5 summarises available estimates and forecasts on the market potential in industrial
biotechnology and selected subfields.
Table 5-5: Estimates and forecasts the size of subfields of the global industrial
biotechnology market (billion US-$ unless otherwise specified)
Subfield Source 2005/
06
2007/
08
2010/
11
2012/
13
~2015 ~2017 ~2025 Cagr*
Biochemicals (excl. pharmaceuticals)
Fine USDA (2008) 15 25-32 88-98
Polymer USDA (2008) 0.3 15-30 45-90
Specialty USDA (2008) 5 87-
110
300-
340
Commodity USDA (2008) 0.9 5-11 50-86
Base chemicals
(billion €)
Festel Capital
(2009)
12 34 113 25
Consumer che- Festel Capital 11 32 84 23
PROJECTIONS
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micals (billion €) (2009)
Speciality che-
micals (billion €)
Festel Capital
(2009)
15 38 73 17
Active pharmaceut.
ingredients (billion
EURO)
Festel Capital
(2009)
10 31 70 21
Commercial amino
acids
BCC (2009) 1.1 1.3 3
Synthetic biology BCC (2009) 0.08 1.6 82
Traditional bio-
based chemicals
(billion €)
McKinsey (2009) 46 60 5
Chemicals by
fermentation
(billion €)
McKinsey (2009) 14 21 8
Chemicals by
enzymatic pro-
cesses (billion €)
McKinsey (2009) 5 7 7
Total USDA (2008) 21.2 132-
183
483-
614
Total (billion €) McKinsey (2009) 65 88
Total (billion €) Festel Capital
(2009)
48 135 340 22
Enzymes for industrial application
Total BCC (2008) 2.1 2.7 4
Total Reiss et al. (2007) 7.4 6.5
Biomaterials
Bioplastics (1,000
tonnes)
OECD (2009a) 500-
1500
Biofuels
Biofuels (billion €) McKinsey (2009) 34 65 14
Biodiesel (billion
litres)
OECD-FAO
(2008)
11
Ethanol (billion
litres)
OECD-FAO
(2008)
52
Industrial Biotech
Total (billion €) McKinsey (2009) 99 153 9
* Compound annual growth rate in nominal terms (percent).
Source: Compilation by ZEW based on the sources quoted.
5.3 Success Factors, Barriers and Challenges: Cluster Analysis
The geographical distribution of industrial biotechnology clusters can be summarised in four
regions: West- and North Europe, American West coast, American East coast, and East Asia.
In Europe, the strongest biotechnology clusters are in the United Kingdom (Cambridge) and
Germany (Heidelberg). Denmark (Aarhus), France (Marseille) and Sweden (Uppsala) are in
earlier development stages and therefore have not reached maturity yet. On the American
West coast, clusters in Seattle, San Francisco Bay Area and San Diego are well positioned,
while on the American East coast, Montreal (Canada), Boston and the research triangle in
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North Carolina are major hubs. Finally, East Asia is mainly represented by Japan, Taiwan,
China (Shanghai) and Singapore on the global industrial biotechnology market.
Europe is the world leader in key industrial biotechnologies such as enzyme technologies and
fermentation. The most important enzyme producers are located in Europe with a total of
about 80 in Europe compared to 20 in the US (EC, 2008b). Nearly 70 percent of the estimated
$313 billion spent in 2006 on R&D of relevance to biotechnology by leading companies in
industrial applications, was spent by European firms (OECD, 2009a).
The two chosen case studies are Cambridge (United Kingdom) and the Bay Area (United
States of America). Cambridge in UK is the most important cluster in Europe and one of the
strongest (industrial) biotechnology areas on a worldwide level (Chiesa and Chiaroni, 2005).
The Bay Area around San Francisco is not only the birthplaces of biotechnology (the first
biotechnology company Genentech was found there in 1976), but it is also a well established
and renowned biotechnology cluster with a similar age and historical development as
Cambridge. Which makes them also interesting to compare is the fact that they had the same
form of cluster creation in the past. Cambridge and the Bay Area could both be classified as
spontaneous clusters, which is the result of a spontaneous concentration of the key factors
enabling its birth and development, without major influence of governmental commitment
(which would indicate policy-driven clusters) (Chiesa and Chiaroni, 2005).
Figure 5-20: US-European comparison of the success of biotechnology clusters (2003)
Source: http://iis-db.stanford.edu/docs/190/Casper_biotech_clusters.pdf
5.3.1. Industrial biotechnology cluster Europe: Cambridge (United Kingdom)
The cluster of Cambridge in UK comprises the area around the city with a radius of nearly 30
km. The biotechnology cluster is embedded within 30 government-funded laboratories and
seven renowned universities in the Cambridge region. Currently, there are more than 250
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biotechnology companies present on Cambridge campus, accompanied by 29 public firms and
a large number of service providers. These biotechnology companies were mainly founded on
campus rather than becoming established from external sites. Larger companies from the
outside are getting involved in the Cambridge cluster mainly through M&As. All dedicated
biotechnology companies have a combined number of employees of around 10,000: the whole
biotechnology cluster, including universities and supporting activities, employs 25,000
people.52 The Cambridge biotechnology cluster is served by local support providers and
receives large investments (2004: €600 million).
Figure 5-21: Actors in the Cambridge biotechnology cluster
Source: Walker (2005).
Although there are larger biotechnology companies with more than 250 employees, most
firms in the Cambridge cluster have approximately 11-20 employees (see Figure 5-22). These
SMEs focus on R&D and license-out technology to larger players with manufacturing and
marketing capabilities. Furthermore, there are many companies with less than six employees,
indicating the continuous development of start-ups within the cluster.
52
http://www.protoneurope.org/news/7th-annual-conference-2010-athens/friaday-29-january-2010/the-heidelberg-
model/attachment_download/file
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Figure 5-22: Distribution of the number of employees in biotechnology firms in the
Cambridge cluster
0
5
10
15
20
25
30
less than
6
6-10 11-20 21-50 51-80 81-100 over 100
Source: Chiesa and Chiaroni (2005: 55).
Short history of the cluster
The industrial biotechnology cluster in Cambridge emerged in the early 1980s. Initial
companies were founded within the Cambridge Science Park and were embedded in an
environment of existing and established electronics and computing industries. The number of
biotechnology companies grew steadily until the mid 1990s, when international investments
in high-tech industries also nurtured the biotechnology cluster in Cambridge. Through this,
the Science Park was soon dominated by biotechnology companies and was viewed primarily
as a biotechnology location. These companies were accompanied and supported by
biotechnology research organisations such as the University of Cambridge, the Institute of
Biotechnology and the Babraham Institute. As the cluster developed critical mass it attracted
scientific, technical and business service providers, building a cluster with a balanced mix of
academic and commercial expertise with local support providers.
Figure 5-23 illustrates the historic growth of the cluster. The time period 1995-1999 showed
the highest growth rate, driven by two factors. Commercial awareness of biotechnology
during this period as well as a rapidly growing global economy investing venture capital in
high-tech industries have spurred the cluster’s growth. Growth came to a hold, however, as
the stock market declined in 2001/02 and in the following years, and the number of new
companies in the cluster declined. In addition to this, there were more IPOs than in the years
before, increasing the number of publicly listed firms.
Figure 5-23: Number of new biotechnology firms in the Cambridge cluster
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0
10
20
30
40
50
60
pre
1984
1985-
1989
1990-
1994
1995-
1999
2000-
2002
2003-
2004
Firms
Firms quoted on the
stock exchange
Source: Chiesa and Chiaroni (2005: 52).
Biotechnology is not the only technology represented in Cambridge. As Figure 5-24 shows, a
wide range of teFchnologies emerged there over the last decades. This multidisciplinarity had
an influence on the success of the cluster, since many research fields are interrelated. This
opened collaboration opportunities between technology specialists.
Figure 5-24: The emergence of technology clusters in Cambridge over time
Source: Barrel (2004).
System failures and system drivers for growth
Infrastructure
Infrastructure was available right from the beginning, since the biotechnology companies
were founded within the premises of the University of Cambridge. Biotechnology firms have
a wide range of choices for biology and chemistry laboratories, which are located in several
science parks on campus or in the greater Cambridge area (Cambridge Science Park, Granta
Park, Cambridge Research Park, Chesterford Research Park). Next to this, firms have also
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access to UK’s most successful bio-incubator, which is located on the Babraham Research
Campus.
The Cambridge biotechnology cluster has a good balance between academic institutions (e.g.
University of Cambridge), locally established companies (e.g. Cambridge Antibody
Technology), companies from overseas (Amgen USA), spin-offs from universities and
research institutes (e.g. Akubio Ltd.), and spin-offs from biotechnology companies (e.g.
Sareum Ltd.) (see Walker, 2005). Furthermore, the biotechnology cluster is embedded into a
larger technology network in Cambridge. Next to biotechnology, there are also strong
research efforts in nanotechnology/materials and information technology, with many
collaborative R&D projects in an interdisciplinary environment. Finally, there is also a
growing number in supporting companies and services, including law firms, accounting firms,
patent agents, consulting firms, and international banks, which contribute to the cluster’s
success (Barrel, 2004).
Institutions
Norms and values: It is proposed that culture change is one of the enabling factors that
stimulated the growth and development of the cluster. This change is related to the generation
of a more entrepreneurial spirit and the establishment of a common belief and purpose of the
Cambridge science community (Barrel, 2004).
Public policy and funding: The cluster is unique in Europe in a way that not a single person or
individual organisation has consciously played a significant role in the creation of the cluster
and its development over time. Cluster development was driven by many different players and
factors, but without a strong commitment of public actors in the beginning. Only when the
biotechnology industry was already well established in the area and forming a cluster, many
agencies were created to act as central actors in guiding the cluster development (e.g.
bioindustry association, East Region Biotechnology Initiative, East Anglia Development
Agency) (Chiesa and Chiaroni, 2006).
The national government supports the regional activities through its Biotechnology and
Biological Sciences Research Council (BBSRC). Their main policy is to ensure a sustainable
and world-class research base in the UK to attract investments in bioscience research. To do
so, they support the development of new approaches and technologies, and they accelerate the
transformation of research outputs into commercially successful products and processes.
Within BBSRC, there is also a ‘Bioscience for Industry Strategy Panel’, providing strategic
input on industrial user needs, knowledge transfers and interactions with the industry.53
53
http://www.bbsrc.ac.uk/organisation/organisation-index.aspx
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Furthermore, public policies for biotechnology are also created through a number of other
governmental organisations. The Bioscience Unit of the Department of Trade and Industry
(DTI) has the oversight for the biotechnology sector and promotes industry-related R&D and
technology transfer. The Office of Science and Technology (OST) is also part of DTI and
responsible for overall science policies. Regulatory competence lies with the Department of
Health (DoH). Since biotechnology activities often originate from university research, the
Department for Education and Skills (DfES) plays an important role in university policy and
funding in relation to biotechnology. Tax breaks and tax credits created through The Treasury
are key policies and one of the most significant initiatives in stimulating investments in
biotech. Introduced in 2000, tax credits are widely used. SMEs are entitled to tax breaks on
their non-capital R&D expenditure over £10,000 at 150 percent. If the firm makes no taxable
profit (which is the case for many biotechnology firms), losses can be surrendered to the
Exchequer in return for a cash payment of 24 percent of total eligible R&D spend. This
scheme is estimated to support the industry with £150 million. Finally, many regional
Development Agencies (RDAs) identified biotechnology as a key technology and thus created
a range of models to reinforce the foundation of new companies and/or to strengthen existing
ones (House of Commons, 2003). In general, the UK has an advantage over countries such as
Germany and the USA because of the comparatively liberal regulatory framework within
biotechnology R&D is conducted.
On a national level, the government’s research councils run a number of initiatives to
encourage the commercialisation of research. The BBSRC (bioscience for the future) is one of
the seven research councils, which is funded by the Department for Business, Innovation and
Skills (BIS). Its budget is around £450 million (2008) and supports 1600 scientists and 2000
research students in universities and research institutes in the UK. Cambridge University
receives quite a large share of this budget (160 grants with a sum of £55 million in 2008) for
its own biotechnology research and commercialisation activities in form of exploitation of
research outcomes.54
Venture capital: The cluster has also access to financial resources at all investment stages,
which has shown to be critical for growth. The business angel network in Cambridge is one of
the most active in Europe (Walker, 2005). The biotechnology cluster is served through the
‘Great Eastern Investment Forum’ and the ‘Cambridge Angels’. Next to their primary
function of providing capital, these business angels offer professional advice, contacts, and
practical help. Another new angel initiative is the ‘Cambridge Capital Group’, which supports
companies with linkages to university research with private investments. Once the start-ups
enter the global market, they are accompanied by the regional operating ‘Cambridge Gateway
54
http://www.bbsrc.ac.uk/organisation/organisation-index.aspx
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Fund’ in pursuing venture capital. Furthermore, venture capital is also available through the
proximity to the large financial market in London. For example, the Barclays Bank dedicated
large sums to the promising high-tech industry, with many smaller venture capitalists
following this development (Page, 2003).
Interactions
Companies in the region enjoy access to local suppliers of technical and professional services
and this has created a regional supply chain that is unrivalled in Europe. Several other factors
contributed to the success of the cluster. A number of biotechnology entrepreneurs were
attracted by the mixture of increased funding, availability of premises and the high-tech
atmosphere on campus. At the same time, several organisations helped to found and support
start-ups in a variety of ways. But none of these organisations was responsible for the creation
of the cluster, rather than the combination and synergy effects of actions across organisations.
For example, the Babraham Bioincubator offered small laboratories and offices for flexible
and temporary work, but it did not provided subsidised services. Later on, when the
biotechnology cluster was already established, it was (and still is) supported by the East
Region Biotechnology Initiative (ERBI), which is an industry led initiative which was
formally started in 1997 by the local biotechnology community and local and national
government officials. Initially, it obtained its financial resources from the Department of
Trade and Industry. Now, ERBI receives the majority of funding from private sources. ERBI
aims on enhancing the growth and development of biotechnology in Cambridge and the East
of England, with the mission of asserting the region as a world-renowned centre of
excellence. The organisation promotes local, national and international networking, supports
successful growth on new and emerging ventures, and makes sure that the infrastructure
enables a steady growth of the biotechnology community (Chiesa and Chiaroni, 2005).
In addition to ERBI's activities, there is a huge amount of sharing of best practice, contacts
and experiences, and newcomers to the cluster can easily and quickly integrate into the
scientific and business communities. In addition to this, the critical mass of activity in the
region has created a so-called ‘bio re-cycling’ phenomenon, meaning that nothing is
redundant for very long. People, laboratories, IP, and equipment are quickly re-absorbed into
the local biotechnology cluster (Walker, 2005).
Capabilities
The Cambridge biotechnology cluster combines world renowned research universities with
important research institutes. Furthermore, Cambridge has a well established entrepreneurial
culture with many biotechnology firms originating from university spin-offs, which were and
still are supported by number of incubators and Science Parks.
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Market failures and drivers for growth
Market structure
With currently more than 250 biotechnology companies, the cluster created a strong profile as
a excellent location for early stage companies and start-ups with high growth rates and
innovative technologies. They are not only attracted by the cutting edge research centres, but
also by large established biotechnology organisations (number of employees higher than 250),
which offer potential knowledge transfers and learning opportunities through collaboration
activities. Therefore, Cambridge has a well established entrepreneurial culture with university
spin-offs (dating back to the 1980s).
Investors are also keen for biotechnology companies to locate in the area, in order to benefit
from other advantages, such as local venture capitalists and business angels, a range of
supporting services with legal, patent, recruitment, and property advisers, and regional
biotechnology associations. Finally, they want to associate the new company with the image
of Cambridge as a leading scientific centre.55
Market demand
Next to the relatively easy access to financial resources and markets in London, other high-
tech clusters in the UK and bio hubs in Europe, the exceptional strategic location of the region
enables research institutes and biotechnology companies to sell products and services
throughout Europe to all kind of different markets. With the Stansted airport only half an hour
away, Cambridge is very good connected to most major European cities and biotechnology
communities in continental Europe (Walker, 2005).
Conclusion
The Cambridge biotechnology cluster is a world-leader and the biggest of its kind in Europe.
It was created spontaneously without major support from the government. Cambridge is so
successful, because it has a unique set of characteristics: it combines top ranked research
institutes, world class universities, intense commercial activity with small start-ups as well as
multinational companies, incubators, company creators, science parks, a range of professional
advisers and services (including biotechnology associations), a culture that respects risks, and
last but not least a strategic location close London’s large financial market, providing access
to venture capitalists and business angel networks.
55
http://www.berr.gov.uk/files/file28706.pdf
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System and market failures and drivers
Public funding: During the early stages of cluster development, the government had very little
impact on the formation of the cluster. There was limited financial support, guidance and
commitment on the part of public actors. After the cluster reached a more mature stage, the
government started to assist in its further development by implementing supporting
association, initiatives and agencies and creating specific research councils (BBSRC) for
public funding. Nevertheless, the UK government has only committed limited amounts of
public money to subsidising the biotechnology industry. The lack of government support
could be the right choice, since the biotechnology sector is able to survive without large
public funding. But on the other hand, the industry is highly reliant on business angles and
venture capital. This could result in a twin obstacle of market failure and absence of public
support at one point in time (House of Commons, 2003).
Tax incentives: Tax breaks and tax credits created through The Treasury are key policies and
one of the most significant initiatives in stimulating investments in biotech. It boosts R&D
activity on a national scale, up to 10 percent in the long-term.
Public procurement and lead markets: We found no specific information on the role of public
procurement and lead markets.
5.3.2. Technology cluster Non-Europe: Bay Area (United States of America)
The San Francisco Bay Area is one of the most commercially successful biotechnology
clusters. Over the last 30 years, the biotechnology cluster has grown to 1.400 life science
firms with 90,000 employees and generating over $2 billion in exports annually.56 More
specifically, the 69 public biotechnology firms generated $17.7 billion in revenues (2006).57
These companies are accompanied and supported by several private research institutes, nine
regional universities and public officials at all levels of government.58 The total market
capitalisation is estimated at $144 billion.
Figure 5-25: San Francisco Bay Area biotechnology public company financial highlights ($m)
2005 (percentage change over 2004)
Source: modified from Su and Hung (2009: 612).
56
http://www.protoneurope.org/news/7th-annual-conference-2010-athens/friaday-29-january-2010/the-heidelberg-
model/attachment_download/file
57
http://www.oslocancercluster.no/index2.php?option=com_docman&task=doc_view&gid=25&Itemid=39
58
http://www.baybio.org/wt/page/history
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Short history of the cluster
The biotechnology cluster in the Bay Area started in the late 1970s, supported by a large
scientific base (University of California in San Francisco, Berkeley and Davis) and the
accessibility of venture capital. Genentech, founded 1976 in San Francisco, was the first
biotechnology company in the world. During the 1980s, Genentech acted as an anchor
company, which was followed by the emergence of 50 other biotechnology firms, creating a
expansion of workforce up to 19,000 jobs and a turnover of $2 billion (1987). Part of these
new firms were actually founded from previous Genentech senior managers (16 percent of all
Genentech senior managers founded their own biotechnology company). In the early years,
the region did not appear as one coherent cluster, but rather as a collection of small clusters of
firms linked to multiple venture capitalists (Owen-Smith and Powell, 2006). In the 1990s, the
cluster achieved a certain level of maturity, with a shift from exploration to exploitation of
biotechnology. This development was accompanied by the growth of the most successful
companies, such as Genetech and Amgen and by taking the leadership position on a
worldwide level. During the period 1988-1999, the Bay Area network involved 159
organisations (82 DBFs, 12 PROs, and 64 venture capital firms), connected by 243 local
contractual ties. It is important to notice that no public intervention or any centralised
organisation had a role in the development of this cluster (Chiesa and Chiaroni, 2005).
System failures and system drivers for growth
Infrastructure
The geographic proximity of scientific centres of excellence played an important role in the
cluster development because of potential knowledge spillovers. But it was the availability of
venture capital and other supportive institutional infrastructure which made the cluster
successful in its early days. Nowadays, the combination of public funding and venture capital
nurtures the cluster development. In absolute figures, the biotechnology cluster raised more
than $4 billion in capital, including $600 million in venture financing (2006).59
Institutions
Rules and regulations: The activities in the Bay Area are also supported by US specific laws
regarding the ownership of intellectual property, which were clarified in the ‘Bayh-Dhole
University and Small Business Patent Act’ (1980). This act promotes the commercialisation
of scientific research by giving universities the rights on their patents, thus clarifying IP
ownership among research staff, departments, knowledge transfer offices and universities.60
59
http://www.oslocancercluster.no/index2.php?option=com_docman&task=doc_view&gid=25&Itemid=39
60
http://www.berr.gov.uk/files/file28741.pdf
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There are improvements in the FDA regulations, which created faster pathways for the
production of biotechnology products and processes.61
But there are also public regulations which hinder the development process of certain
biotechnologies. For example, the Californian Air Resources Board (CARB) approved
specific rules for Low Carbon Fuel Standards (LCFS) and new measurements for carbon
intensity, which go into effect in 2011. According to this new way of calculating, the carbon
footprint of biofuels is higher than for fossil fuels. This overregulation of biofuels generation
is a threat for R&D activities in advanced biofuels and cellulosic ethanol.62
Norms and values: The success of the Bay Area biotechnology cluster is built on a culture of
entrepreneurship. Is assumption is bases on the relatively high rates of IPOs and new venture
creation in this region.
Public policy and funding: Funding from the federal government level originates from the
National Institute of Health and the National Science Foundation (NSF, $2.2 billion in 2007),
The US department of Agriculture, NASA (office of life and microgravity sciences) and the
US department of Energy (office of Biological and Environmental Research). These funds are
channeled through universities and research institutes to stimulate innovations in basic
research. Also the city of San Francisco provides public funds for the creation of labs and
office parks as well as a number of taxpayer-funded research grant.63 Furthermore, California
and the city of San Francisco offer several tax breaks and incentives for biotech-related
activities.
Venture capital: Venture capital is available to support the commercialisation of scientific
research and the transition of knowledge to the market. There is a large number of local
venture capitalists investing in biotechnology start-ups, accounting for 34 percent of all active
venture capital firms in the United States (see Su and Hung, 2009). Finally, there is one
federal programme to support the foundation of biotechnology start-ups. The Small Business
Innovation Research Program (SBIR) financially encourages university faculties to create
commercial-oriented spin-offs of their research.64
Interactions
During the formation of the cluster, universities in the region tried to a create links to
biotechnology firms. The UC (University of California) administration set up an initiative
called BioSTAR to promote research collaborations between academics scientists and
61
http://epscor.unl.edu/ppts/Panetta.ppt
62
http://www.baybio.org/wt/page/energy_research
63
http://legacy.signonsandiego.com/news/business/20041205-9999-mz1b5cluster.html
64
http://www.sbir.gov/about/index.htm
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dedicated biotechnology firms (DBF). More than 100 biotechnology firms participated,
investing $32 million in the first four years.
After the cluster reached maturity (at the end of the 1990s), venture capital became
increasingly important, while at the same time the involvement of public research
organisations (PROs) was shrinking. Even more importantly, the cluster witnessed a rapid
growth of direct ties between DBF. In 1999, DBF-DBF connections outnumbered the other
two types of ties (venture capital, PROs) (Owen-Smith and Powell, 2006). These
collaborative partnerships create strong network ties and build the social capital of this area,
which is one of the key success factors for this cluster (Su and Hung, 2009).
Figure 5-26: Bay Area main component ties by dyad
DBF = dedicated biotechnology firm, VC = venture capital, PRO = public research institutes.
Source: Owen-Smith and Powell (2004: 33).
To support the interaction between biotechnology companies, research institutes, venture
capitalist, etc., the BayBio bioscience association was found. It offers the bioscience
community networking opportunities, advocacy, group purchasing and access to organisations
that support research, development and commercialisation of biotechnology products.
Capabilities
The biotechnology cluster in the Bay Area had a strong science base because of numerous
top-level research universities and institutions. Many of their scientists founded their own
biotechnology companies with their research results, which created more than 170 academic
spin-offs. This means that the success of many biotechnology firms in this region is based on
technological knowledge rather than organisational knowledge (Su and Hung, 2009).
Figure 5-27: Academic spin-offs in the Bay Area since the origin of the cluster
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Source: Chiesa and Chiaroni (2005).
Market failures and drivers for growth
Market structure
During the 1980s, Genentech acted as an anchor company, which was followed by the
emergence of 50 other biotechnology firms, creating a expansion of workforce up to 19,000
jobs and a turnover of $2000 million (1987). Part of these new firms were actually founded
from previous Genentech senior managers (16 percent of all Genentech senior managers
founded their own biotechnology company). Today, the cluster is becoming a hub of
biotechnology and all related activities, with relatively low entry and exit barriers for
organisations.
Market demand
The biotechnology cluster in the Bay Area is market-oriented and a hub of biotechnology and
biotech- related activities, with relatively low entry and exit barriers for organisations.
Conclusion
The Bay Area in San Francisco has a dense concentration of biotechnology companies and
major research and intellectual centres (notably UCSF, UC Berkeley and Stanford
University). Along with a mature infrastructure of bio-savvy law firms, venture capitalists and
other support organisations, it remains a biotechnology hotbed for the coming years.65
System and market failures and drivers
The cluster originated from a tight social network among biotechnology firms, venture capital
and research institutions. Now, the direct links between DBFs are building the main network
65
http://www.theatlantic.com/business/archive/2009/05/is-bay-area-biotech-in-trouble/17701
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structure. Next to the social network effect, also the heterogeneity of individuals and
organisation regarding knowledge, skills and experiences contributed to the succes of the
cluster. Finally, the cluster was and still is market-oriented, becoming a hub of biotechnology
and all related activities, with relatively low entry and exit barriers for organisations.
Public funding: Public funding or other government activities played no major role in the
early development of the cluster. Since the cluster is in place and reached a certain size,
cluster development is supported by some institutions on federal government level, such as
NSF, US department of Agriculture, NASA, US department of Energy. These public funds
mainly aim on basic research and do not provide incentives to create commercial spin-offs.
There is only one federal programme (Small Business Innovation Research Program) to
support the foundation of biotechnology start-ups.
Tax incentives: California and the city of San Francisco offer several tax breaks and
incentives for biotech-related activities.
5.3.3. Conclusion of industrial biotechnology cluster comparison
Strengths and weaknesses
The Cambridge and the Bay Area clusters have many similarities. Both are very mature and
internationally renowned clusters with similar age and historical development. Both of them
developed spontaneously without strong policy interference compared to most of the other
clusters discussed in this research. Both have kept world leading market positions in Europe
and United States over the last decades.
In both cases, most biotechnology firms were not created or relocated from the outside, but
originated from within the area, with cluster growth mainly taking place around
internationally leading research institutes. They are also similar in their strong interactions
and relationships between science, industry and public spheres, combined with a very strong
entrepreneurial culture.
A difference between the clusters is that in Cambridge, universities played the largest role in
creating biotechnology firms through spin-offs, while in the Bay Area, the combination of one
large player (Genentech) and a strong academic science base was the origin for many start-up
biotechnology firms, founded either by former employees of Genentech or by former
university staff. There, the anchor company took the dominant role and was supported by the
surrounding university infrastructure. This development led to a situation that biotechnology
firms in the Bay Area were more commercially oriented than firms in Cambridge.
The only possible weakness of both clusters is potentially that the clusters are based on ‘old’
biotechnology and need to refocus their activities on new biotechnology application areas,
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giving them ample ground for future competitiveness. As will be argues later, clusters are
path dependent: once a cluster acquires momentum it will likely continue to grow and
prosper. The opposite also holds true: once a cluster loses its competitive edge it will be hard
to regain it and not decline further.
Public policy, funding and tax incentives
Although the government has not had a dominant role in the start of these clusters, the
clusters did receive substantial support. Both receive government support through tax breaks
and other fiscal incentives to nurture further growth. Unique to these clusters are sufficient
financial resources for all investment stages, i.e. there is no clear ‘valley of death’. This can
be explained by the maturity and success of the clusters: once the cluster and its companies
have developed a sufficient track record and reputation, they will attract funding from
additional sources and will become less dependent on (basic) research focused public funding.
In a similar vein, the maturity and success of the cluster has attracted all sorts of professional
services to the area (think of specialist lawyers, brokers, marketing experts, international IPR
specialists) and complementary services and activities, giving the clusters the full dynamism
and creative density of a full grown cluster. This dynamism created a virtuous circle, where
the primary cluster operations are supported by secondary services, which in turn reinforce
cluster development by providing an healthy infrastructure to attract new biotechnology firms.
Lead markets: The role of lead actors / anchor firms
In the cases of Cambridge there is no clear role of one lead firm or market. However, it is
clear that the Cambridge cluster was traditionally dominated by pharma-orientated biotech.
The area knows some very large pharmaceutical companies that found its local suppliers and
collaboration partners in that area. These companies were perhaps not anchor firms, but did
play a role as lead customers to give the cluster momentum. The recent development towards
industrial biotechnology has not gone through such a well pronounced development yet.
The situation in the Bay Area is different: also there many large firms acted as accelerators for
growth by stimulating R&D, commercialisation, spin-offs and internationalisation of
activities and knowledge transfer. But it was Genentech as the world’s very first
biotechnology firm that had a special function in creating new start-ups in the Bay Area,
being the main collaboration partner and anchor firm for many R&D and business activities.
Table 5-6: Summary of findings from industrial biotechnology cluster comparison
Cambridge – United Kingdom Bay-Area – United States
History Long history of science and high tech
developments
Biotechnology development since 1980s
Rich university Colleges enable growth and
development of science parks
Established in 1976 with first bio-tech
company Genentech
Spin-offs of anchor company leads to
growth
Research / public funding plays important
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role in development
Venture capital & commercialisation
important to reach maturity
Size ~280 firms
25,000 people (incl. academics and
supporting activity firms/organisations)
~1400 live science firms, from which ~100
are dedicated biotechnology firms
The whole cluster employs 90,000 people,
annual exports are $2 billion
Classification (Post-)mature (Post-)mature
Infrastructure Cluster developed around world leading
universities
Availability of public and private research
facilities
Strong incubator: Babraham Research
Campus
ERBI: private cluster platform
Strong knowledge infrastructure with large
universities close by
Institutions Rules and regulations
Cambridge has an advantage over countries
such as Germany and the USA because of
the comparatively liberal UK regulatory
framework within biotechnology R&D is
conducted.
Norms and values / culture
Strong cluster identity, also consciously
promoted by ERBI
Strong entrepreneurial spirit as well as
collaborative attitude between scientists
Rules and regulations
Clear IPR: giving Universities rights on IP
Patent law enhances commercialisation
Improved FDA regulation speeds up process
New regulations on carbon emissions threat
to the industry
Norms and values / culture
Culture of entrepreneurship
Strong collaborative culture
Public policy /
funding /
taxation
No clear role public policy in promoting the
cluster – self originated
Support in later stages from national and
regional bodies
Funding available at all stages of research &
development
Good access to private funding: VC,
business angels, banks.
Tax credit on their non-capital R&D
expenditure over £10,000 at 150 percent;
losses can be surrendered to the Exchequer
in return for a cash payment of 24 percent of
total, eligible R&D spend
No public policy involvement in creating the
cluster
Good availability of venture capital �
promotes commercialisation
Availability of start-up support
Tax-breaks / incentives: biotechnology firms
are exempt from paying payroll taxes for up
to 7.5 years (2004)
Interactions Strong industry-university linkages
Strong relationships locally between
researchers (personal relationships)
Strong links internationally
BioSTAR: promotes university-industry
collaboration
BayBio bioscience association: collaboration
PPP and VC
Strong social networks of university
graduates and ex-employees of large
companies that start their own company
Capabilities World leading scientists on biotechnology
Very strong position in research,
development and commercialisation
Strong scientific basis
170 university spin-offs (start-ups)
Market demand Strategic position in European market
Large companies serve as lead customers
and finance new developments
Bay Area supplies world wide to
pharmaceutical enterprises
Market structure Good mix of small and large firms.
Start-ups and spin-offs.
Market open for new entrants
Strong mix of small entrepreneurial firms
and large companies that provide route for
commercialisation
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Supportive financial structure available to
grow companies
Enough space for start-ups and spin-offs
Dynamic and entrepreneurial
Cluster features Self originated, no policy result
Financing for all stages
Concentrated in 30m range
Strong informal networks support
collaborative structures
Self originated, no policy result
Big role for entrepreneurship, spin-offs and
spin-offs
Financing for all stages of development
Source: TNO compilation.
5.3.4. Factors influencing the future development of industrial biotechnology
Factors influencing the future market potential of industrial biotechnology
Industrial biotechnology is a continuously evolving field of technology. Although
biotechnology is well established in the chemical industry it is still a niche there and overall it
is in its infancy. Until now the endless biodiversity which serves as basis for applications in
industrial biotechnology is known only to a small extent. Industrial biotechnology provides
the opportunity to improve the quality of existing products and to develop completely new
products which cannot be produced by traditional synthetic methods and processes. In
addition, industrial biotechnology is a powerful technology to provide solutions for
environmental friendly processes. Industrial biotechnology has the potential to substitute
processes in the chemical industry and scarce resources. In the light of increasingly scarce
resources and rising energy prices it is expected that the share of biotechnology applications
increases in the coming years to achieve a sustainable development. Thus, the demand for
sustainable solutions will be powerful driver for industrial biotechnology applications. But
biotechnology must compete with alternative production technologies such as purely chemical
processes. Becoming more cost-competitive through the increase of output efficiency is
thereby an important goal.
But industrial biotechnology is a cross-disciplinary field of research. Thus, future
development critically depends on scientific advances in other research areas which provide
key knowledge for industrial biotechnology. These areas include microbiology and
bioinformatics but also just emerging areas such as synthetic biology or systems biology.
Besides, broad public support and acceptance of industrial biotechnology is essential, and
social implications and concerns such as the provision of sufficient land to satisfy food
demand and negative impacts of biotechnological inputs must be addressed
The role of public support
Universities and public research organisations play a very prominent role in industrial
biotechnology by providing new technological knowledge. In recent years, patenting by
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public research has increased rapidly accounts for about 30 percent of the patents. Therefore,
the maintenance and funding of public research institutions as a public support measure
contributes significantly to advancements and the success of industrial biotechnology.
Second, it is important to facilitate the exchange between universities, public research
organisations and industry. National programmes at the federal level as well as EU
programmes have been shaped to improve interaction between research institutions and
companies. Thereby, not all funding support instruments distinguish between the different
application areas of biotechnology and target explicitly on industrial biotechnology. For
example, in Germany in the framework programme for biotechnology invested 980 million
Euros in this technology area.66 The funding initiative “BioIndustrie 2010” (within the
framework programme) focuses on industrial biotechnology and has a budget of €60 million
between 2006 and 2011. Besides stimulating additional R&D investments in companies,
sustainable networks of firms and scientific institutions should be established in order to
exploit the innovative potential and competences by transferring ideas and research output
from the scientific community into commercial applications and products. The 7th framework
programme of the EU directs their activity also in biotechnology.67 A European knowledge-
based bio-economy should be built by bringing together science, industry and other
stakeholders.
In addition, financial support for spin-offs from public research can help to enlarge the
community of industrial biotechnology start-ups. In the US funds of the Small Business
Innovation Research Program (SBIR) provide critical seed money to new business innovators,
including biotechnology companies. Between 1983 and 1997 there was more than $240
million in SBIR awards for biotechnology companies from the Department of Defense (a
restriction to industrial biotechnology is not possible). There is compelling evidence that the
SBIR program has had a positive impact on developing the U.S. biotechnology industry. The
program contributed to the creation of high-technology small firms and enhancing U.S.
competitiveness (Audretsch, 2003). Thus, the success of the biotech sector in the US is also a
result of public support.
In biofuels, government policies such as subsidies and mandated use of biofuels have been
key factors for the tremendous growth in biofuels production and consumption play, for
example in Brazil, the USA and China; countries which have a comparative advantage in
biofuels production. Subsidies are allocated at many points in value chain, from subsidies for
crops, subsidies to production of biofuels to subsidies for the purchase of biofuels or for the
66
http://www.fz-juelich.de/ptj/rahmenprogramm-biotechnologie/
67
http://ec.europa.eu/research/fp7
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purchase or operation of a vehicle. Total government support for biofuels in the United States
reached approximately $6.3 to $7.7 billion in 2006 (Koplow, 2007). Total annual support for
biofuels provided by EU governments reached €3.7 billion in 2006 (Kutas et al., 2007). An
evaluation of the cost-effectiveness and impacts of biofuel policies is still missing.
Contribution of industrial biotechnology to social wealth
Industrial biotechnology offers several potential contributions to social wealth. In particular it
provides opportunities to achieve a sustainable development Industrial biotechnology can help
to limit the consumption energy and scarce resources, to provide alternative sources of energy
as well as to decrease the waste resulting from industrial process. With respect to health and
quality of life, industrial biotechnology offers for example vitamins, functional food or
improved cosmetics such as regenerative skin creams.
Importance of sustaining production capabilities
Scientific research is the most important knowledge source in this KET. In particular for
advances in the creation of new enzymes and microbial cells scientific input from related
scientific disciplines is crucial. At present about two-thirds of the enzyme producing firms are
located in the EU. To push industrial biotechnology by integrating biotechnological and
chemical processes a close interaction between firms and public is a critical element. In this
respect, sustaining production capabilities for intermediate products such as enzymes as well
as chemicals can be regarded as important.
5.4 Conclusions and Policy Implications
State of technology
Biotechnology is a fast developing technology. Enzyme products for the manufacture of
detergents, food, textiles, chemical and pharmaceutical industry are well established on the
market although only about 130 different enzymes of the thousands of known enzymes are
used industrially (BMBF, 2008). Industrial biotechnology provides the opportunity to
improve the quality of existing products and to develop completely new products which
cannot be produced by traditional synthetic methods and processes. Sales of products
produced by biotechnological processes accounted for €99 billion in 2007 of which the
majority is generated by biochemicals (McKinsey, 2009).
Europe’s technological position
Europe, North America and East Asia have always the highest market share of patents at their
respective regional patent office (EPO, USPTO and JPO). With respect to triadic patents the
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market is similar distributed between the three regions. At EPO/PCT Europe contributes with
36 percent only slightly more than North America to total industrial biotechnology patenting.
In terms of patents per GDP, Europe still produces the highest number of patents but the
distance to East Asia is not as pronounced.
The two largest subfields within industrial biotechnology are enzymes (33 percent) and other
enzyme processes which comprise organic acids, amino acids, vitamins, proteins except
enzymes (30 percent), followed by fermentation processes and established chemicals. While
in North America and the Rest of the World patents on enzymes are relatively more
important; in Europe and East Asia fermentation and other established biochemicals are more
pronounced.
Although the patents on enzymes are most frequently their commercialisation is limited.
Enzymes can be regarded as an input. Sales are generated mainly by their “end-product” like
biochemicals.
Within Europe, the distribution of patent applications by subfield does not vary to a large
extent between the countries of applicants. Exceptions are the strong focus on enzyme patents
in Denmark which is due to the location of the world largest producer of enzymes there.
Germany is more specialised in established biochemicals, reflecting its strong chemical
industry.
Links to disciplines, sectors and other KETs
Industrial biotechnology patenting is a cross-disciplinary field of research that affects a
multitude of industries. But almost half of all industrial biotechnology patents are linked to
pharmaceuticals, 23 percent to the chemical industry, 17 percent to the manufacture of
instruments (optical, medical, measurement, steering instruments). The importance of
pharmaceuticals might be overestimated since patents in the area of enzymes are not already
assignable to the different types of biotechnology. Enzymes used for the red (medical)
biotechnology may be still in the sample of analysis.
Industrial biotechnology patents are closely linked to applicants from the chemical industry,
accounting for 42 percent of all industrial biotechnology patents. Public research plays a very
prominent role in patenting, accounting for about 30 percent. In recent years, patenting by
public research has increased rapidly compared to a decrease in most business sectors.
Market prospects and growth impacts
All existing market forecasts for industrial biotechnology and the various submarkets suggest
a strong increase in sales in the next decade. Market estimates are difficult to compare and
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integrate since different subfields of the industrial biotechnology markets are defined. The
most optimistic forecasts for biochemicals – the most important field of industrial
biotechnology – expect global sales in 2025 of more than 600 billion US-$. So far, previous
forecasts have proved to be too optimistic, however. But there is no doubt that demand for
products which involve industrial biotechnology will increase clearly above the total market
expansion.
For the predictions estimations on the development for specific technologies are needed. But
the estimations are challenging since, for example, the rates of development in the emerging
field of synthetic biology or to competing technologies are unknown (OECD 2009a).
Advances in the improvement of enzyme’s characteristics will be important as well as the
integration of biotechnological and chemical technologies.
An important driver for the industrial biotechnology sector will be the stronger use of
renewable raw materials and efficient bioprocesses to achieve a sustainable development. But
biotechnology must compete with alternative production technologies such as purely chemical
processes. Becoming more cost-competitive through the increase of output efficiency is
thereby an important goal.
Policy options
As exploiting the potential of industrial biotechnology is eventually based on further massive
advances in research, it thus seems essential to promote Europe’s industry and science such
that further research efforts are possible. Scientific research is the most important knowledge
source in this KET. Linking industry and science and smoothly transferring scientific findings
into commercial applications is a critical element. A close interaction between firms and
public research is required. Cluster initiatives have proved to facilitate this exchange
significantly.
Besides, in particular scientists are of great importance for the industrial biotechnological
industry through foundations by scientists researching in this technology field. The spin-offs
are expected to contribute significantly to the further technological development of industrial
biotechnology. In addition, start-ups founded by scientists are regarded as important
transmission media which allow transferring new scientific knowledge in economic activities
and thus introducing new biotechnological products and methods on the market. Typically,
they concentrate on very specific industrial biotechnology applications and explore the
business prospects of new research results. For the diffusion it is also essential that the
products fit to the needs of customers in terms of (sustainable) performance and costs.
In order to establish a dynamic sector of industrial biotechnology companies, venture capital
funding as well as public support to R&D conducted by these firms is essential. Small
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biotechnology firms have limited financial resources. In order to realise growth the provision
of capital funding is essential. While in the 1990s a generous venture capital industry
supported a variety of start-ups, today there is a shortfall in venture capital market. Private
venture capital companies very carefully evaluate the business prospects of young firms and
most often provide only limited funding, focussing on close-to-market-introduction projects
and not on early stage projects of biotechnology start-ups. In addition, most investors are only
given little attention to industrial biotechnology although industrial biotechnology requires
lower investments and is less risky as, for instance, red biotechnology. This is attributed to the
fact that industrial biotechnology mainly develops new processes for the production of
already known chemicals (OECD 2009c). Therefore, raising the attention and point out the
chances of this field can improve the funding opportunities for industrial biotechnology firms.
In Europe 78 percent of biotechnology SMEs faced problems to raise funds to continue
important R&D projects (EuropaBio 2009). In this situation, policy will have to compensate
for this “market failure” in the financial market.
First, financial support for spin-offs from public research can help to enlarge the community
of industrial biotechnology start-ups. Secondly, programmes to actively commercialise public
research patents though out-licensing is another promising option. Thirdly, industrial
biotechnology research programmes at public research should be designed in a way that
combines basic research with more application-oriented development, involving partners from
the business enterprises sector. Competence centres and R&D co-operation programmes have
proved to be helpful in this respect.
Another starting point for policy action is a claim for sustainable development. The regulatory
framework set by policy can push the development and use of renewables. Industrial
biotechnology is a powerful technology to provide solutions for environmental friendly
processes. This instrument is already in place. With respect to biofuels the European Council
agreed to the Action Plan 2007-2009 Energy Policy for Europe (EPE) in which it set a
mandatory minimum target to be achieved by all Member States for biofuels of 10 percent of
vehicle fuel by 2020.
Further policy actions should relate to providing a stable regulatory environment, particularly
with respect to likely safety and health of industrial biotechnology. Another aspect is to
secure that sufficient land is available to grow food in order to satisfy food demand in order to
relieve public worries.
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6 PHOTONICS
6.1 Definition and State of Technology
Photonics is a cross-sectoral technology, bringing together the disciplines of physics,
nanotechnology, materials science, and electrical engineering (EC 2008). By using light
(photons are energy-rich light packages) as information carrier and as energy carrier,
photonics adopts more and more tasks that previously were done by means of electrical and
electronic processes (Jahns, 2001). Photonics has exceptional properties like high
focusability, speed of light, ultra-short pulses, and high-power. The importance of Photonics
can be seen from the multitude of application sectors where it is increasingly seen to be
driving innovation (see Table 6-1). These sectors include information processing,
communication, imaging, lighting, displays, manufacturing, life sciences and health care, and
safety and security (EC, 2008a).
Information and Communication: Optical networks have opened the way to almost unlimited
digital communication, building the very foundations of our Information Society. The major
highways of communication and information flow are based on optical technology. Photonics
enables the processing, the storage, the transport and the visualisation of the huge masses of
data. Information and knowledge are becoming our most valuable commodities – unlimited
access to which is becoming arguably the most significant driver of productivity and
competitiveness. It is optical transmission networks that are enabling all of this, giving data
accessibility to anyone, anywhere (Photonics21, 2006).
Industrial Production / Manufacturing and Quality: Light is the tool of the future. In
manufacturing (laser-) light is used as a fast and precise tool for many purposes, materials and
objects. Laser material processing is welding, cutting or drilling with unprecedented
flexibility, precision, quality, cost structure and productivity. Laser technology offers
numerous advantages in comparison with conventional processes. Pulsed laser systems are
particularly suitable for micro-structuring of both sensitive and hard materials because of the
low thermal loading of the components and the contactless nature of the process. The
processing speeds are high and any signs of wear on the tool are avoided. The market of laser
systems for material processing developed from a small niche market in the beginning of the
1980s to a market of €4.75 billion in 2005. This development is typical for a sector driven by
photonic technologies (Photonics21, 2006).
Life Sciences and Health: Modern health care has been revolutionised by the use of optical
applications in examination, diagnosis, therapy and surgery. Modern surgical microscopes
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have become key tools and image guided systems make use of computer tomography in
navigated surgery. Laser diagnosis and treatments in ophthalmology, dermatology and other
medical fields have evolved into standard procedures. The role of photonics will grow
tremendously in the future, because of the capability of photons to monitor biomaterial in
real-time, non-contact and without affecting the life processes (Photonics21, 2006).
Table 6-1: Application sectors and important products in the field of photonics
Field of Technology Applications Examples
Production Technology Laser Materials Processing Systems
Lithography Systems (IC, FPD, Mask)
Lasers for Production Technology
Objective Lenses for Wafer Steppers
Optical Measurement and
Machine Vision
Machine Vision Systems and components
Spectrometers and Spectrometer Modules
Binary Sensors
Meas. Systems for Semiconductor Industry
Meas. Systems for Optical Communications
Meas. Systems for Other Applications
Medical Technology and Life
Science
Lenses for Eyeglasses and Contact Lenses
Laser Systems for Medical Therapy and Cosmetics
Endoscope Systems
Microscopes and Surgical Microscopes
Medical Imaging Systems (only Photonics-Based Systems)
Ophthalmic and Other in Vivo-Diagnostic Systems
Systems for In-Vitro-Diagnostics, Pharmac. & Biotech R&D
Optical Communications Optical Networking Systems
Components for Optical Networking Systems
IT: Consumer Electronics,
Office Automation, Printing
Optical Disk Drives
Laser Printers and Copiers, PODs, Fax and MFPs
Digital Cameras and Camcorders, Scanners
Barcode Scanners
Systems for Commercial Printing
Lasers for IT
Sensors (CCD, CMOS)
Optical Computing
Tetrahertz Systems in Photonics
Lighting Lamps
LEDs
OLEDs
Flat Panel Displays LCD Displays
Plasma Displays
OLEDs and Other Displays
Display Glass and Liquid Crystals
Solar Energy Solar Cells
Slar Modules
Defence Photonics Vision and Imaging Systems, Including Periscopic Sights
Infrared and Night Vision Systems
Ranging Systems
Munition / Missile Guiding Systems
Military Space Surveillance Systems
Avionics Displays
Image Sensors
Lasers
Optical Systems and
Components
Optical Components and Optical Glass
Optical Systems (“Classical” Optical Systems)
Optical & OE Systems & Components Not Elsewhere Classified
European Competitiveness in KETs ZEW and TNO
EN 198Error! Unknown document property name. EN
Source: Photonics21 (2007b), ZEW compilation.
Lighting and Displays: Innovative lighting systems create convenient surroundings and save
energy. Semiconductor light sources –LEDs (light emitting diodes) and organic LEDs
(OLEDs)– provide advantages like: long service life, no maintenance, IR/UV-free lighting,
low energy consumption and chromatic stability. The OLED technology is the first real area
light source technology in history.
Photovoltaics: It denominates the direct transformation of sun light (incident photons) into
electric energy by means of solar cells. The technology has already developed so far that solar
modules with an efficiency of over 40 percent have demonstrated under laboratory conditions.
The global output of solar cells is growing rapidly by 68 percent in 2007 (Initiative Photonik
2020).
In 1905 discovered Einstein that light does not flow like a continuous fluid, but consists of
indivisible elementary unity that we now call photons. The term Photonics was coined in
1967 by Pierre Aigrain, who gave the following definition: ‘Photonics is the science of the
harnessing of light. Photonics encompasses the generation of light, the detection of light, the
management of light through guidance, manipulation, and amplification, and most
importantly, its utilisation for the benefit of mankind’ (EC, 2008a). Photonics has a decisive
impact since the 1960s when with the development of electronics, laser technology and fibres,
optics created the technological environment for optical communication (Jahns, 2001).
The next innovation boost in this field will come from mastering the manipulation of the
elementary particles of nature, exploiting the effects of quantum physics, further reducing the
footprint of optical elements to the micro- and nanometer scale, tailoring the propagation of
electromagnetic waves with the help of metamaterials, extending Photonics to spectral regions
like THz which at present are underexploited, and learning from biology how to manipulate
and process light. Photonics holds a huge potential – not only for new and even better forms
of communications and entertainment but also in many other applications, including
manufacturing, medicine, displays, and a whole range of sensors for chemicals, biological
materials and in the environment. Ultimately, photonics even promises to completely replace
microelectronics as the technology that computers use to ‘think’ (optical computing), leading
to a huge increase in performance (EC, 2008a).
Chapter 6 Photonics
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6.2 Technological Competitiveness, Industry Links and Market Potentials
6.2.1. Technological Competitiveness
Market Shares
Europe's performance in producing photonics patents is compared to that of applicants from
North America (USA, Canada, Mexico) and East Asia (Japan, Korea, Taiwan, Singapore and
China, incl. Hong Kong). Measured in terms of patents applied at EPO or through the PCT
procedure (EPO/PCT patents), the number of photonics patents applied per year increased
markedly to roughly 6,650 patent applications in 2005. East Asian applicants applied the
largest number of photonics patents thanks to a rapid increase in patenting over the past ten
years (Figure 6-1). European and North American applicants produce about the same annual
number of photonics patents. In contrast to East Asia, photonics patenting in these two
regions did not increase substantially after 2001.
Figure 6-1: Number of photonics patents (EPO/PCT) 1981-2005 by region of applicant
0
500
1000
1500
2000
2500
3000
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
In 2005, European applicants had a share of 29 percent in total photonics patent applications
at EPO/PCT, compared to 27 percent for North American applicants and 42 percent for East
Asian applicants (see Figure 6-2). Europe’s market share decreased slightly over the past 15
years (starting from 35 percent in 1991).
Figure 6-2: Market shares in photonics patents (EPO/PCT) 1991-2005, by region of applicant
(percent)
European Competitiveness in KETs ZEW and TNO
EN 200Error! Unknown document property name. EN
0
10
20
30
40
50
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
In order to account for “home office” effects in patenting (i.e. the propensity for applicants
from a particular region to use predominantly their regional patent office for applications),
patent applications in photonic at USPTO (North America) and JPO (East Asia) are analysed
as well. The shares of patent applications differ significantly when looking at regional patents
as shown in Figure 6-3. When only considering EPO applications, Europe was most of the
time ahead with a share in total EPO photonics patents of 33 to 39 percent, while European
applicants are of less significance when looking at USPTO, JPO or triadic patents. For
USPTO patents, North American applicants show a share of around 50 percent or higher up to
the year 1996. Their share decreased drastically afterwards to 30 percent in 2004. The overall
picture of the market shares in photonics patents shows a significant increasing of East Asia
applicants, while the share of North America applicants is substantially decreasing since the
mid-nineties. Europe’s share remains rather stable.
Chapter 6 Photonics
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Figure 6-3: Market shares in photonics patents 1991-2005 for national applications and
triadic patents (percent)
a. EPO)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. USPTO)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
c. JPO)
0
10
20
30
40
50
60
70
80
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies (including PCT applications transferred to national patent offices from all three regions).
Source: EPO: Patstat, ZEW calculations.
In order to determine the relative importance of photonics patents for a region, patent
intensities are calculated (see Figure 6-4). The patent intensity is defined as the number of
patents per year form applicants of a certain region to the GDP of that region. This type of
specialisation indicator shows that North America and Europe produce similar numbers of
photonics patents per GDP. One striking observation is the significant increase in patent
intensity of East Asian applicants since 1998.
European Competitiveness in KETs ZEW and TNO
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Figure 6-4: Patent intensity 1991-2005 for photonics patents (number of EPO/PCT and
triadic patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT
0
50
100
150
200
250
300
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
50
100
150
200
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by subfields
The field of photonics is divided in four subfields based on the following IPC classes:
Solar: F21K, F21V, H01L 25, H01L 31/42,
Lighting: H05B 31, H05B 33, H01L 51
Laser: H01S 3, H01S 4, H01S 5
Optical devices: H01L 31, H02N 6, G02B 1, G02B 5, G02B 6, G02B 13/14
The largest subfield is optical devices, accounting for roughly 56 percent of all photonics
patents (Figure 3-5). All three main regions show similar shares for this subfield. About 18
percent of all photonics patents fall in the subfield of solar cells while Europe is ahead with
26 percent. Laser follows with 15 percent and lighting with 10 percent. East Asia reports well
above average shares of 16 percent for lighting while the shares for Europe and North
America were only half the level of East Asia.
Chapter 6 Photonics
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Figure 6-5: Composition of photonics patents (EPO/PCT, 1981-2007 applications) by
subfields (per cent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Solar Lighting Laser Devices
Source: EPO: Patstat. ZEW calculations.
When looking at the technology market shares by subfield over time (Figure 6-6), Europe
shows rather high, though falling market shares in solar cells and lower but rather stable
market shares in lighting, laser, and optical devices. East Asia’s market share increased
significantly in all four subfields while North America falls back.
Figure 6-6: Market shares for EPO/PCT photonics patents by subfields 1991-2005 (percent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Solar
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Lighting
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Laser
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Devices
Source: EPO: Patstat, ZEW calculations.
The composition of photonics patents by subfields is rather stable over time in all three
regions (see Figure 6-7). However, patent applications related to lighting have gained some
importance in all three regions, particularly in East Asia. Furthermore, patent applications in
photonics by European applicants are more focused on solar than the one of North American
European Competitiveness in KETs ZEW and TNO
EN 204Error! Unknown document property name. EN
and East Asia applicants. North American applicants show a specialisation on optical devices,
whereas East Asia reports a comparably high share for lighting.
Figure 6-7: Composition of photonic patents (applications at home patent offices), by region,
subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
N
or
th
Am
e
ric
a
Ea
st
As
ia
Solar Lighting Laser Devices
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Dynamics in photonics patent applications at the regional home offices significantly differ by
subfield and region. In all three regions and all three periods, patenting in the field of lighting
increased at the highest rate. While Europe shows particularly high growth rates for the early
1990s, East Asia reports the highest growth for the most recent period (1998/01 to 2002/05)
(see Figure 6-8). Patenting dynamics in laser were rather low in the most recent period in all
three regions. Patenting in optical devices grew slowly in the most recent period in Europe
and North America, but increased significantly in East Asia. Patenting in the field of solar
shows rather modest growth rates which were highest in the late 1990s in all three regions.l
Chapter 6 Photonics
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Figure 6-8: Average annual rate of change in the number of photonics patents (applications
at home patent offices), by region, subfield and period (percent)
-10
0
10
20
30
40
50
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
Solar Lighting Laser Devices Total
Europe
-10
0
10
20
30
40
50
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-10
0
10
20
30
40
50
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
European Competitiveness in KETs ZEW and TNO
EN 206Error! Unknown document property name. EN
Patenting at the country level in Europe
Within Europe, inventors from Germany represent the largest group of producers of photonics
patents. Over the past three decades, they accounted for 38 percent of all photonics patents
applied at EPO/PCT, followed by inventors from France (16 percent), the UK (15 percent)
and the Netherlands (9 percent). The number of photonics patents by German inventors
reached the highest level in 2004 (see Figure 6-9). The number of patents from the UK
increased significantly from 1999 to 2001 and the Netherlands expanded patent output in
photonics from 1998 to 2002. France shows a more moderate but continuous growth in
photonics patenting.
Figure 6-9: Number of potonics patents in Europe (EPO/PCT) 1981-2005 by country of
inventor
0
100
200
300
400
500
600
700
800
900
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE FR
UK IT
NL SE
CH BE
RoE
Eight
European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
The economic significance of photonics patenting differs substantially by country (Figure
6-10). Photonics patent intensity -that is the ratio of the number of photonics patents to GDP-
is highest in the Netherlands, Switzerland and Germany. Intensities above the European
average are also reported for Sweden, France and the UK. Belgium and Italy are the only two
countries among the eight largest photonics patents producers in Europe with a patent
intensity below the European average. The countries not belonging to the group of the eight
largest patent producers in this KET show a very low patent intensity.
Chapter 6 Photonics
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Figure 6-10: Patent intensity in photonics 1991-2005 of European countries (EPO/PCT
patents)
0
50
100
150
200
250
300
DE FR UK IT NL SE CH BE RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Eight European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
Growth rates in photonics patenting also differ among European countries. The Netzerlands
and Italy as well as the group of countries not belonging to the eight largest photonics patents
producers in Europe could increase their patent output between the first half of the 1990s
(1991-95) and the first half of the 2000s (2001-05) above the European average at compound
annual rates between 13 and 17 percent (Figure 6-12). Growth rates at about the European
average (11 percent) are reported for Germany, the UK and Belgium while growth rates were
rather low in France, Sweden and Switzerland.
Figure 6-11: Change in the number of photonics patents between 1991/95 to 1996/00 and
1996/00 to 2001/05, by country (EPO/PCT patents; compound annual growth
rate in percent)
-5
0
5
10
15
20
25
DE FR UK IT NL SE CH BE RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
European Competitiveness in KETs ZEW and TNO
EN 208Error! Unknown document property name. EN
Eight European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
Most countries show higher growth rates for the 1990s (1991/95 to 1996/00) than for the early
2000s (1996/00 to 2001/05), excpet for the Netherlands and Belgium. Countries with early
growth in photonics patents were Sweden, Italy, the UK and Germany.
The composition of photonics patent applications by subfields and country of inventor is
depicted in Figure 6-12. 53 percent of photonics patents in Europe fall into the field of optical
devices. The second largest subfield is solar cells (24 percent). 14 percent are related to laser
and 9 percent to lighting. Sweden, Switzerland and Belgium are the countries with the highest
share of patents in the field of optical devices while Italy and the “rest of Europe” show high
shares in the subfield of solar cells when compared to the European average. The Netherlands
and Belgium are rather focused on lighting.
Figure 6-12: Composition of photonics patents by subfields and countries (EPO/PCT, 1981-
2007, percent)
0 10 20 30 40 50 60 70 80 90 100
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Europe total
Solar Lighting Laser Devices
Eight European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
Specialisation patterns in photonics patenting are shown in Figure 6-13. This figure reports
the difference between the share of a subfield in a country’s total photonics patents and the
respective share for Europe total (excluding the country of consideration). Germany, Italy and
the “rest of Europe” are specialised in the field of solar while the Netherlands, the UK and
Belgium report above average patenting activity in lighting. Laser is a subfield where France,
the UK and Sweden show some specialisation. France, the UK, Sweden, Switzerland and
Belgium are specialised in optical devices.
Chapter 6 Photonics
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Figure 6-13: Specialisation patterns of photonics patenting in Europe, by subfield and
country, relative to Europe total (percent)
-25 -20 -15 -10 -5 0 5 10 15 20 25
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Solar
Lighting
Laser
Devices
Difference between the share of a subfield in a country’s total photonics patents and the respective share for Europe total (excluding the
country under consideration).
Eight European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
European countries show different trends in photonics patenting by subfield (Table 4-1).
When comparing the growth in the number of patents applied by subfield for the 1990s (i.e.
between the number of patents over the 1991-95 and the 1996-2000 periods) and the early
2000s (i.e. between 1996-00 and 2001-05), one can see an extremely high growth in lighting
in both periods and only low patenting dynamics in laser. Growth rates in solar and optical
devices were higher in the former period. Most countries follow this general pattern. Notable
deviations include the Netherlands and Belgium in the field of solar where both countries
report high growth rates for the more recent period. In the field of lighting, Italy shows
particularly high increases in patent output in both periods. Danymics in laser patenting were
rather high in Sweden, Belgium and the “rest of Europe” in the 1990s while the UK and the
Netherlands report high growth rates for the early 2000s. The Netherlands and the “rest of
Europe” were able to maintain high growth rates in the field of optical devices in the recent
period.
European Competitiveness in KETs ZEW and TNO
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Table 6-1: Change in the number of photonics patents between 1991/95 to 1996/00 and
1996/00 to 2001/05 by subfield and country (EPO/PCT patents, compound annual
growth rate in percent)
DE FR UK IT NL SE CH BE RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Solar 16 10 7 11 13 6 11 12 17 22 19 -10 9 8 -1 40 19 11 14 11
Lighting 24 27 34 33 51 21 84 45 36 30 8 37 23 17 31 34 80 19 34 26
Laser 10 6 5 2 4 10 11 -2 -15 9 23 -4 10 1 17 5 28 17 7 6
Optical devices 12 6 8 6 15 6 20 8 11 18 18 -3 11 5 10 6 19 18 12 7
Photonics total 13 8 7 7 14 8 16 10 10 20 19 -4 11 6 9 14 19 16 12 9
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
Eight European countries with the largest number of photonics patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
6.2.2. Links to Sectors and Fields of Technologies
Technological links to sectors
Patenting in photonics is important to a number of sectors as as revealed by direct
technological links between photonics patents and industrial sectors. 43 percent of the optical
devices patents are technologically linked to the electronics industry, 29 percent are
technologically related to the manufacture of instruments and 8 percent are linked to the
machinery and equipment industry (see Table 6-2). Further industries that are technologically
affected by photonics patenting are chemicals, glass/ceramics/concrete, metals, rubber/plastics
and vehicles. There are little differences in the sector composition of technological links of
photonics patents among the three regions.
Table 6-2: Technological links to sectors of photonics patents (EPO/PCT), by region (1981-
2007 applications, percent)
Europe North America East Asia Photonics total
Food 0 0 0 0
Textiles 0 0 0 0
Wood/Paper 1 1 0 1
Chemicals 5 4 6 6
Pharmaceuticals 1 1 1 1
Rubber/Plastics 3 2 2 2
Glass/Ceramics/Concrete 4 3 3 4
Metals 4 2 2 3
Machinery 8 7 9 8
Electronics 43 45 49 43
Instruments 29 33 26 29
Vehicles 3 2 2 2
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Chapter 6 Photonics
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Patenting in the fields of solar and laser are most closely linked to the electronics industry
whereas optical devices show a stronger technological relation to the instruments industry
(Table 6-3). Lighting patents are technologically linked to electronics and machinery, but also
show a significant impact on the chemicals industry.
Table 6-3: Technological links to sectors of photonica patents (EPO/PCT), by subfield
(1981-2007 applications, percent)
Sector
Solar Lighting Laser Optical
devices
Photonics
total
Food 0 0 0 0 0
Textiles 0 0 0 0 0
Wood/Paper 2 0 0 1 1
Chemicals 2 12 2 7 6
Pharmaceuticals 0 3 0 1 1
Rubber/plastics 2 0 0 3 2
Glass/ceramics 2 2 2 6 4
Metals 3 2 2 3 3
Machinery 6 27 5 5 8
Electronics 62 43 69 34 43
Instruments 14 8 19 40 29
Vehicles 6 1 1 1 2
Total 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
If one looks at the sector affiliation of patent applicants in photonics, i.e. if one assigns
industry sectors to the applicants of photonics patents based on the main market an applicant
is present, a similar picture emerges. The electronics industry (incl. computer and
semiconductor) and the optical industry (including lighting, cable and solar cells
manufacturers) together account for almost 60 percent of total photonic patents. This share is
particularly high in East Asia (more than 70 percent). Another important source for photonics
patents is the chemical industry (11 percent, particularly in North America and East Asia). In
Europe, the vehicles and defence industry are relatively important groups of photonics patent
applicants. Public research is of less significance for this KET as a producer of patents. Its
share in total photonics patenting is almost 9 percent in Europe, 8 percent in North America
and just 4 percent in East Asia.
Figure 6-14: Sector affiliation of applicants of photonics patents, by region (EPO/PCT, 1981-
2007 applications, percent)
European Competitiveness in KETs ZEW and TNO
EN 212Error! Unknown document property name. EN
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
Total
Optical/cable/solar Lighting Telecommunication Semiconductor/computer
Other Electronics Chemicals Glass/ceramics Other Materials
Machinery/instruments Vehicles/defence Public research
Source: EPO: Patstat. ZEW calculations.
Comparing the sector affiliation of photonics patent applications before and after the end of
1999 - which splits the total sample of photonics patents in two subsamples of similar size -
reveals a shift of photonics patenting from telecommunication towards the optical industry
(Figure 6-15). This trend is particularly strong in North America. In addition, the
semiconductor and computer industry, the chemical industry and the glass and cermaincs
industry gained in importance at the expense of the vehicles and defence industry. In Europe,
telecommunication as well as other electronics lost importance as photonics patents producers
while the lighting industry and the semiconductor industry gained shares. In all three regions,
public research increased its market share in photonics patenting, though only at a moderate
rate.
Chapter 6 Photonics
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Figure 6-15: Change in the sector affiliation of photonics patents applicants before and after
the end of 1999 (EPO/PCT), by region (percentage points)
-15
-10
-5
0
5
10
Europe North America East Asia Total
Optical/cable/solar Lighting Telecommunication Semiconductor/computer
Other Electronics Chemicals Glass/ceramics Other Materials
Machinery/instruments Vechicles/defence Public research
Source: EPO: Patstat. ZEW calculations.
Other electronics (i.e. electronics companies not specialised in telecommunication,
semiconductors, computers or lighting) is the most important applicant sector for all four
subfields in photonics. 30 percent of all lighting patents and 27 percent of all solar patents
were filed by this industry (Table 6-4). Other important industries for generating solar patents
are companies from the lighting industry, the optical industry, the vehicles industry, the
defence industry and the chemicals industry. Lighting patents are often filed by companies
belonging to the optical industry and the chemicals industry. Laser patents orginated from
electronics, telecommunication, optical and semiconductor companies, but also public
research is a relevant actor for patenting in this subfield. Patents in the field of optical devices
are most often produced by electronics and optical companies, as well as by companies from
the chemicals and telecommunication industry.
Table 6-4: Sector affiliation of applicants of photonics patents, by subfield ((EPO/PCT 1981-
2007 applications, percent)
Solar Lighting Laser Devices
Optical/cable/solar 12 21 17 21
Lighting 17 5 2 1
Telecommunication 2 2 18 11
Semiconductor/computer 5 9 10 6
Other Electronics 27 30 24 21
Chemicals 10 17 4 14
Glass/ceramics 2 2 3 6
Other Materials 1 1 1 1
Machinery/instruments 3 2 6 4
Vehicles/defence 16 4 7 6
Public research 4 9 10 7
European Competitiveness in KETs ZEW and TNO
EN 214Error! Unknown document property name. EN
Total 100 100 100 100
Source: EPO: Patstat. ZEW calculations.
The list of the 20 largest photonics applicants by region (in terms of the number of patents
applied since 2000) is given in Table 6-5 for information purposes. Applications by
subsidiaries are assigned to the parent company. Patents applied by firms that later have be
acquired by other companies are assigned to the latter. For patent applications by more than
one applicant fractional accounting applies.
Table 6-5: 20 main patent applicants in photonics by region (EPO/PCT patents, 2002-2007
applications)
Europe North America
Rank Name Country Sector # pat. Rank Name Country Sector # pat.
1 Osram* DE lighting 650 1 3M US chemicals 748
2 Alcatel Lucent FR telecommunication 450 2 Corning US glass 739
3 Philips NL electronics 399 3 Eastman Kodak US optical 553
4 Siemens DE electronics 314 4 Agilent US telecommunication 276
5 Carl Zeiss DE optical 281 5 General Electric US electronics 236
6 Valeo FR automotive 276 6 Du Pont US chemicals 234
7 Thales FR defence 223 7 Intel US semiconductors 215
8 Comm. à l'energie atom. FR government 172 8 Honeyw ell US machinery 179
9 Infineon DE semiconductors 169 9 Hew lett-Packard US computer 174
10 Schott DE glass 166 10 ADC Telecommunications US telecommunication 165
11 Fraunhofer DE research 165 11 MIT US research 147
12 Bookham Technology GB electronics 154 12 Avanex US electronics 138
13 Draka Comteq NL optical 146 13 Tyco Electronics US electronics 136
14 Essilor FR optical 141 14 Univ. of California US research 114
15 Hella DE lighting 137 15 Raytheon US defence 114
16 Merck DE chemicals 129 16 Cree US optical 114
17 STMicroelectronics IT semiconductors 114 17 Finisar US optical 111
18 Ericsson SE telecommunication 107 18 JDS Uniphase US optical 111
19 Pirelli IT automotive 100 19 Northrop Grumman US defence 91
20 Robert Bosch DE automotive 90 20 Motorola US telecommunication 89
East Asia
Rank Name Country Sector # pat.
1 Samsung KR electronics 1029
2 Matsushita Electric JP electronics 750
3 Fuji Film JP optical 698
4 Sumitomo Electric JP electronics 631
5 Sharp JP electronics 564
6 Sony JP electronics 467
7 Canon JP optical 450
8 Nitto Denko JP materials 398
9 Konica JP optical 380
10 Seiko Epson JP optical 373
11 LG Electronics KR electronics 363
12 Seminconductor Energy Lab.JP semiconductors 358
13 Pioneer JP electronics 357
14 Fujitsu JP computer 353
15 NEC JP telecommunication 336
16 Idemitsu Kosan JP oil 295
17 Hamamatsu Photonics JP optical 285
18 Furukaw a Electric JP electronics 278
19 Mitsubishi Chemical JP chemicals 239
20 Nikon JP optical 233
* Part of Siemens.
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Source: EPO: Patstat. ZEW calculations.
Photonics patenting in Europe is concentrated on a few industrial actors. More than one in
five patent applications of the past 27 years has been applied by only five companies (Figure
6-16). In North America and East Asia, concentration is a bit less marked. In Europe, the 15
largest applicants are responsible for more than a third of total patent output in photonics,
compared to 22 percent in North America and 28 percent in East Asia.
Figure 6-16: Concentration of applicants in photonics patenting (EPO/PCT patents) 1981-
2007, by region (percent)
0
10
20
30
40
Europe North America East Asia
CR5 CR10 CR15
CR5 is the number of patents applied by the 5 largest patent applicants in the total number of patent applications. CR10 and CR15 are
calculated accordingly.
Source: EPO: Patstat. ZEW calculations.
Links to other KETs
Related to the issue of sector links is the degree to which photonics patents are linked to other
KETs. One way to assess likely direct technological relations is to determine the share of
photonics patents that are also assigned to other KETs (because some IPC classes assigned to
a photonics patent are classified under other KETs). The degree of overlap of photonics
patents with other KET patents by subfields is shown in Figure 6-17. About a quarter of all
photonics patents have been assigned to other KETs, too. The highest share is reported for
lighting, followed by devices and laser. Overlaps are low for solar patents.
European Competitiveness in KETs ZEW and TNO
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Figure 6-17: Share of photonics patents linked to other KETs by subfield (EPO/PCT patents
1981-2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Solar
Lighting
Laser
Devices
Photonics total
Source: EPO: Patstat. ZEW calculations.
For those photonics patents that are linked to other KETs, one can see that the largest overlap
is with the field of microelectronics (Figure 6-18). This is particularly true for solar and
lighting and less for devices and laser. A significant share of laser patents that have been co-
assigned to other KETs are related to nanotechnology and another relevant fraction is related
to advanced manufacturing technologies. Patents in optical devices with overlaps to other
KETs show a relatively high share of patents co-assigned to advance materials.
Figure 6-18: Links of photonics patents to other KETs by subfields (EPO/PCT patents 1981-
2007, only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Solar
Lighting
Laser
Devices
Photonics total
Nanotechnology Micro-/nanoelectronics
Industrial Biotechnology Advanced materials
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
6.2.3. Market Potentials
The European photonics industry accounted in 2006 for revenues of €49 billion,
corresponding to a growth rate of 12 percent. In 2005 the industry sector employs 246 000
persons in Europe, not including employment with subcontractors (Photonics21, 2007b). In
addition to directly employed people (“some 200,000”), two million other jobs depend on the
photonics industry in Europe (EC 2008). The world market for Photonics accounted in 2005
for €228 billion. Figure 6-19 shows the segmentation of the world market by sectors (BMBF,
2007; Photonics21, 2007b).
Figure 6-19: Photonics World Market by Sector, 2005
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Solar energy
4%
Flat panel displays
26%Lighting
8%
Information technology
21%
Optical communications
5%
Midecal tech. & life
science
8%
Measurement &
automated vision
8%
Production technology
6%
Optical components &
systems
6%
Defence photonics
8%
Source: BMBF (2007), Photonics21 (2007b)
An average annual growth rate of 7.6 percent is expected for the Photonics world market for
the ten years period of 2005 through 2015 and the highest growth rate (13.2 percent) is
expected for the solar energy sector (Photonics21, 2007b). Table 6-6 summarises available
estimates and forecasts on the market potential in photonics and selected subfields.
Table 6-6: Estimates and forecasts for the size of the global photonic market and selected
subfields
Subfield Source 2005/
06
2007/
08
2009/
10
2011
/12
~2013
/14
2015 ~2018 Cagr*
In billion US-$
Microscopes,
accessories and
supplies BCC (2009) 2.4 3.6 7
Terahertz radiation
systems BCC (2008) 0.077 0.521 21
Process spectroscopy BCC (2008) 0.946 1.9 10
Organic light emitting
diodes (OLEDs) BCC (2009) 3.9 8.1 16
Light emitting diodes
for lighting
applications BCC (2006) 5.8 10.5 10
Light emitting diodes
for lighting
applications BCC (2010) 5.2 8 7
In billion EUR
Lithography BMBF (2007) 5.95 16.1 10
Laser Materials
Processing BMBF (2007) 6.8 14.2 8
Image Processing BMBF (2007) 7.4 16 8
Measurement systems BMBF (2007) 11.6 23 7
Medical Technology &
Life Science BMBF (2007) 18.6 38.8 8
Optical
Communication BMBF (2007) 12 31 10
Information Techn. &
Printing BMBF (2007) 47.7 88 6
European Competitiveness in KETs ZEW and TNO
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Lighting BMBF (2007) 18.5 31.9 6
Flat Panel Displays BMBF (2007) 61 119 7
Solar Energy BMBF (2007) 9 31 13
Optical Components &
Systems BMBF (2007) 12.7 30.6 9
Total market
World market BMBF (2007) 210 439 8
European market Photonics21
(2007b) 43.5
* Compound annual growth rate in nominal terms (percent).
Source: Compilation by ZEW based on the references quoted.
6.3 Success Factors, Barriers and Challenges: Cluster Analysis
On a global level, production is (increasingly) located in low-cost countries, predominantly in
Asia. In 2005 Japan represented 32 percent, Europe 19 percent North America 15 percent,
Korea 12 percent and Taiwan 11 percent of world production. High value-added engineering
and complex systems level integration, however, seems still to be located in the so-called
advanced economies. Within Europe for example, Germany accounts for 39 percent of
European production volume, followed by France and the UK (12 percent each), the
Netherlands (10 percent) and Italy (8 percent) (Optech, 2007). Unfortunately, reports on the
subject do not compare global regions by R&D expenditure but only production output. With
high volume production concentrated in Asia research intensity68 is likely to be lower than the
9 percent in Europe (Photonics 21, 2006).
Another structural characteristic of the industry is that global niche players are very common.
Even very small photonics companies with a special competence have global reach and may
control a significant share of the global market for which maybe only one or two other
companies or even research organisations compete. As a consequence it is a characteristic of
this industry that there are rarely entire supply chains present within a specific region. This,
however, depends largely on the specific technology and the fields of application in question.
(Sydow et al., 2007)
Even though the field of photonics can be described as a relatively young high technology
industry with a global reach, a number of established traditional clusters (in the past being
based on classical optics) can be identified: Jena in Germany; Rochester, New York, and
Tucson, Arizona, in the U.S.; and Wuhan in China. All of these are based on a long tradition
of developing optics capabilities in the region. On the other hand, fairly recently a large
68
Research intensity differs by sub-segment. In Germany for example research intensity in photonics is 9.7 percent, while
higher in the sub-segments of production technology (13 percent) and measurement & automated vision (14 percent). In the
sub-segments medical technology and optical components & systems it ranges between 7 percent and 10 percent, while lower
in lighting (5 percent) and solar energy (3 percent) (BMWi, 2007).
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number of newly developing photonics clusters have been observed. This development can
partly be attributed to the advancement, differentiation and specialisation in photonics
technology and the perceived need to work closely together with other competent actors, but
also to local and national governmental initiatives that promote regional clustering activities
(Sydow et al., 2007).
SPIE, the International Society for Optical Engineering, identifies a number of optics and
photonics clusters globally (www.photonicsclusters.com). However, while having mapped
many clusters in Europe and North America there are only few examples from Asia where the
majority of production takes place. This could indicate a bias in the information available,
particularly on Japan of which no cluster is registered. On the other hand this could also mean
that most research takes place not in the countries with the largest production volume but high
income regions. In that context it is also interesting to note that some photonics clusters in the
Triad have even begun to form inter-cluster alliances (Sydow et al., 2007).69
For this analysis we have chosen to compare one European cluster with one international
counterpart. With Germany representing 39 percent of output in photonics we chose the
OpTecBB (Berlin-Brandenburg) cluster in Germany. As comparison we chose the “Quebec
photonics network” (Canada), which exists since the 1970s and is a leader on photonic
application markets.
6.3.1. Photonics Europe: The Optical Technologies Berlin-Brandenburg cluster
(OpTecBB)70
The photonics cluster Berlin-Brandenburg is represented by a regional network of firms,
research institutes and universities called OpTechBB. It was founded in 2000 and is part the
national association called OptecNet, coordinating nine regional networks in the field of
optical technologies in Germany.71 It nominally covers the region of Berlin-Brandenburg, two
of the German Länder, but its members are geographically concentrated in the metropolitan
region of Berlin (Adlershof) (Sydow et al, 2007).
About 260 firms and 40 research organisations employing in total 7,400 people and annual
turnover of around €1,8 billion are forming this photonics cluster (Sydow et al., 2007).
However, this data is based on a survey from 2002. Others in the meantime (2007) speak of
69
Since 2005 the photonics clusters in Berlin-Brandenburg, Tucson, Arizona, and Ottawa, collaborated in the so called “Tri-
Cluster Berlin-Tucson-Ottawa Alliance”. Activities include easing market access for cluster firms improve collaboration and
information exchange including a rotating summer school. This initiative is perceived as successful with first imitators at an
early stage between the photonics clusters in Bavaria, Germany, and Québec, Canada (Sydow et al., 2007).
70
The information here is largely based on a cluster study by Sydow et al. (2007) who conducted 10 semi-structured
interviews in summer 2004 and 81 semi-structured telephone interviews with OpTecBB firms. In 2006 a further round of
interviews was conducted for network analysis (86 interviews).
71
http://www.optecnet.de/welcome-to-optecnet-deutschland-e-v?set_language=en
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more than 300 firms employing around 12,000 people with annual turnover of around €12bn.
Around 90 of these organisations are formal members of the OpTecBB network.
Of the firms, 95 percent employ less than 250 people, while the large majority (90 percent)
are small firms employing less than 50 people (Sydow et al., 2007). The remaining 5 percent
of large firms, however, account for the largest proportion of turnover and employees. But
important for cluster development, these large firms do not actively develop the cluster
(Sydow et al., 2007).
The cluster indirectly benefits of a strong research landscape present in and around the
German capital of Berlin. There are in total four universities in Berlin and Potsdam, including
a large university hospital (Charité), and 10 universities of applied sciences with about
140,000 students. In addition, the region houses more than 70 publicly funded research
institutes from one of the four main non-university research organisations (Max Planck,
Leibniz, Helmholtz and Fraunhofer). These represent an annual R&D budget of €1.8 billion
including 50,000 academic and research staff.72
Short history of the cluster
While the cluster is still in development with the cluster initiative OpTecBB founded in 2000,
the region has a much longer tradition in optical technologies. Beginning in 1801, glasses for
spectacles, lenses and cameras but also microscopes and other optical instruments were
produced in the region in the 19th century. In the 20th century firms like Auer, Pintsch,
Siemens, AEG and later OSRAM produced light bulbs in large volumes for national and
international markets making Berlin known as the ‘City of Light’. Around that time Planck
and Einstein worked on photonic-related issues at the then Berlin University and the newly-
established non-university research facilities in Berlin (Sydow et al., 2007).
This development was interrupted by two historic events: World War II and German re-
unification. During World War II most of the industrial base of Berlin was destroyed. After
that the separated and isolated location of West-Berlin meant that firms such as Siemens,
OSRAM, Kodak, and Philips relocated to regions in Western-Germany, while in the Eastern
part the left over industrial base was shipped to the Soviet Union as reparation. During the
division of Berlin the two parts of the city developed independent and in parts duplicate
capabilities in photonics evolved (Sydow et al., 2007). This resulted in dramatic downsizing
of eastern institutions during the post-reunification era in Berlin. While this resulted in many
job losses also quite a number of spin-off companies and new research institutes in Berlin-
Adlershof were founded. To strengthen the geographical concentration a number of the
72
For details see Berlin science navigator: http://www.berlin.de/sciencesnavigator/
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institutions located in West-Berlin were relocated to, or newly established, in Adlershof
towards the end of the 1990s. The OpTecBB cluster initiative hence can be seen as a re-
enforcement initiative of a long existing cluster. This could explain why the cluster as
developed so positively in a relatively short period of time (Sydow et al., 2007).
System failures and system drivers for growth
Infrastructure
Next to the wider research infrastructure outlined in the introduction, the cluster benefits from
a large (public) research infrastructure in the field of optical technologies. There are four
universities and three applied universities with Physics departments or photonics research
groups. Additionally, there are more than 20 public non-university research organisations that
have some activities in photonics, ranging from basic research (e.g. BESSY and the Max
Born Institute) to more applied photonics research (e.g. Ferdinand Braun Institute or Heinrich
Hertz Institute). (Sydow et al., 2007). Also the historic base, despite its destruction during and
after World War II, is an important factor with a number of spin-offs having emerged from
the former research institutions of Eastern Germany. However, in contrast to other clusters73
there are no formal shared research facilities lowering entry barriers for start-ups and small
firms.
Institutions
Rules and regulations: photonics, in contrast with bio- or nanotechnology, is not a radically
new technology with potential health risks in need for regulation. Rules and regulation are
hence not mentioned by any of the analyses as a relevant factor.
Norms and values: affect the cluster initiative at several levels. On the one hand a global trend
in research towards centres of excellence can be observed. OpTecBB as one regional
competence network, financed through a larger national initiative (OptecNet) in the field of
optical technologies, is one example of this trend explaining the relatively large public funds
going into this initiative.
On the other hand also at the cluster level, norms and values of members seem to make a
difference. In comparison to other global photonics clusters74, legitimacy among members of
OpTecBB scores highest, with the members well informed about the purpose and path of the
cluster initiative and their active involvement from the start. Also the boundary of the cluster
is clearer contributing to binding members, despite the fact that only about one out of three
73
One example of shared research facilities is the Philips open innovation campus in Eindhoven, the Netherlands.
74
South Arizona (USA), Scotland and West Midlands, UK.
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cluster firms is a member of the cluster network organisation (Sydow et al., 2007). These
factors also contribute positively to the external recognition of the cluster.
Public policy: plays a critical role in re-enforcing old industrial structures in the field of
photonics in Berlin-Brandenburg. Both the national and regional government75 have actively
supported the cluster. On the one hand several public research institutes have been relocated
to the cluster or newly founded (see history of cluster above). Secondly, the cluster network
organisation OpTecBB has been supported politically and financially by public authorities
since 2001 as part of the national Optec initiative.
The financial resources are used to finance three FTE at OpTecBB as well as to keep the
internal database up to date, to publish press releases and the bi-annual newsletter, and to
organise the annual ‘Networking Days’ and annual members meeting. Half of the OpTecBB
budget comprises membership fees matched by state funding from regional and national
authorities. (Sydow et al., 2007). Compared to other clusters the financial resources of the
cluster organisation are significant. A compared cluster in South Arizona (US) hardly receives
any financial support, whereas in Scotland some financial resources are available (Sydow et
al., 2009).
Financial incentives: There are no specific tax incentives or subsidies known to attract
photonic firms to the OpTecBB cluster. However, there are general tax incentives and
subsidies available to stimulate economic development in former Eastern Germany that firms
located in the cluster region could benefit from. The tax burden for companies locating in
Brandenburg for example is most favourable compared to many other regions in Germany
with a low municipal tax. Furthermore, Brandenburg as one of the EU’s Objective-1 regions
benefits from EU structural funds.76 However, these are not targeted at the OpTecBB cluster
development and financial incentives are only one factor in a complex equation determining
location decisions of firms. For example one firm specifically chose not to locate at the
Adlershof campus despite the offered subsidies, as its location in West-Berlin was of key
importance to maintain its network relationships.77
Tax incentives and subsidies seem to be more widely used outside Europe to attract firms to
cluster locations. Hausberg et al. (2008) show that these instruments are seen sceptical by
German but also European actors in terms of frequency used and importance. In contrast
Canada offers the most generous R&D tax incentives among G-7 countries complemented by
further provincial tax incentives to attract research activities of large international firms.
75
OpTecBB is supported by the national Ministy of Economic Affairs, the regional ministries of Berlin and Brandenbur, the
Technologiestiftung-Innovationszentrum Berlin and the Technologie Stiftung Brandenburg (OpTec, 2010)
76
http://www.zab-brandenburg.de/files/documents/Der_Standort_Brandenburg_7__Auflage_Dezember_2009_englisch.pdf
77
http://www.attoworld.de/junresgrps/attosecond-dynamics/pressrelease/optics_laser_Jul2008pdf.pdf
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Venture capital: No coordinated venture capital activities are known to exist at the OpTecBB
cluster. However, Sydow et al. (2007) also report no start-up support at comparable
international clusters.
Interactions
Interactions play a critical role in cluster success. The OpTecBB initiative is primarily a
cluster network initiative with a formal cluster platform. The cluster management has two
core functions. First, it represents the activities of cluster firms to the outside world through a
website, database, press releases but also coordinated events at industry fairs globally.
Secondly, it facilitates interaction between cluster firms, although interaction between firms is
only partly centrally organised. Interaction is facilitated through the annual two-day strategy
workshop called “Networking Days” organised by the OpTecBB, and the event “Members
Introduce Themselves”. Members Introduce Themselves is an event where cluster members
invite other cluster members to take a tour through their facilities and present their firm. This
event takes place about four times per year.
According to a cluster comparison by Sydow et al. (2007) the level of interaction at the
Berlin-Brandenburg cluster is high, with high involvement of individual firms in cluster
management. With the formal cluster-building approach having created social space for
personal interaction, a lot of informal interaction has developed Though these relations have
generated quite a number of important collaborative R&D projects, they have not led to an
equal amount of commercial relationships that go beyond joint R&D (see Lerch et al., 2006).
However, this is also partly explained by the cluster structure comprising relatively many
research organisations and small firms.
Also at the inter cluster level interaction is emerging. OpTecBB is interacting with photonics
clusters in Tucson (USA) and Ontario (Canada) including reciprocal visits of regional
representatives, an international summer school, and joint events at photonics trade fairs.
However this alliance was still in an infant stage in 2007 and will have to evolve.
Capabilities
Capabilities of actors can be best described by strong technological capabilities with many
internationally renowned research institutes (Max Planck, Helmholtz, Fraunhofer) and
universities (Humboldt University, Charité, Free University Berlin, Technical University
Berlin) present, supporting the emerging capabilities of small, specialised firms. Also Sydow
et al. (2007) categorise the OpTecBB cluster primarily as scientific. An important success
factor in the heterogonous optical industry is a high degree of specialisation which allows to
capturing large shares in global ‘niche’ markets.
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Market failures and drivers for growth
The cluster primarily consists of small and medium-sized firms, and a relatively large number
of research institutes. As a potential weakness the lack of a large anchor firm is mentioned
(Sydow et al., 2009). In terms of demand photonics is a global industry, with small firms
highly specialised, able to capture large shares of global market segments. The lack of a large
anchor firm means that no important lead users are located at the cluster. Instead the strong
science base is the driving force for firms to be located in the region.
Conclusion78
The OpTecBB cluster is built on a long and rich industrial history in the field of optics and
electronics dating back to the 19th century. However, World War II and German separation
have resulted in a interruption of this historical tradition, with efforts to revitalise the cluster
after German unification. The strong historical base in the field of photonics is the main
reason why the cluster has developed so positively over the last years, next to the very strong
research base. But also in terms of size and level of agglomeration, Berlin compares
favourable to other photonics clusters in Germany (Lerch, 2008). The cluster is furthermore
dominated by small companies and has a focus on research activities.
System and market failures and drivers
The strengths of the cluster and success of its recent evolution is based on a very strong
(public) research base in the region. This creates a positive ecosystem with significant spill-
over effects. Secondly, OpTecBB has created a strong and overarching member based
network that is very open to outsiders yet has managed to form a clear identity and purpose
for its members. This results in an advanced interconnectedness of actors at the cluster. Also
OpTecBB has significant financial resources compared to other international clusters being
supported by a federal initiative (OptoNet) and membership fees. Lastly, the cluster is
geographically concentrated despite its nominally wide reach with more than half of
OpTecBB members located in Berlin-Adlershof.
However, next to its strengths there are also a number of weaknesses of the cluster. There is
no large anchor firm that can act as a coordinator, provide economic stability and strong
international research links. Instead, this role is in part filled by larger public research
institutes. But these cannot compensate the missing competences in commercialisation and
marketing. Secondly, the high share of small firms means that capital resources are thin, being
a potential barrier to innovation. Also no venture capital activity is reported in at the
78
Even the limited number of cases engaged within this study is sufficient to demonstrate that, within one (high-tech)
industry clusters can develop very differently (Sydow et al., 2007).
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OpTecBB cluster. And thirdly, photonics and micro-systems are currently insufficiently
recognised by regional economic and innovation policy. (Sydow et al., 2009)
Public funding: Public funding for the OpTecBB has been critical in two respects. First, it
supported the set-up of the cluster network organisation as part of a wider national initiative.
Secondly, the many public research organisations which give the cluster its strong scientific
base rest on public financing. The research organisations were partly newly founded and
partly relocated to concentrate activities geographically in the cluster.
Tax incentives: While there are general subsidies and tax incentives available for firms to
locate in Eastern Germany at EU, national and regional level, these are not targeted at the
cluster development. For firms this is only one factor affecting their location decision, while
the wider ecosystem is at least as important. Furthermore, tax incentives are not a widely used
tool for cluster development in Germany.
Public procurement and lead markets: Public research institutes play an important role for the
cluster development. But public procurement is not used directly as few products of the
cluster are suitable for public procurement. The products of firms located at the cluster are
highly specialised in industrial apparatuses aiming at a global market.
6.3.2. Photonics Non-Europe: Quebec photonics network
The Quebec photonics cluster is located inside the wider Canadian Photonic Corridor
spreading from Quebec City over Montreal to Ottawa (see Figure 6-20). With the National
Optical Institute (INO), the Research Center for photonic/optical and laser of the Laval
University, and the Canadian Defense Research and Development Center, Quebec represents
a key actor in the Canadian photonics activities (GC, 2010).
Figure 6-20: Location of the Quebec photonics network
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Source: http://www.ryerson.ca/ors/funding/resources/download/photonics.ppt
About 100 companies79 active in optics-photonics in Quebec employ about 4,750 specialists
generating close to $60 million annual turnover. Most of the companies are located in
Montréal and Québec City, a few others can be found in the Sherbrooke and Gatineau areas.
These firms represent about a quarter of all photonics firms in Canada, one fifth of total
employment and about 15 percent of total turnover (CPC, 2009). About one third of these
jobs are in field of research. The photonics industry in Québec province comprises mainly
small and medium-sized firms, covering the entire value chain. The sector nationally is
dominated by small firms: ¾ have turnovers less than $1 million and 85 percent of firms
employ less than 100 people.
This diverse range of photonics and optical firms primarily support applications in the
telecommunications sector, but have also gained a reputation in emergent technologies like
bio-photonic, safety and instrumentation as well as optical systems for information.80.
Currently, the photonics industry in Quebec supplies goods to many industry sectors, mainly
telecommunications equipment (36 percent), electronic equipment (20 percent), industrial
process control (18 percent), instruments and measurement (18 percent), medical instruments
(5 percent) and avionics (3 percent) (QPN, 2010).
The cluster is represented by the ‘Quebec Photonic Network’, a non-for-profit organisation
with mandate to accelerate the advancement of the Optics - Photonics industry in the Province
79
The most important firms are: ABB Analytical, ART Research et Technologies, Avensys, Creaform, EXFO, Fiso division
of Roctest, Forensic Technology, Infodev Systèmes Électroniques, LxSix Photonics, Lyrtech, MPB Technologies, Optel
Vision, OptoSecurity, Perkin Elmer Optoelectronics, Servo-Robot, Silonex, StockerYale, Telops, TeraXion
80
http://www.quebecphotonic.ca/PhotonicsCorridor.html
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of Quebec. The Quebec Photonic Network primarily acts as an information hub and a
representative for all actors involved. It brings together public authorities, with research
institutions and industry actors. It furthermore facilities networking between cluster
inhabitants and facilitates access to public support mechanisms (e.g. tax incentives). Thirdly it
promotes the cluster nationally and internationally and fosters the development of new
markets. Lastly, it plays a role in supporting research initiatives, the transfer of technology
and training in the field of photonics.
Short history of the cluster
Quebec has a long history in the development of the amplification of light starting with one of
the first inventions of optical instruments in 1704 by Samuel de Champlain, a founder of
Quebec City. Since the 1940s a strong history in optics and photonics research has been built
up with key research centres, such as the National Optics Institute, striving to innovate at the
basic research and industrial levels. This meant that since the 1970s, the City of Québec area
has been a leader in photonic market applications, from instrumentation to imagery, vision
systems, optical communications and high-performance fibre optics.
While photonics activities in the province of Quebec have a long tradition, the cluster has
experienced a very dynamic development over the last 20 years. Where in the late 1990s
around 20 organisations formed the photonics cluster this has grown to 118 in 2007 (IQ, no
date). Growth rates of 20 percent annually in output and 12 percent in employment could be
observed in the last years with many new being founded. For example the National Optics
Institute alone generated over 20 spin-off companies since its establishment in 1985.
(Northern Lights, 2010)
System failures and system drivers for growth
Infrastructure
Quebec has a very specialised research infrastructure focused on niche markets (Wolfe,
2005). This includes eight world-class centres ranging from the Centre d’optique photonique
et laser (COPL), the largest university research centre in optics-photonics in Canada to the
Canadian Institute for Photonic Innovations (CIPI), the head of a network of 18 universities
that offer technology exploitation and innovation programmes. (GC, 2010) COPL is Canada’s
largest university research centre in optics/photonics striving to perform both fundamental
and applied research, to support industry, and to train the next generation of optics/photonics
scientists. CIPI on the other hand is a national network of excellence for Canadian photonics
research. Of the 111 Canadian university chairs in the field of photonics 40 percent are
located in Quebec (CIPI, 2010)). Other important research actors in Québec province are the
National Optics Institute (NOI) with 240 researchers and the Defence R&D Canada facility in
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Valcartier, Québec with 350 researchers (Ouimet, 2004). This research infrastructure is an
important backbone for the cluster providing highly qualified technical personnel but also
important technical knowledge that is used by firms through closely working together with
research institutes.
Institutions
Rules and regulation have not been mentioned by any report as playing a role for the
photonics cluster. Evidence on informal relations in the cluster is scarce. However, the CEO
of the Quebec Photonics Network sees the relatively dense social network of Québec City
confined to a relatively small area as a reason why collaboration might be easier. Also the fact
that competition in the sector is global provides incentive for local actors to work together
(Northern Lights, 2010).
What is role public policy: Public policy seems to be critical in two respects: 1) through tax
legislation, and 2) through a regional development agency. In addition the public
infrastructure as outlined above plays also an important role.
Financial incentives: Canada offers the most generous R&D tax incentives among G-7
countries complemented by further provincial tax incentives to attract research activities of
large international firms. According to the Quebec’s Photonics Network the R&D fiscal
assistance system results in net cost of $49 for every $100 R&D investment. But also in terms
of corporate tax rates, Quebec has one of the lowest rates (30.9 percent) in North America
(IC, no date). Furthermore, the research environment is also attractive given the low turnover
rate of research specialists and competitive salary levels. This means that corporate research
in Quebec is growing at rates of 10 percent annually, also with 2 percent of GDP higher than
in the EU. (QPN, 2010)
Local economic development agency Pôle Québec Chaudière-Appalaches works closely with
Montréal-based Investissement Québec as well as companies and institutions from the area to
ensure the success of photonics-related endeavours. The agency does many things, from
facilitating the formation of research and business partnerships between local entities to
hosting events and conferences to promoting the area as a desirable spot for expanding
foreign companies. (Marshall, 2010). But Investissement Quebec also assists firms financially
in the form of loans, loan guarantees or non-repayable contributions for innovative product
development (IQ, no date)
Venture Capital: Quebec has access to the highest concentration of venture capital in Canada
(QPN, 2010). Innovatech Québec-Chaudière-Appalaches is particularly active in the
optics/photonics industry. Also the National Optics institutes plays an important role in this
context having generated 20 spin-offs over the last years. While start-up capital is abundant,
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the region suffers from the lack of venture capital firms with the level of capital required to
insure the development of firms (Ouimet, 2004).
Interactions
The Quebec Photonics Network is a formal cluster organisation that acts as an information
hub between the cluster and the outside world. Its further role is to cooperate with national
and international Photonics Networks and support the support the sales and marketing efforts
of its members (QPN, 2010). Interaction is also facilitate by the geographic structure of the
region with close proximity of many actors supporting informal interactions.
Next to the cluster network organisation the large research institutes such as CITR, or CRIM,
play a central role in the network at the photonics cluster, which in part confirms that this is a
science-based cluster. Research in 2003 has found that all organisations are directly connected
to at least one other organisation and that 62.6 percent of the ties within the cluster are weak
and 37.4 percent are strong. Looking only at firms, the percentage of weak ties even increases
to 78.5 percent, reflected in strong ties of non-firms (44.7 percent) e.g. research institutes
(Ouimet, 2004). Interestingly, Ouimet et al. (2004) found that Quebec optics and photonics
firms with the highest degree of innovation have a highly diversified network, which is
mainly based on weak ties. One can hence not conclude that strong ties are more desirable
than weak ties.
With more than 80 percent of output going into exports, primarily the US, it is not surprising
that national and international relationships are found to be much stronger than local ones
Quebec’s photonic industry (Ouimet, 2004). This characteristic of the industry is also
reflected in international cooperation between international photonics clusters including
German (Bavaria) and French (Bordeaux) clusters.
Capabilities
The cluster is a science based cluster with word leading research institutes. Cluster firms
export more than 80 percent being a strong indicator for their global competitive position.
However, in a survey few seem to track closely their competitors indicating that marketing
competencies are potentially underdeveloped (Ouimet, 2004).
Market failures and drivers for growth
The photonics industry in Quebec is characterised by small and medium-size firms thriving
on a strong research community and a high quality local business environment. They largely
source their inputs regionally with 63 percent of the firms buying more than 50 percent of
their supplies in the Quebec City area. But firms do not consider their local suppliers as a
source of ideas or knowledge (Ouimet, 2004). On the other hand very few customers of
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photonics firms are regionally located. Around 80 percent of output is exported, with the
Canadian photonics industry supplying 47 percent to the USA, 24 percent to Europe, 5
percent to Asia/Pacific, and 9 percent to the rest of world (CIPI, 2010). This is against claims
of Porter that vibrant clusters require a broad base of demanding sophisticated local clients
and fits the pattern that can be found for photonics clusters internationally. But this does not
mean that firms do not rely on the exchange of ideas, information and knowledge with
customers for innovation. On the contrary photonics firms spend long periods of time with
customers (6 to 12 months) to develop customer fit solutions. (Ouimet, 2004)
Conclusion
While photonics activities in the province of Quebec have a long tradition, the cluster has
experienced a very dynamic development over the last 20 years. Where in the late 1990s
around 20 organisations formed the photonics cluster this has grown to 118 in 2007 (IQ, no
date). Growth rates of 20 percent annually in output and 12 percent in employment could be
observed in the last years making it a success case.
However, compared to other global photonics clusters the industry is relatively small,
dominated by SMEs that are also relatively younger (Ouimet, 2004). The cluster can hence be
classified as a developing cluster (Wolfe, 2008). The cluster is furthermore, science based
with a number of world leading research organisations playing critical role for the cluster.
System and market failures and drivers
The key factors driving the photonics industry in the province of Québec are:
the presence of world-class research centres and institutes working closely with industry,
the availability of highly qualified technical personnel,
a dynamic business environment and a strong commitment from governments to support the
industry, and
the proximity to key markets in the US and Canada
The lack of a large anchor firm that could stimulate and guide the cluster development may be
seen as a weakness. Also the small size of firms and their limited availability of capital is a
potential barrier to growth and innovation.
Public funding: Public funding of an excellent research infrastructure with world leading
research institutes is a critical factor. Also funding programmes stimulating collaboration
between public research and industry is available. In addition the regional development
agency (IQ) provides loans, loan guarantees and no-refundable contributions to stimulate
innovation and employment
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Tax incentives: Canada has one of the most attractive R&D tax incentives of among
industrialised countries. In addition provincial tax credits are made available to attract
international firms to locate.
Public procurement and lead markets: Public procurement is not a suitable policy tool for
development of photonics clusters as the products are highly specialised industrial products.
6.3.3. Conclusions on Photonics Cluster Comparison
Strengths and weaknesses
Both clusters have similar strengths growing quickly over the last years. This can be
explained with the relatively small scale of previous activities but also the growing
commercialisation prospects for photonics applications. They also both are built on a long
industrial tradition in the optical technology industry. Furthermore, they benefit from a strong
scientific base with world-class research centres and institutes working closely with industry.
This also results in a strong labour pool with highly qualified technical personnel available. A
particular strength of the OpTecBB cluster is its geographic concentration and financial
resources creating a strong cluster identity and interconnectedness of actors located at the
cluster. A particular strength of the Quebec cluster is its dynamic business environment and
proximity to key markets in the US and Canada.
Both clusters have similar weaknesses mainly related to the structure of the sector consisting
of predominantly small, specialised firms. For example, both clusters do not have a large
anchor firm that can act as a coordinator, provide economic stability and strong international
research links. Instead, this role in case of OpTecBB is in part filled by larger public research
institutes. But these cannot compensate the missing competences in commercialisation and
marketing. Secondly, the high share of small firms means that capital resources are thin, being
a potential barrier to innovation. Also no venture capital activity is reported in at the
OpTecBB cluster.
Public policy, funding and tax incentives
Both clusters have received considerable support from national and regional governments for
a cluster platform, public R&D infrastructure and collaboration. In addition, the Canadian
authorities also have specific support mechanism to help start-up firms to commercialise new
products. Also the Quebec region attracts the highest concentration of US venture capital in
Canada. At the OpTecBB no venture capital activities are reported.
Next to the provision of a strong public research infrastructure, specific policy tools differ.
Canada uses predominantly R&D tax incentives to attract and support firms, whereas
Germany focuses on collaboration and network support. However, the OpTecBB cluster
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being located in former Eastern Germany benefits from local tax incentives in support of
regional development. But these are not technology related.
Lead markets: The role of lead actors / anchor firms
Both Berlin-Brandenburg and Quebec have some larger firms located in their clusters but
these are not mentioned as playing a role as lead or anchor firms. Instead the role of anchor is
played by large research organisations. This is a potential weakness as large firms have the
added advantage of having strong international marketing power. But this lack can be
explained with the structure of the industry that comprises many small, highly specialised
firms exporting globally. Many of the smaller firms are hence market leaders in ‘their’
segment that is often globally shared between a handful of competitors.
Table 6-7: Summary of findings from photonics cluster comparison
OpTecBB – Berlin-Brandenburg
Germany
Quebec Photonic Network, Canada
History Long history, since 1801
Cluster platform since 2000
Long history, since 1704
Since 1940 Optics & Photonics research
The cluster is a very fast developing cluster,
with high firm growth and turn-over
Size ~300 firms
12,000 people
€12 billion of annual sales
~100 firms
4,500 people
€0.6 billion of annual sales
Classification Developing Fast growing
Infrastructure Strong knowledge infrastructure:
Universities and Public research institutes
Strong knowledge infrastructure – focused
on niche markets
Institutions Rules and regulations
minor role
Norms and values / culture
Strong cluster identity – strong external
recognition
Rules and regulations
no particular role
Norms and values / culture
Entrepreneurial culture contributing to fast
growth
Public policy /
funding / taxation
Considerable support for cluster platform
Support through available publicly funded
research orgs
No specific tax/financial incentives related
to technology, but Brandenburg has
favourable tax regime for regional
development
No venture capital scheme in place
Strong role through:
Tax legislation
Support from regional development agency
Availability of public knowledge infra
Most generous R&D tax incentives among
G-7
Tax incentives to attract large MNCs
Low corporate taxes
Low labour costs
Favourable loans available from
Investissement Quebec
Funding available for collaboration
High level of Venture Capital (lack though
for firm growth)
Interactions High level of interaction: formal and
informal
High level R&D collaboration
High firm involvement in cluster platform
Linkages to international clusters
Informal interaction through proximity of
cluster firms
Formal interaction in cluster platform
Good mix of strong and weak ties leading to
optimal innovativeness
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Very strong international relationships: >80
percent for export
Capabilities Scientific knowledge, belong to international
top
Strong science based knowledge base,
belong to international top
Market demand Lack of lead-firm(s) Strong interaction with customers
No local lead customer or firm
Strong focus on niche markets
Market structure Market dominated by smaller firms , this is a
weakness as large lead buyers lack for
demand, internationalisation and
commercialisation
Market dominated by SMEs
Focus internationally
Sourcing locally – selling internationally
Cluster features Very strong knowledge ‘ecosystem’ with
spillovers
Generous funding of platform
Very high growth rate or nr of firms’ turn
over (20 percent) and employees (12
percent)
Very strong focus and concentration on
niches
Strong international orientation
Strong funding structure for firms (tax
incentives as well as funding)
Source: TNO compilation.
6.3.4. Factors influencing the future development of photonics
Factors influencing the future market potential of photonics
Photonics is a driver for technological innovation and one of the most important key
technologies for markets in the 21st century. It has a tremendous leverage for creating
products in a broad range of industrial sectors that multiply the value of initial photonic
components and technologies many times over. The innovative and competitive capability of
many important European industries, such as ICT, lighting, health care and life-sciences,
space and defence as well as the transport and automotive sector largely rely on progress and
development in photonics (Photonics21, 2006).
The role of public support
There are massive efforts taken in the USA and in Asia with respect to research funding
(Photonics21, 2006). For example, in Japan research projects in the field of laser technology
have received public funding since 1977 (BMBF, 2002b). In Europe, the European
Commission treats photonics as a key technology for the economy of the 21st century because
it impacts on many important European industries, such as telecommunication, lighting,
environment, health care and life sciences, safety and security. In keeping with its greater
importance for Europe, Photonics has been given a higher profile in the Seventh Framework
Programme (FP7) and Photonics related research and development is supported in different
areas of FP7. Political support will particularly be needed in providing the necessary research
environment capable of accelerating photonics research, enhancing cooperation, increasing
public and private R&D investments and ensuring the mobilisation of the critical mass of
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resources. The European research policy faces the challenge to effectively link and coordinate
the national R&D activities and programs in the Member States of the European Union.
Furthermore, at the European level, R&D programs involving optics and photonics are
dispersed among various application areas. Projects are carried out widely isolated from each
other in a number of different thematic priorities (Photonics21, 2006).
Contribution of advanced materials to social wealth
There are manifold contributions of photonics to social wealth. The global warming issue, for
instance, requires the development of energy saving technologies. One such example is in the
field of lighting where the classical energy intensive light bulb will be replaced by high-
efficiency lighting (e.g. LED, OLED). Furthermore, photonics technologies are important in
the area of energy production (photovoltaic power generation). Wealth effects are also
obvious in completely different sectors like the field of medical technology. New diagnostic
technologies allow the examination and manipulation on the cellular, sub-cellular or
molecular level. This opens up new possibilities regarding new diagnostic tools and new
treatments. Other photonic technologies, like eye and laser surgical procedures, have become
standard.
Importance of sustaining production capabilities
Photonics production is dominated by Asia, notably Japan, Korea, and Taiwan while China is
catching up. Europe accounts for 19 percent of the worldwide production volume and North
America host 15 percent. The single regions and countries in Europe are focused on parts of
the Photonics product spectrum and several of the Photonics sectors are dominated by a few,
large producers. This is true for the sectors of lighting, production technology,
communications, and defence photonics (Photonics21, 2007b). Production capabilities allow
for an application of newly developed technologies and as a result facilitate experimental
learning that can be assumed to be valuable in future technology development efforts.
6.4 Conclusions and Policy Implications
State of technology
Photonics can be described as a relatively young high technology industry. The number of
patent applications started to increase exponentially in the mid-nineties and still has not
reached its peak. Photonic markets today mainly refer to lighting, measurement and
automated vision, production technology, medical technology and life science, optical
communication, optical components and systems, solar energy, and information technology.
The current global market size is about €200 billion.
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Europe’s technological position
Photonic development is concentrated on three global regions, Europe, North America and
East Asia. East Asia holds the highest market share, followed by Europe and North America.
In terms of patents per GDP, East Asia has a significantly higher photonic patenting intensity
than the other two regions. Europe has a comparable patenting intensity as North America.
While East Asia was able to improve its technological competitiveness in terms of patent
applications, Europe’s market share remained stable over the past fifteen years, while North
America is slipping down.
The largest subfield in terms of patents is optical devices (more than half of all photonic
patents), followed by solar cells, laser, and lighting. Europe has a high market share in solar
cells (though decreasing) while Europe’s market share in optical devices, laser, and lighting is
slightly lower than thirty percent.
Within Europe, most countries show a focus on optical devices while Austria is specialised in
solar cells. The Netherlands has the highest proportion of lighting patents and France, the
United Kingdom and Sweden in laser patents.
Links to disciplines, sectors and other KETs
At the science side, main links of photonics got to electronics and instruments, but also
machinery (especially in the subfield of lighting) have been making important contributions to
the development of this KET. Public research plays a subordinate role in patenting and
contributes to less than ten percent to total photonic patents.
Photonic patents are technologically linked to electronics, manufacture of instruments,
machinery and vehicles, and the chemical industry. In East Asia, most photonic patent
applicants from the business enterprise sector belong to the electronics industry while public
research is less important. In North America, the optical, cable and solar industry, the
telecommunication industry and the chemical industry are the most important groups of
photonic applicants. In Europe, the electronics industry, vehicle industry and the
telecommunication industry plays an important role.
Market prospects and growth impacts
All existing market forecast for photonics and the various submarkets suggest a strong
increase in sales in the next decade. The forecast for total photonics expect global sales in
2015 of more than €400 billion. So far, many of the forecasts have proved to be too
optimistic, however. But there is no doubt that demand for photonic products will increase
clearly above the total market expansion.
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Photonics can, as most other KETs, contribute to economic growth through two ways. On the
other hand, photonics applications can help to increase the efficiency of production processes
in various industries by enabling more advanced production technologies (e.g. in the fields of
measuring and controlling or through a more widespread use of laser technology). On the
other hand, photonics has a strong potential to open up new markets not explored yet through
product innovation, thus stimulating additional demand and contributing to net growth.
Many new applications in photonics are expected to substitute other technologies. Substantial
substitution potentials are seen in the field of microelectronics.
Photonics can raise qualitative growth with new and flexible production methods which for
instance enable economically viable production of lot sizes of 1 to 1,000,000 pieces.
Furthermore, photonics will play a central part in the development of renewable energy.
Success factors, market and system failures
The field of photonics profits from a large and diversified industrial base with a large number
of successful enterprises committed to R&D and innovation in photonics. Photonics is also a
well-established field of research at universities and public research centres. A main challenge
is to better interlink the two groups of actors. As for industry-science links in general,
important success factors include a long-term oriented co-operation with clear division of
labour between the industrial and the public research part.
Another important issue is standardisation. There is some evidence that in the past,
international industry standards were defined by actors outside Europe, resulting in
competitive disadvantages for European companies as they often had to adjust to standards set
by their competitors (Photonics21, 2007a). More efficient and timely coordination of
European standardisation processes could help to strengthen the market position of European
companies and and speed up commercialisation. Photonic applications in the areas of ICT,
lighting, manufacturing and life sciences are particularly affected by international
standardisation issues.
Policy options
The European production volume corresponds to 19 percent of the world market in 2005. The
European industry has a weak position in the sectors of information technology and flat panel
displays (Photonics21, 2007b). Photonics production is already dominated by East Asia and
East Asia’s significant increase in patent intensity since 1998 continues to strengthen its
dominant position. At the same time, photonics are a promising field of technology that is
likely to generate a large number of new applications for many different industries, including
electronics, automotive, mechanical engineering, energy production and distribution, and
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medical technologies. In order to feed these and other industries with new technological
opportunities from photonics and to sustain sectoral clusters that incorporate new
technologies from photonics, a strong photonics industry in Europe is indispensable.
Public policies to strengthen research in and commercialisation of photonics in Europe should
particularly take into account the experiences of successful clusters. Though cluster policies
tend to be important for any KET, this approach is particularly important for the field of
photonics since it requires the combination of a complex set of technologies, involving actors
from different industries along the value added chain. For a detailed discussion of how KET
clusters can be stimulated and supported, see section 9.2 in the final chapter.
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7 ADVANCED MATERIALS
7.1 Definition and State of Technology
Advancing the properties of materials is one of the most longstanding industrial innovation
activities. Throughout human history, substantial efforts have been made to improve the
material base of the manufacture of goods, allowing for higher product quality and new
product characteristics. In modern times, advancing materials has first focussed on further
improving metals by introducing new alloys with superior performance characteristics
(particularly in the case of steel) and exploring the industrial applicability of new metals (such
as aluminium). In addition, a number of material innovations took place in the field of non-
metallic materials such as glass, ceramics and concrete. From the late 19th century onwards, a
new main focus on chemical technology emerged. A large number of synthetic materials have
been invented, and alternative raw material bases have been explored (coal, petroleum, natural
gas). During the 20th century, most efforts in advancing material technology were on building
up of so-called "macrostructures" or "superpolymers" by linking together molecular units into
super-long chains (e.g. polyethylene, styrene, Teflon) possessing desired physical and
chemical properties (Moskowitz, 2009). Since the late 1970s, a new paradigm in material
technology has emerged which defines the most recent generation of advanced materials. This
paradigm focuses on the customisation of the atomic structure of materials by creating,
manipulating and reconfiguring molecular or atomic units within a wide range of material
categories. Nevertheless, material innovations still occur along the all the lines mentioned
above.
Today, the term “advanced materials” is often used to describe those components which
structure and properties have been modified and improved at the mili/micro/nanoscale level.
As a result, advanced materials possess new and different types of internal structures and
exhibit avantgard properties and higher added value, with an unprecedented range of
applications (Moskowitz, 2009). A common characteristic of these materials, compared to
conventional ones, lies in the improved performance they offer (particularly) in very
demanding environments (e.g. in terms of temperature, humidity) or for very demanding
processes (e.g. in terms of capacitance, miniaturisation). They also offer additional advantages
over conventional materials in terms of physical-chemical properties (e.g. conductivity,
weight, durability) which is very often transformed by using industries into (end-) products of
higher added value.
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The renewed strong interest in the field of advanced materials lies in the fact that the newest
advanced materials are believed to have a current application rate nearly three times higher
compared to previous generations of materials. It has been estimated that the eight most
important materials entering the market in the 1900s-1960s period (e.g. electrometals,
synthetic ammonia, nylon, styrene, etc) can claim a total of 24 different applications, that is,
an average of 2.7 per material. The 14 newest advanced materials (e.g. nanocrystals,
nanocomposites, nanotubes, organic electronic materials, etc) account for 120 different
applications, for an average of 8.6 per material (see Moscowitz, 2009, for a full account). It is
expected that by 2020, these most advanced materials will generate worldwide direct sales of
some hundreds of millions of Euros.
Owing to their “combinatorial” nature, it is difficult to provide a clear-cut classification of
advanced materials. Nonetheless it is possible to group “new” advanced materials into five
generic categories:
advanced metals (e.g. advanced stainless steel, super-alloys, intermetallics, etc),
advanced polymers (e.g. synthetic engineering-nonconducting polymers, engineered plastics,
conducting polymers or organic-electronic materials OPEs, advanced coatings,
advanced/nanofibbers, etc),
advanced ceramics and superconductors (e.g. nanoceramics, piezoelectric ceramics,
nanocrystals),
novel composites (e.g. polymer composites, continuous fibber ceramic composites, metal
matrix composites, nanocomposites, nanopowders, metal fullerenes and nanotubes),
biomaterials (e.g. bioengineered materials, biosynthetics, nanofibbers, catalyst).
Alternative definitions put more emphasis on combining a structure-based view with
application potentials of new materials (see Schumacher et. al., 2007) used for this
investigation combines a material-based view with an application oriented view. From such a
perspective, one may distinguish nanomaterials (e.g. nanoparticles and crystals,
nanocomposites, nanofibres and nanorods, nanotubes and nanofullerenes, thin films and
spintronic materials; the common characteristic is to scale down materials into a size that
results in different material properties; see chapter 3 on nanotechnology), smart materials
(i.e. complex materials that combine structure characteristics with specific physical and
chemical properties, such as shape memory materials, functional fluids and gels,
piezoelectrical, ferroelectrical and pyroelectrical materials, magneto, electrostrictive
materials, electroactive polymers, electro-, photo- and thermo-chromic materials, tunable
dielectrics), bioconceptual materials (i.e. materials based on biological technologies such as
bioinspired materials, biohybrids, bioactive materials, biodegradable materials and soft
matter), and tailored macroscale materials for high performance applications (which
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comprise structural materials for extreme environments, functional materials for extreme
environments, energy efficient materials, electromagnetic materials).
Advanced materials are a special kind of general purpose technology. Like other general
purpose technologies, advanced materials can be applied widely across industries, also
emanating into service sectors such as health, software, architecture and construction,
telecommunication and engineering services. Advanced materials contribute to more efficient
production processes and trigger new product development. In contrast to other general
purpose technologies such as ICTs, however, the diffusion of advanced materials exert little
network effects among users. The large variety of materials, many tailored to specific
application purposes, restrict economies of scale in their production. In addition, both the
development and the diffusion of new materials takes particularly long periods, often decades.
First, considerable research efforts are needed until new materials comply with the
requirements of users in terms of reliability, stability, cost-efficiency, recyclability and safety.
Secondly, product regulation typically requires time-consuming procedures for each field of
application until new materials are approved for commercial use in the respective application
area. Thirdly, using new materials most often requires substantial adaptations in production
and distribution processes of users along the value chain, including changes in process
technology, product design, delivery mechanisms, recycling etc and may involve high
investment by users. The latter fact often delays a rapid diffusion of new materials.
Another peculiarity advanced materials is the broad spectrum of scientific disciplines and
research areas that contribute to advanced materials. Material sciences, chemistry, physics,
nanosciences and -increasingly- biology have to be combined with in-depth knowledge of
process technology and other engineering sciences, information technology and life sciences.
As a consequence, cross-disciplinary research is prevalent. Examples for new
interdisciplinary fields in materials research include computational materials science and
biochemical nanotechnology.
Advanced materials are used in virtually all manufacturing industries, and they drive
innovation in many sectors. The most important application areas for new advanced materials
are currently semiconductors, automotive and aircraft, energy and environment, medicine and
health, construction and housing, and various process technologies. Developing advanced
materials often requires a close co-operation between basic research (e.g. public science),
material producers (e.g. chemical industry, metals industry), end product producers (e.g.
automotive or semiconductor industry), process equipment producers (e.g. machinery
industry) and sometimes other users down the value added chain that use products containing
advanced materials. Since new materials are often a key component of new products, many
producers of end products also engage in R&D on advanced materials.
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7.2 Technological Competitiveness, Industry Links and Market Potentials
7.2.1. Technological Competitiveness
Analysing technological competitiveness in advanced materials based on patent data and
using patent classification systems to identify advance in material technology is challenging.
While patent classification allows to identify inventions in different areas of substances and
basic materials (e.g. certain metals, polymers, non-metallic matters), it is much more difficult
to identified whether these inventions comply with the notion of advanced materials given
above. In addition, some types of advanced materials such as smart materials or biomaterials
are particularly difficult to identify through patent classification systems.
For this study, advanced materials are identified through a set of IPC classes that constitute
seven subfields of advanced materials (IPC classes given in parentheses):
Layered materials (B32B 9, B32B 15, B32B 17, B32B 18, B32B 19, B32B 25, B32B 27)
High-performance materials (C01B 31, C04B 35)
Tailored macroscale materials (C08F, C08J 5, C08L)
New alloys (C22C)
Energy-efficient materials (D21H 17, H01B 3)
Magneto and piezo materials (H01F 1, H01F 1/12, H01F 1/34, H01F 1/44)
Nanomaterials (Y01N 6)
Note that one and the same patent may be assigned to several subfields of advanced materials
owing to the fact that most patents are assigned to many IPC classes.
Market shares
Based on this definition of advanced materials, so far about 150,000 patents have been
applied either at EPO or based on PCT (EPO/PCT patents) in the field of advanced materials
within the past 30 years. The annual number of patent applications by and large followed the
general pattern for EPO/PCT patents. Several years of constant annual numbers of patent
applications in the early 1990s were followed by a significant increase during the second half
of the 1990s. In contrast to the general trend in patenting, the annual numbers of patents
further increased after the world economic recession in 2001. In both 2004 and 2005, more
than 9,500 advanced materials patents were applied at EPO/PCT (Figure 7-1). The still
ongoing upward trend in advanced materials patenting underpins that this KET is still in an
expanding phase of generating new knowledge relevant to industrial application.
European Competitiveness in KETs ZEW and TNO
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Figure 7-1: Number of patents (EPO/PCT) in advanced materials 1981-2005, by region of
applicant
0
500
1000
1500
2000
2500
3000
3500
4000
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
In recent years, the number of patent applications by East Asian applicants increased
particularly strong. North American and European applicants increased their patent output
after 2000 at a more moderate rate. The strong increase of East Asian patents reflects a raise
in patenting by Chinese and Korean applicants as well as a stronger world market orientation
of advanced materials manufacturers from all East Asian countries.
As a consequence, East Asian applicants were able to gain market shares in the technology
market for advanced materials from 2000 onwards. In 2005, 37 percent of all advanced
materials patents were applied by East Asian applicants, whereas both North American and
European applicants lost market shares (Figure 7-2). The current market share of European
applicants is at 31 percent, the one of North American applicants at 30 percent. Applicants
from outside these regions do not play any important role in this KET, accounting for a joint
market share of just 2 percent.
Figure 7-2: Market shares for EPO/PCT patents in advanced materials, 1991-2005 (percent)
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0
10
20
30
40
50
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
The marked increase of market shares of East Asian applicants is revealed by the analysis of
market shares at different regional technology markets, based on patent applications at the
leading patent office for each regional market (EPO for Europe, USPTO for North America,
JPO for East Asia). European applicants still hold a leading position in their home market and
were able to maintain a market share of almost 40 percent over the past 15 years (Figure 3-3).
East Asian applicants slowly increased their share until the year 2000 at the expense of North
American applicants. Since then, market shares remained stable.
With respect to patent applications at the USPTO, East Asian applicants could almost
overhaul their North American competitors by 2004, both standing at a market share of 38
percent. European applicants report a stable market share at USPTO of 22 to 23 percent for
the past ten years.. Among the patents applied at JPO, market shares of East Asian applicants
are constantly increasing while those for European and North American applicants are falling
at a similar pace.
When looking a triadic patents, East Asian and North American applicants interchanged their
position. While North American applicants held a market share of around 40 percent in the
1990s, this figure felt to about 30 percent in the 2000s. East Asian applicants were able to
raise their share in the total number of global advanced materials patents from about 30 to
about 40 percent. The contribution of European applicants remained quite stable over the
whole period at about 30 percent.
European Competitiveness in KETs ZEW and TNO
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Figure 7-3: Market shares in advanced materials patents 1991-2005 for national applications
and triadic patents (percent)
a. Europe1)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. North America2)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
c. East Asia3)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies
Source: EPO: Patstat, ZEW calculations.
In order to determine the relative importance of advanced material patents for a region, patent
intensities can be calculated. The patent intensity relates the number of patents per year from
applicants of a certain region to the GDP of that region. This type of specialisation indicator
shows that East Asia produces the highest number of advance material patents per GDP,
followed by North America and Europe which report a similar intensity level. In 2005, the
number of advanced materials EPO/PCT patents per GDP in East Asia is almost 50 percent
above the level of Europe and North America. Over time, East Asia has increased its patent
intensity in advanced materials as far as EPO/PCT patents are concerned, while North
America and Europe report constant figures. A different picture emerges when consulting
triadic patents. North America shows a falling trend, Europe reports a constant level and East
Asia experienced both downward and upward developments for this indicator (Figure 3-4).
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Figure 7-4: Patent intensity 1991-2005 in advance materials (number of EPO/PCT and
triadic patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT
0
50
100
150
200
250
300
350
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
50
100
150
200
250
300
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by subfields
This study distinguishes seven subfields of advanced materials based on IPC classes. The
largest subfield within advanced materials is macroscaled materials tailored to specific
applications (Figure 7-5). This rather traditional field of advance in material technologies
accounts for 54 percent in total advance materials patenting. Layered materials are the second
largest area (17 percent), followed by alloys, high-performance materials and energy-efficient
materials. Magneto and piezo materials as well as nanomaterials account for a small fraction
of just 2 to 4 percent. East Asian applicants show a higher share for alloys and high-
performance materials while Europe is strongly focused on macroscaled materials.
Figure 7-5: Composition of EPO/PCT advanced materials patents by subfields (percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Layered materials High performance materials Macroscaled materials
Alloys Energy-efficient materials Magneto/piezo materials
Nanomaterials
Source: EPO: Patstat, ZEW calculations.
Differentiated by subfields, Europe holds a high market share of 30 percent or more in
macroscaled materials, layered materials and energy-efficient materials. Market shares are
European Competitiveness in KETs ZEW and TNO
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lower in alloys, high-performance materials and in the two small areas of nanomaterials and
magneto/piezo materials. For all seven subfields, market shares of Europe in the most recent
subperiod (2003-05) do not exceed the level of 1991-93. This means that the general
downward trend of Europe’s share in the total number of EPO/PCT patents holds for all
subfields. East Asia shows increasing shares in all subfields. Layered materials are the only
subfield where East Asian applicants did increase their market share only slightly, and
nanomaterials is the only subfield where North American applicants are still ahead of East
Asian, though the latter clearly catch up.
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Figure 7-6: Market shares for advance materials patents (EPO/PCT) by subfields 1991-2005
(percent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Layered materials
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
High perform. m.
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Macroscaled m.
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Alloys
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Energy-eff. m.
0
10
20
30
40
50
60
70
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Magneto/piezo m.
0
10
20
30
40
50
60
70
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Nanomaterials
Source: EPO: Patstat, ZEW calculations.
When looking at the most recent period, Europe was also able to increase its market shares
marginally in alloys, magneto/piezo materials, nanomaterials and high-performance materials.
These are all subfields with a below-average market share for Europe. This could be read as a
slow improvement of technological output in areas with weaker performance.
Analysing technological dynamics by subfields based on EPO/PCT patents may be biased
from varying attractiveness of the European market. For instance, a rise in demand for
European Competitiveness in KETs ZEW and TNO
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advanced materials in Europe may stimulate patenting by North American and East Asian
applicants at EPO, thus raising the number of EPO/PCT patents. A decreased attractiveness of
the European market may result in the opposite effect. In order to avoid such biases from the
market environment, we evaluate technological dynamics in advanced materials by looking at
patent applications by European, North American and East Asian applicants at their
respective home patent office (EPO, USPTO and JPO, respectively). For all three regions we
find a trend in patenting toward layered materials and nanomaterials, and decreasing shares of
macroscaled materials (Figure 7-7). While macroscaled materials accounted for 62 percent of
all advanced materials patents at EPO by European applicants in the period 1990-93, this
share felt to 51 percent in 2002-05. In North America the respective share declined from 60 to
44 percent, and in East Asia from 5a to 43 percent. This trend reflects that classical chemical
technology plays a decreasing role in advanced materials, though it is still the main source for
advances in material technologies in terms of the number of patents.
Figure 7-7: Composition of advanced materials patents (applications at home patent offices),
by region, subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
N
or
th
Am
e
ric
a
Ea
st
As
ia
Layered materials High performance materials Macroscaled materials
Alloys Energy-efficient materials Magneto/piezo materials
Nanomaterials
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Figure 7-7 also shows specialisation patterns of regions by subfields over time. These differ to
some extent from the pattern that emerges when looking at EPO/PCT patents (see Figure 7-5).
North America shows particlarly high (and increasing) shares for layered materials and
nanomaterials but smaller (and decreasing) shares for high-performance materials, alloys and
Chapter 7 Advanced Materials
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energy-efficient materials. Europe reports comparably high shares for macroscaled materials
and energy-efficient materials. East Asia is specialised on high-performance materials, alloys
and magneto/piezo materials. For all three subfields, shares are decreasing over time,
indicating that the East Asian specialisation pattern is dispersing.
Analysing the average annual rate of change in the number of advanced materials patents by
subfields, regions and subperiods (Figure 7-8) reveals some interesting insights. North
American applicants were the first to sharply increase their patent activity in nanomaterials
while Europe and East Asia entered this field form the second half of the 1990s on. While
Europe was able to maintain a high rate of growth in nanomaterials until the most recent
period, growth rates diminished in North America and East Asia in this subfield. In the most
recent period, the number of patents in high-performance materials and energy-efficient
materials has increased substantially. A similar development can be seen for East Asia. North
American applicants did not increase their patent activities in these subfields.
Figure 7-8: Average annual rate of change in the number of advanced materials patents
(applications at home patent offices), by region, subfield and period (percent)
European Competitiveness in KETs ZEW and TNO
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-10
0
10
20
30
40
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
Layered materials High performance materials
Macroscaled materials Alloys
Energy-efficient materials Magneto/piezo materials
Nanomaterials Total
Europe
-10
0
10
20
30
40
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-10
0
10
20
30
40
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Patenting at the country level in Europe
In order to better assess the potentials and strengths of advanced material patenting in Europe,
we analyse the development of patenting over time and by subfield for individual European
Chapter 7 Advanced Materials
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countries. For this purpose, patents are assigned to countries by the location of the inventors,
applying fractional counting in case a patent is applied by inventors from different countries.
We only look at EPO/PCT patents.
Within Europe, Germany is by far the largest producer of advanced materials patents,
followed by France and the UK (Figure 7-9). Inventors from Germany account for 45 percent
of all advanced materials patents applied in the years 2000 to 2005 at EPO or through PCT.
French inventors contribute by 14 percent, UK inventors by 10 percent and Dutch inventors
by 6 percent. Italy, Switzerland and Belgium each account for 5 percent of total European
advanced materials patenting.
Figure 7-9: Advanced materials patents (EPO/PCT) in Europe 1981-2005, by country of
inventor
0
250
500
750
1000
1250
1500
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE FR
UK IT
NL SE
CH BE
RoE
Source: EPO: Patstat, ZEW calculations.
The economic significance of advanced materials patenting differs substantially by country
(Figure 3-10). Patent intensity -that is the ratio of the number of advanced materials patents to
GDP- is highest in Switzerland, Germany and Belgium. The Netherlands and Sweden also
report intensities above the European average. France produces as many advanced materials
patents per GDP as Europe in total does. Patent intensities are clearly below the European
average in the UK, Italy and the group of countries not belonging to the eight largest patent
producers in advanced materials in Europe.
Figure 7-10: Patent intensity in advanced materials 1991-2005 of European countries
(EPO/PCT patents)
European Competitiveness in KETs ZEW and TNO
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0
100
200
300
400
500
600
DE FR UK IT NL SE CH BE RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Eight European countries with the largest number of advanced materials patents (based on inventors’ locations) from 1981-2005. “RoE”:
all other European countries.
Source: EPO: Patstat, ZEW calculations.
The differences in the absolute number of advanced materials patents and in patent intensities
have to be kept in mind when looking at patenting dynamics since countries with low patent
activities can more easily generate high growth rates. Among the eight countries that produce
the largest number of advanced materials patents, Belgium could increase its patent output
between first half of the 1990s (1991-95) and the first half of the 2000s (2001-05) at the
highest pace (average annual growth of almost 9 percent) which is only exceeded by the “rest
of Europe” group which caught up in advanced materials patenting over the past 15 years by
increasing patent output at an annual rate of almost 10 percent (Figure 3-11). Growth rates
above the European average are reported for France, Switzerland, the Netherlands and
Sweden while Germany and Italy increased patent output at more modest rates. The UK is the
country among the eight largest advanced materials patents producers with the lowest growth
rate (3.5 percent).
In most countries, growth rates were higher during the 1990s (1991/95 to 1996/00) than in the
previous period (1996/00to 2001/05). Italy does not follow this pattern as it could achieve a
remarkable high growth in the early 2000s. Germany and the UK report similar, though rather
low, growth rates in both periods. Advanced materials patenting slowed down in the early
2000s (compared to the 1990s) particularly strongly in the Netherlands, Sweden and France.
Figure 7-11: Change in the number of advanced materials patents between 1991/95 to 1996/00
and 1996/00 to 2001/05, by country (EPO/PCT patents; compound annual growth
rate in percent)
Chapter 7 Advanced Materials
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0
2
4
6
8
10
12
14
DE FR UK IT NL SE CH BE RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
Eight European countries with the largest number of advanced materials patents (based on inventors’ locations) from 1981-2005. “RoE”:
all other European countries.
Source: EPO: Patstat, ZEW calculations.
The composition of advanced materials patents by subfields does not differ significantly
among the eight largest European countries in terms of patent output in this KET (Figure
7-12). The only country with a very specific pattern is Sweden. It has a strong focus on alloys
(reflecting Sweden’s economic specialisation on metals production) and a comparably low
share for macroscaled materials (which mirrors the low importance of the chemical industry
in this country).
Figure 7-12: Composition of advanced materials patents in Europe, by subfield and country
(percent)
0 10 20 30 40 50 60 70 80 90 100
DE
FR
UK
IT
NL
SE
CH
BE
RoE
Europe total
Layered materials High performance materials Macroscaled materials
Alloys Energy-efficient materials Magneto/piezo materials
Nanomaterials
European Competitiveness in KETs ZEW and TNO
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Eight European countries with the largest number of advanced materials patents (based on inventors’ locations) from 1981-2005. “RoE”:
all other European countries.
Source: EPO: Patstat, ZEW calculations.
Figure 7-13 provides a more detailed picture of country-specific specialisation by subfield
within advanced materials. Belgium, the Netherlands, Italy and Germany show particularly
high shares in macroscaled materials. Belgium, Switzerland, Italy and the UK are
comparatively focused on layered materials. The UK and the “rest of Europe” report
somewhat higher shares for nanomaterials compared to the European average. France is
specialised on high-performance materials and alloys. Alloys are also a relative strength of
Switzerland and the rest of Europe. Energy-efficient materials have a higher share in the
advanced materials patent portfolio of France, the UK and the rest of Europe.
Figure 7-13: Specialisation patterns of advanced materials patenting in Europe, by subfield
and country (percent)
-8 -6 -4 -2 0 2 4 6 8 10
DE
FR
UK
IT
NL
CH
BE
RoE
Layered materials
High performance
materials
Macroscaled
materials
Alloys
Energy-efficient
materials
Magneto/piezo
materials
Nanomaterials
Difference between the share of a subfield in a country’s total advanced materials patents and the respective share for Europe total
(excluding the country under consideration).
Eight European countries with the largest number of advanced materials patents (based on inventors’ locations) from 1981-2005. “RoE”:
all other European countries.
Source: EPO: Patstat, ZEW calculations.
Chapter 7 Advanced Materials
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European countries show different trends in advanced materials patenting by subfield (Table
7-1). When comparing the growth in the number of patents applied by subfield for the 1990s
(i.e. between the number of patents over the 1991-95 and the 1996-2000 periods) and the
early 2000s (i.e. between 1996-00 and 2001-05), one can see a strong increase in the field of
nanomaterials and layered materials. In both subfields, growth rates were higher in the more
recent period. The same is true for high performance materials which show a decline in patent
output during the 1990s followed by a sharp increase in the early 2000s. In the four other
subfields, patenting dynamics were low in the early 2000s but high in the 1990s.
Table 7-1: Change in the number of advanced materials patents between 1991/95 to 1996/00
and 1996/00 to 2001/05 by subfield and country (EPO/PCT patents, compound
annual growth rate in percent)
DE FR UK IT NL SE CH BE RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Layered materials 8 12 7 14 9 10 8 13 17 12 4 15 4 20 16 15 18 14 9 13
High performance mat. -3 8 -8 14 -5 9 0 24 7 3 -1 6 -8 11 -4 13 6 12 -3 10
Macroscaled materials 4 1 12 1 3 -1 0 6 9 -1 10 2 7 1 10 5 10 3 6 2
Alloys 13 3 8 1 7 -4 16 0 13 7 13 -1 9 12 16 2 14 10 11 3
Energy-efficient mater. 0 3 4 7 4 -5 15 -4 14 6 21 -10 19 1 19 3 15 1 7 1
Magneto/piezo mater. 10 -3 13 -4 17 -3 28 -11 -9 17 -9 28 18 -3 ∞ -13 -22 43 8 1
Nanomaterials 8 28 18 25 10 31 7 33 31 37 9 25 49 21 35 27 39 29 15 28
Advanced materials tot. 5 4 9 4 4 3 2 8 10 3 9 3 8 6 11 6 12 7 6 4
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
“∞“: not available due to zero value in base period.
Eight European countries with the largest number of advanced materials patents (based on inventors’ locations) from 1981-2005. “RoE”:
all other European countries.
Source: EPO: Patstat, ZEW calculations.
Most countries show by and large the same pattern. The Netherlands and Belgium deviate
from this pattern insofar patenting in layered materials and nanomaterials already increased
very strongly during the 1990s. Switzerland shows a strong performance in alloys patenting in
the early 2000s and Sweden was able to increase its output in the small field of magneto/piezo
materials at a tremendously high rate. France reports the highest growth rate in energy-
efficient materials patenting in the early 2000s and Italy increased its patent output in
macroscaled materials at a very high rate in the same period.
7.2.2. Links to Sectors and other Fields of Technologies
Technological links to sectors
When linking advanced materials patents to industrial sectors based on the IPC classes a
patent was assigned to by Schmoch et al. (2003), we find that technological advance in
materials is most relevant for the chemical industry (with a share of 35 percent in all advanced
material patents), followed by the glass, ceramics and concrete industry (14 percent), the
European Competitiveness in KETs ZEW and TNO
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metals industry (10 percent), the electronics industry (9 percent) and the mechanical
engineering industry (9 percent) (Table 7-2). Direct technological links to the manufacture of
instruments and vehicles are rather low.
Table 7-2: Technological sector affiliation of advanced materials patents (EPO/PCT), by
region (average of 1981-2007 applications, percent)
Europe North America East Asia Advanced
materials total
Food 0 0 0 0
Textiles 2 2 1 2
Wood/Paper 3 3 2 3
Chemicals 38 37 30 35
Pharmaceuticals 5 4 2 4
Rubber/Plastics 6 5 5 6
Glass/Ceramics/Concrete 14 15 14 14
Metals 10 9 13 10
Machinery 9 9 9 9
Electronics 6 7 16 9
Instruments 5 6 6 6
Vehicles 2 1 2 2
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
The sector pattern does not differ to a great extent between the three main regions. Europe
shows a somewhat higher share for chemicals while the share of European patents that are
technologically relevant to the electronics industry is lower. In East Asia a reverse pattern can
be observed. 16 percent of all advanced materials patents are technologically linked to the
electronics industry and just 30 percent to the chemical industry.
Differentiating by subfields shows the close technological link between macroscaled materials
-which is by far the largest subfield in this KET- to the chemical industry (Table 7-3). Patents
in the field of alloys are primarily linked to the metals industry, and magneto/piezo materials
most often related to electronics. Technological links of high-performance materials and
energy-efficient materials are more evenly distributed to different sectors, as is the case of
nanomaterials.
Table 7-3: Technological sector affiliation of advanced materials patents (EPO/PCT), by
subfield (average of 1981-2007 applications, percent)
Layered
materials
High
perform.
materials
Macro-
scaled
materials
Alloys Energy-
efficient
materials
Magneto/
piezo
materials
Nano-
materials
Total
Food 0 0 0 0 0 0 0 0
Textiles 3 1 2 0 2 0 1 2
Wood/Paper 3 0 2 1 13 0 1 3
Chemicals 17 18 53 5 23 11 37 35
Pharma 1 1 5 1 1 1 7 4
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Rubber/Plastics 10 2 7 1 2 1 1 6
Glass/Ceramics 35 34 7 6 10 5 7 14
Metals 5 14 3 54 23 24 12 10
Machinery 11 11 6 17 7 7 10 9
Electronics 7 14 6 11 16 45 14 9
Instruments 5 3 7 2 2 3 10 6
Vehicles 3 2 1 4 0 2 0 2
Total 100 100 100 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
The sector affiliation of the applicants of advance materials patents the mainly confirms the
findings shown above. The largest advanced materials patent producing sector is the chemical
industry, having a share of almost 50 percent (Figure 7-14). This result holds for all three
regions, though the dominance of this sector is highest in Europe (62 percent) and lowest in
East Asia (39 percent). Other important sector sources for advanced materials patenting are
the oil industry (particularly in North America), the rubber & plastics industry (particularly in
East Asia), the metals industry (Europe and East Asia) and the electronics industry (East
Asia). Public research is of little relevance, the highest share is found for North America (6
percent) followed by Europe (5 percent).
Figure 7-14: Sector affiliation of applicants of advanced materials patents (EPO/PCT), by
region (average of 1981-2007 applications, percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
Total
Chemicals Detergents Plastics Rubber Oil Glass/ceramics
Metals Other materials Electronics Equipment Instruments Public research
Note: Patents have been assigned to sectors based on the sector affiliation of the most important patent applicants, who account for 80.2
percent of all advanced materials patents (EPO/PCT) applied from 1981 to 2007.
“Public research” includes patents applied by government authorities and by private actors (the number of the latter being of negligible
size).
Source: EPO: Patstat. ZEW calculations.
Comparing the sector affiliation of advanced materials patent applications before and after the
end of 1997 - which splits the total sample of advanced materials patents in two subsamples
of similar size - reveals a shift of advanced materials patenting away from chemicals and the
European Competitiveness in KETs ZEW and TNO
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oil industry (Figure 7-15). This trend holds for all three regions. In North America, the
electronics and metals industries also lost in importance, and in East Asia, the group of other
materials (e.g. textiles, wood, paper) show a decreasing share in total advance materials
patenting.
Figure 7-15: Change in the sector affiliation of applicants of advanced materials patents
before and after the end of 1997 (EPO/PCT), by region (percentage points)
-9
-6
-3
0
3
6
Europe North America East Asia Total
Chemicals Detergents Plastics Rubber Oil Glass/ceramics
Metals Other materials Electronics Equipment Instruments Public research
Source: EPO: Patstat. ZEW calculations.
The plastics industry and public research are the sectors that could substantially increase their
shares in total advance materials patenting. All three regions report growing shares for these
two sectors by about 3 to 4 percentage points. In North America, patenting by public research
could raise its share by more than 5 percentage points. Other sectors that have gained
importance in advanced materials patenting are the glass, ceramics and concrete industry, the
rubber and the metals industry (both except for North America) and the instruments industry.
In Europe, the equipment industry (machinery, vehicles, defence) and the manufacturer of
detergents were able to raise their share in total advanced manufacturing patenting, too. North
America reports a shift towards other materials (particularly textiles and paper), and East Asia
reports increasing shares for manufacturer of machinery and vehicles.
Breaking down the sector affiliation of advanced materials patents by the sector of the
applicant (Table 7-4), some important differences to the technological links between
advanced material patents and sectors (see Table 7-3 above). The chemical industry is the
most important source of patents in the field of layered materials, though the majority of these
patents are technologically related to the glass and ceramics industry. Similarly, most patents
in the field of energy-efficient materials have been applied by enterprises from the chemical
industry while technologically these patents are related to a substantial part to the metals
industry. Patents in high-performance materials are primarily applied by the electronics and
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chemical industry while from a technological point of view they are primarily related to the
glass and ceramics industry.
Table 7-4: Sector affiliation of applicants of advanced materials patents (EPO/PCT), by
subfield (average of 1981-2007 applications, percent)
Layered
materials
High
perfor-
mance
materials
Macro-
scaled
materials
Alloys Energy-
efficient
materials
Magneto/
piezo
materials
Nano-
materials
Chemicals 44 25 59 12 49 19 29
Detergents/cosmetics 2 0 4 0 4 1 1
Plastics 7 2 7 1 3 1 2
Rubber 2 0 4 0 1 1 1
Oil 5 2 8 1 5 1 1
Glass/ceramics 7 7 1 1 1 1 2
Metals 6 11 1 46 3 32 2
Other materials 7 1 3 1 7 2 2
Electronics 8 29 5 18 19 23 19
Equipment 6 12 2 13 5 9 4
Instruments 3 2 2 2 1 3 6
Public research 3 10 3 6 2 8 31
Total 100 100 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Public research is the single most important sector for patenting in nanomaterials (31 percent
of all nanomaterials patents originated from public research institutions, including
government agencies), followed by the chemical and the electronics industry. Public research
is also a relevant source for patenting in high-performance materials (10 percent) and in
magneto/piezo materials (8 percent) whil it is of little significance in layered materials,
macro-scaled materials and energy-efficient materials.
The list of the 25 largest advanced materials applicants (in terms of the number of EPO/PCT
patents applied since 2000) is given in Table 7-5 for information purposes. One should note
that patents by subsidiaries are assigned to the parent company. Patents applied by firms that
later have be acquired by other companies are assigned to the latter. For patent applications by
more than one applicant, fractional accounting applies.
In all three regions, large chemical companies rank first. The world’s largest applicant of
advanced materials patents in 2000-2007 is BASF (Germany, excluding patents by Ciba
which has been acquired in 2009), followed by Du Pont, Dow and 3M (all USA). Important
applicants from outside the chemical industry are coming from the electronics industry, the
glass industry, the oil industry, the manufacture of detergents and cosmetics, the metals
industry, the rubber and plastics industry, the paper industry, the textiles industry and the
manufacture of machinery.
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Table 7-5: 25 main patent applicants in advanced materials by region (EPO/PCT patents,
2000 to 2007 applications)
Europe North America
Rank Name Country Sector # pat. Rank Name Country Sector # pat.
1 BASF DE chemicals 1410 1 Du Pont US chemicals 1303
2 Evonik Degussa DE chemicals 885 2 Dow US chemicals 1170
3 Arkema FR chemicals 796 3 3M US chemicals 1101
4 Bayer DE chemicals 646 4 General Electric US electronics 588
5 Sabic Innov. Plastics NL plastics 467 5 ExxonMobil US oil 548
6 Clariant CH chemicals 346 6 Rohm and Haas US chemicals 365
7 Wacker DE chemicals 325 7 Kimberly-Clark US paper 306
8 Borealis DK chemicals 314 8 Procter & Gamble US deterg./cosm. 249
9 Lanxess DE chemicals 310 9 Corning US glass 234
10 L'Oreal FR deterg./cosm. 304 10 Eastman Kodak US instruments 233
11 Saint-Gobain FR glass 302 11 Honeyw ell US machinery 227
12 Henkel DE deterg./cosm. 301 12 Alcan CA metals 223
13 Solvay BE chemicals 261 13 PPG US chemicals 220
14 Siemens DE electronics 245 14 Goodyear US rubber 210
15 Basell Polyolef ine DE chemicals 223 15 Eastman Chemical US chemicals 198
16 Ciba* CH chemicals 221 16 National Starch US chemicals 186
17 Beiersdorf DE chemicals 217 17 ConocoPhillips US oil 171
18 DSM NL chemicals 215 18 Ashland US chemicals 163
19 Total-Elf FR oil 178 19 Cytec US chemicals 154
20 CNRS FR research 176 20 Univ. of California US research 154
21 Celanese DE chemicals 167 21 Milliken US textiles 136
22 Sandvik SE metals 146 22 United Technologies US machinery 131
23 Merck DE chemicals 134 23 Equistar Chemicals US chemicals 128
24 Comm. à l'energie atom. FR government 129 24 Hew lett-Packard US electronics 112
25 Michelin FR rubber 123 25 Air Products US chemicals 107
East Asia
Rank Name Country Sector # pat.
1 Fujif ilm JP chemicals 602
2 Mitsubishi Chemicals JP chemicals 508
3 Sumitomo Chemical JP chemicals 476
4 Kaneka JP plastics 467
5 Mitsui Chemicals JP chemicals 433
6 Shin-Etsu Chemical JP chemicals 412
7 Nippon Steel JP metals 398
8 JSR JP plastics 394
9 Nitto Denko JP materials 379
10 Asahi Glass JP glass 362
11 Bridgestone JP rubber 350
12 Daikin JP chemicals 334
13 Idemitsu Kosan JP oil 330
14 Sumitomo Metal JP metals 324
15 LG Chemicals KR chemicals 316
16 Show a Denko JP chemicals 306
17 Toray Industries JP chemicals 304
18 Nippon Shokubai JP plastics 276
19 NGK Insulators JP electronics 267
20 Kuraray JP plastics 263
21 Matsushita Electric JP electronics 262
22 Kobe Steel JP metals 242
23 TDK JP electronics 236
24 Mitsubishi Polyester Film JP chemicals 229
25 Samsung KR electronics 227
* Acquired by BASF in 2009.
Source: EPO: Patstat. ZEW calculations.
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Public research institutions and government authorities are rather rare among the top 25
patent applicants in advanced materials. In Europe, the CNRS and the Commissariat à
l’Energie Atomique (both from France) are the only organisations from this sector that qualify
for the top 25 patent applicants. The University of California is the only organisation from
North America that is listed among the top 25 patent applicants in this region. In East Asia, no
public research organisation is among the top 25. This result clearly deviates from that for
most other KETs which show quite high shares of patents that originated from public
research. The low share of public research for advanced manufacturing patenting indicates
that technological advance in this KET is less driven by completely new scientific findings,
and that industry has developed large in-house research capacities.
This result is not surprising since advanced materials are a KET with a very long history and
several waves of technical progress (see the introductory section to this chapter). Each wave
brought new technological opportunities that have been picked up by existing companies but
which also gave room for new entrants. Over time, a manifold group of companies from
different industries has emerged that conduct R&D on a significant scale. These companies
constantly search for advance in materials technologies and have developed routines to search
and adopt relevant findings from scientific research early. Nevertheless, the increasing share
of public research organisations in advanced materials patenting that can be observed for the
past ten years shows that a new wave of technological advance is about to emerge
(particularly based on nanotechnology) that reinforces the role of public research.
Figure 7-16: Concentration of applicants in advanced materials patenting (EPO/PCT patents)
1981-2007, by region (percent)
0
10
20
30
40
50
Europe North America East Asia
CR5 CR10 CR15 CR20 CR25
CR5 is the number of patents applied by the 5 largest patent applicants in the total number of patent applications. CR10, CR15, CR20 and
CR25 are calculated accordingly.
Source: EPO: Patstat. ZEW calculations.
In Europe, the chemical industry is dominating the group of the largest advanced materials
applicants particularly strongly (Figure 7-16). The dominance is reinforced if one considers
European Competitiveness in KETs ZEW and TNO
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manufacture of detergents, cosmetics, plastics, rubber and oil as technologically closely
related to the manufacture of chemicals. Just 5 out of the 25 largest applicants of advanced
materials patents are not associated with the chemical industry and its directly forward and
backward linked industries. In North America and East Asia, companies from sectors not
directly linked to chemicals are more often represented in the list of the top 25 patent
applicants.
Advanced materials patenting in Europe and North America is strongly concentrated on a few
industrial actors. In both regions, more than one quarter of all patents of the past 27 years has
been applied by only 5 companies. In East Asia, concentration is less marked (14 percent of
all patents come from the five largest applicants). In Europe, the 25 largest applicants are
responsible for almost half of total patent output in advanced materials, compared to 47
percent in North America and 40 percent in East Asia.
Links to other KETs
Related to the issue of sector links is the degree to which advanced materials patents are
linked to other KETs. One way to assess likely direct technological relations is to determine
the share of advanced materials patents that are also assigned to other KETs (because some
IPC classes assigned to a advanced materials patent are classified under other KETs). The
degree of overlap of advanced materials patents with other KET patents by subfields is rather
low. Just 12 percent of all patents have been co-assigned to other KETs (Figure 7-19).
Overlaps are extremely high for nanomaterials (which by and large corresponds to a subfield
of nanotechnology) but are very low for macroscaled materials, energy-efficient materials and
layered materials.
Figure 7-17: Share of advanced materials patents linked to other KETs by subfield (EPO/PCT
patents 1981-2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Layered materials
High performance materials
Macroscaled materials
Alloys
Energy-efficient materials
Magneto/piezo materials
Nanomaterials
Advanced materials total
Source: EPO: Patstat. ZEW calculations.
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For those advanced materials patents that are linked to other KETs, one can see that overlaps
exist to most other KETs. About 40 percent of overlapping advanced materials patents have
been co-assigned to nanotechnology (particularly nanomaterials, but also in magneto/piezo
materials and high performance materials), about 25 percent are linked to microelectronics
(energy-efficient materials, high performance materials is with the field of advanced materials
(first of all particularly nanomaterials, nanostructures and nanobiotechnology) and about 20
percent relate to photonics (with high shares for layered materials and macroscaled materials)
(Figure 7-18). Less than 10 percent of advanced materials patents with overlaps to other
KETs relate to advanced manufacturing technologies (though 60 percent of co-assigned alloys
patents are linked to this KET), and only a very few links exist with industrial biotechnology.
Figure 7-18: Links of advanced materials patents to other KETs by subfields (EPO/PCT
patents 1981-2007, only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Layered materials
High performance materials
Macroscaled materials
Alloys
Energy-efficient materials
Magneto/piezo materials
Nanomaterials
Advanced materials total
Nanotechnology Micro-/nanoelectronics
Industrial Biotechnology Photonics
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
7.2.3. Market Potentials
Determining market potentials for advanced materials faces similar difficulties as for
nanotechnology or industrial biotechnology. The main contribution of advanced materials to
innovation and competitiveness is to allow manufacturers in various industries to improve
their products and processes. The full economic impact of advanced materials does not occur
with the producers of these materials, but in the downward industries where advanced
materials are used to manufacture complex products in complex production processes.
Evaluating the economic impact of advanced materials would thus require to determining the
entire market volume of products based on advanced materials. This would imply, however,
to assign a substantial fraction of total manufacturing output to this KET, which is likely to
overestimate its real economic contribution since innovative complex products not only rest
on advanced materials, but many other innovative inputs from other fields of technology.
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Another challenge for determining market sizes of advanced materials is the large variety of
different materials that constitute this KET. Market potentials of advanced materials relate to
many different submarkets for individual materials (e.g. markets for various metals and
alloys, polymers, rubber, ceramics, glass products) as well as for compounds or integrated
materials (such as smart materials or layered materials). While many of these submarkets are
not related to each other, there is nevertheless a substantial degree of substitution potential
among individual advanced materials which makes it difficult to sum up market potentials of
individual materials to a total market potential for advanced materials. What is more,
advanced materials typically substitute standard materials (which also were advanced
materials at the time of their market introduction, but since then have moved forward the
product life cycle to maturity stage). Market growth for advanced materials therefore should
not be interpreted as a net growth in output but rather indicates the speed at which standard
materials are being substituted by new materials. This is in contrast to most of the other KETs
analysed in this report for which market potentials can be regarded to a large extent as the
potential for additional sales.
The global market for all industrial materials-chemicals, rubber and plastics, metals, glass,
ceramics, concrete and other non-metallic materials, textiles, paper, wood and other biologic
materials-is estimated to exceed $7 trillion in 2009.81 Advanced materials constitute only a
small fraction of this total volume. Depending on the exact definition of what constitutes an
“advanced” material, their global market volume may be around $100 billion (see Moskowith,
2009: 57). When including the large group of advanced polymers, tailored macroscaled
materials and new alloys, the global market volume may be about twice this amount. If one
applies a more narrow definition of advanced materials that particularly focuses on the
application of nanotechnology, market volumes are clearly smaller and do not exceed about
$20 billion.
A recent study by Moskowitz (2009) estimates the global market volume for advance
materials-following a definition that focuses on material innovation in the fields of
biomaterials, alloys, ceramics, polymers and composites, coatings and nanotechnology-based
materials-to be $103 billion in 2010. This figure does not take into account the economic
crisis from 2008/09 and is therefore likely to be overrated. For 2020, Moskowitz expects a
global market volume for these advanced materials of $177 billion, which corresponds to a
compound annual nominal growth rate of 5.6 percent. This is somewhat more than the
expected mid-term real growth of the world economy (between 4 and 5 percent) which is
typically used as a reference for determining the growth of the total market for materials. The
81
Note that this figure includes some double-counting since some materials such as polymers, fibres or additives
are input for other materials such as rubber, plastics or textiles.
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higher growth rate for advanced materials indicates that they tend to substitute older
materials, though at a rather moderate pace.
One reason for the relatively slow expansion of market volumes in advanced materials are
long periods needed for substituting established materials by new ones. In the economics of
materials, newly introduced materials often reach their maximum penetration rate only after
40 to 50 years after market introduction (see Moskowitz, 2009). In the first 20 years, the
penetration rate -that is the share of total sales in the relevant market- often does not exceed
10 or 15 percent. For most advanced materials that have first been introduced around 2000,
including biomaterials, nanocarbon and nanofibers, their share in the relevant market is
expected to remain below 10 percent until 2020. On exception is organic polymer electronics
which could reach a market share for electronics materials of around 25 percent in 2025
(Figure 7-19).
Figure 7-19: Expected penetration rates for selected advanced materials (percent)
0
10
20
30
40
50
60
70
80
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Pe
n
et
ra
tio
n
ra
te
in
th
e
re
le
v
an
t m
a
rk
et
Reference
model
Bioengineered
materials
Advanced
ceramics
Engineering
polymers
Thin f ilms
Organic
polymer
electronics
Source: adopted from Moskowitz (2009).
The speed of diffusion of new materials depends on several factors. One important
determinant is the length of investment and product cycles in the industries that use advanced
materials. Long investment and product cycles imply long amortisation periods. In order to
avoid canibalisation, new investment and new products tend to be introduced only when past
investment and old products have reached their maturity stage. Another determinant for the
speed of diffusion is the need for specific investment and adaptation of production facilities in
order to use new materials in production. If these are high, fixed costs of introducing new
materials will be high and increase opportunity costs of introducing advanced materials.
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Another major determinant is the price-cost advantage of new materials over established ones.
Price-cost advantages are particularly high if new materials enable the introduction of
completely new products or significantly improved production processes which either allow
for higher product prices or significantly reduce unit costs. In case advanced materials
represent rather incremental improvements in performance characteristics compared to
established materials, these price-cost advantages are low and slow down diffusion.
Figure 7-19 shows that biopolymers and other bioengineered materials are expected to diffuse
significantly slower than organic polymer electronics. Biomaterials are typically used in the
chemical industry which is characterised by long product and investment cycles. Substituting
traditional materials such as polymers based on crude oil by biomaterials demands new
investment while offering little price-cost advantages. Consequently, diffusion of these
advanced materials is expected to take significantly longer than for organic polymer
electronics which are used in the electronics industry, an industry with short life cycles. What
is more, organic polymer electronics promise significant increases in performance
characteristics of electronic products and processes.
Table 7-6 provides a summary of current market size and projected market volumes for a
larger number of submarkets in the field of advanced materials. These forecasts are based on
analyses of market research institutions that were made between 2007 and 2010. While more
recent forecasts already considered the effects of the economic crises in 2008/09, forecasts
from 2007 and 2008 tend to be influenced by the very positive global economic climate that
was prevalent until the mid of 2008. The table also lists main application areas for each
submarket of advanced materials.
Medium-term growth rates for advanced materials range from 4 percent and less (which
means a market growth below the average growth of the world market across all types of
goods) up to 25 percent and more. Advanced materials with particularly high expected rates
of growth are typically those with a very low market volume, while markets with moderate
growth rates tend to represent huge market volumes. This indicates a typical pattern of
innovation diffusion in advanced materials. New materials substitute existing ones which
takes a long time due to high investment needed both by producers of materials and users.
Table 7-6: Estimates and forecasts of the size of global markets for advanced materials
Submarket Current
market
size
Refe-
rence
year
Fore-
cast
Refe-
rence
year
Cagr* Main application areas Source
billion
US-$
billion
US-$
per-
cent
Biocompatible
materials
10 health DTI (2006)
Galliumnitrid wafer 4 2006 semiconductors WTC Munich
(2007)
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Biopolymers 1 2007 25 chemicals UBA (2007)
Diamont films &
coating
0.53 2007 1 2012 14 machinery, instruments BCC (2007)
Activated carbon
(tonnes)
.89 2007 1.2 2012 5.2 environment Freedonia (2008)
Nanomaterials 1 2006 4.2 2011 33 semiconductors Freedonia (2007)
Nanomaterials 1 2006 100 2025 27 health, electronics, consumer,
construction
Freedonia (2007)
Organic & printed
electronics
1.58 2008 semiconductors IDTechEx (2008)
Engineering
ceramics
4 2006 5.8 2011 6.5 machinery, automotive,
environment
Materials
Technology
Publications (2007)
Powder metallurgy 21 2006 30 2012 5 machinery, instruments,
automotive
Materials
Technology
Publications (2007)
Thin-film &
organic
photovoltaics
0.84 2008 3.8 2015 24 optical/solar NanoMarkets
(2008)
Photocatalysts 0.8 2007 1.6 2014 10 construction, consumer goods BCC (2010)
Thick film devices,
processes and
applications
0.027 2007 0.05 2014 9 electronic devices, energy
devices, display devices,
mechanical/chemical devices
BCC (2010)
Aerogels 0.05 2006 0.65 2013 44 thermal and acoustic insulation
applications
BCC (2009)
Smart glass 0.85 2006 1.85 2013 12 transportation, construction BCC (2009)
Metal matrix
composites
4.1 2007 5.9 2013 6 transportation,
electronics/thermal
management, aerospace,
industrial, consumer goods
BCC (2009)
Advances structural
carbon products:
fibers, foams &
composites
1.7 2007 2.2 2013 4 aerospace and defence,
industrial applications, energy,
sporting goods, automotive &
other ground transportation,
infrastructure
BCC (2009)
Metal and ceramic
injection molding
0.985 2009 1.9 2014 14 powder metal injection
molding, ceramic injection
molding, Liquid metal molding
BCC (2008)
Metamaterials 0.15 2007 1.65 2018 24 electromagnetic, acoustical,
extreme parameter
BCC (2008)
Superconductors 1.4 2007 2.7 2013 12 magnets, electrical equipment,
electronics
BCC (2008)
Photonic crystals 0.014 2007 0.666 2013 90 ICT, light emission, energy
delivery, energy conversion,
sensing
BCC (2007)
Specialty fibers 5 2006 9.2 2012 11 aviation/aerospace, sporting
goods, automotive, other
industrial
BCC (2007)
Electronic
chemicals and
materials
22.7 2005 34.8 2010 9 wafers, CMP slurries, gases,
polymers, photoresist
chemicals, wet chemicals
BCC (2006
Compound
semiconductor
materials
14.44 2006 33.7 2012 15 wireless electronic devices,
optical data storage, fiber optics
communi-cations, illumination,
solar cells
BCC (2008)
Optical coatings 5 2008 5.7 2015 2 electronics, defence/security,
architecture, solar, medical,
telecom, transportation
BCC (2009)
Optical coatings 4.3 2005 5.6 2012 4 telecom, electronics, vehicles,
medical, security, architecture
BCC (2006)
Total market for
advanced materials
102.7 2010 177.0 2020 6 Moskowitz (2009)
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* Compound annual growth rate in nominal terms.
Source: Compilation of ZEW based on the sources quoted, partially taken from Brand et al. (2009).
One exemption from this pattern is nanomaterials which are believed to constitute a huge
market of around $100 billion in 2025 (Freedonia, 2007). Whether an annual growth rate of
almost 30 percent can be sustained over a 20-year period is rather doubtful, however.
The largest sub-market for advanced materials is currently related to electronics (particularly
semiconductors) with a market volume of over $20 billion in 2005, which was expected to
rise to about 35 billion in 2010. Another large market is optical coatings ($5 billion), powder
metals (about $20 billion in 2006) and engineering ceramics ($4 billion in 2006).
The anticipated economic relevance of the advanced materials fields is based on the fact that
they represent one of the most significant cost factors of medium and high tech industries.
Advanced materials can be used in a wide range of manufacturing and service industries and
its science and technology base is deeply related to the chemicals, nanotechnology and
biotechnology fields. Materials is consider an area of great potential for enabling innovations
in key industries such as energy, electronic and optical equipment (inc. ICT), industrial
equipment, aeronautics and space, automotive, engineering, textiles, eco-industry, pulp and
paper, agro-food, building, health care, military, and consumer goods (see Table 7-7).
Table 7-7: Impact of advanced material technology on the ICT, energy and biotechnology
sectors (percent of contribution)
1970 1980 1990 2000 2010 2020 2030
ICT 15 25 40 55 65 75 85
Energy 10 15 30 45 55 65 70
Biotechnology 5 10 20 30 45 55 65
Source: Moskowitz (2009: 75).
An important role of advanced materials as KET is to contribute to reducing resource
dependency as well as environmental impacts of production systems. A considerable potential
is expected in the areas of energy (mid-term market volume of €19 billion, e.g. catalysts and
batteries), environment (mid-term market volume of €12 billion, e.g. polymers and smart
packaging), health (e.g. tissue engineering), transport (e.g. lightweight materials) and ICT
(e.g. optical fibres and semiconductors) (EC, 2009). However, a recent report from the Europe
Innova Sectoral Innovation watch has alerted that advanced materials are an area where
Europe has under-invested (in terms of venture capital) compared to mainstream innovation
areas (e.g. energy generation and infrastructure) (Europe Innova, 2010).
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7.3 Success Factors, Barriers and Challenges: Cluster Analysis
Advanced materials clusters can be found all over the globe, but mainly in North America,
Europe, Japan, Australia, and BRIC countries. In North America, four US large clusters of
advanced materials are worth mentioning: the southwest region (Texas and Oklahoma), the
upper New York State region (expanding to the Albany area), California (Silicon Valley and
Northern California Nanotechnology initiative) and the mid-West (the nanobelt) (Moskowitz,
2009). It is difficult to provide a detailed account of clusters specifically pertained to the
advanced materials sector. In Europe, strong clusters in new materials, for instance advanced
polymers are in the Rhein-Main-Neckar region and Cologne region in Germany, the Rhône-
Alpes rand Île de France in France, and Denmark.82 To the previous list we may add recently
developed clusters in advanced (chemicals) materials in Wallonia (Plastiwin), and the Polish
Kujawsko-Pomorskie plastics cluster and the Slovenian Plasttechnics.
Other countries with advanced materials clusters are Canada (Quebec, Ontario) and China
(e.g. Shangai, Wuhan, Changsha), Australia (Melbourne and Sydney), and India (New Delhi).
Although emerging clusters can be identified all over the globe, the cases from Wallonia and
Changsha which were chosen for this study can offer an interesting illustration of newly
created clusters where public policy intervention and industry self-organisation might be
currently playing a distinctive role.
7.3.1. Advanced Materials Europe: Wallonia’s Plastiwin cluster
Introduction
The manufacturing industry in Wallonia represented 24 percent of the value added of the
regional economy in 2006 (the rest corresponds to services) (Biatour et al., 2010). From there,
the chemical industry represents a share of about 25 percent in relation to the whole industry
in the region (ECRN, 2009b). The chemical industry in Wallonia, which forms the basis on
which the new advanced materials clusters is developing, includes 200 companies, 60,000
jobs of which 25,000 direct jobs and a turnover of €10.9 bn. Its export rate is estimated to be
around 75 percent (including life sciences). This traditional sector is the second largest
industrial employer and an important driver of economic growth in the region (ECRN, 2010).
82
We only consider those clusters in Europe with high focus and innovativeness level that correspond to both listings:
chemicals and plastics clusters. However, this approach has shortcomings when aiming to identify other types of advanced
materials clusters, as e.g. the Chestershire-Manchester-Liverpool region in the UK has a considerable specialisation in
chemicals and composite materials, which in the ECO data is listed 4th in the chemical clusters category with high level of
innovativeness. Another case is the cluster located in the Zuid-Nederland region (Maastricht-Aachen-Liege) which level of
innovativeness is not reported, but a number of highly innovative (well established and spin-off) firms in the Chemelot
Industrial Park are developing and producing a number of new advanced polymers (e.g. elastomers, coatings, etc),
biomaterials and composites.
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The Plastiwin initiative aim is to stimulate innovation in the Wallonia region. The number of
actors in the cluster is relatively small, and its geography is spread across all the five Walloon
provinces with an extended coverage to the Brussels region (see figure below).83 The regions
of Hainaut and Liege account for 70 percent of the activities in the chemical sector and are the
provinces with the highest concentration of actors. It is estimated that Plastiwin represents
mainly SME’s (as 80 percent of Walloon companies account for less than 50 workers),
employs around 10,000 people (40 percent of employment of the Walloon chemical industry),
and has a common turnover of €5.6 billion(2006) (ECRN, 2009a; Verhoyen and Phillipe,
2009).
Figure 7-20: Geographical distribution of the Plastiwin Cluster
Source: modified from Gouvernement Région wallonne (2008) and Clusters Wallonia84
This cluster brings together three types of chemical-related manufacturers along the plastics
value chain (raw materials, casting, engineering, tools manufacturing, R&D, primary and
secondary processing), research centres, training centres and industrial associations. Firms in
the cluster are active in the fields of: packaging, construction, automotive and transport,
compounds and mixes of materials, electrics and electronics, furniture and comfort, technical
items, medical and hygiene, household items, office items, agriculture and horticulture, toys
and recycling.85 There are 50 core players, engaging in manufacturing, processing, services,
engineering, design, retailing and recycling. In addition, a handful of companies and industry
83
In a strict sense, Plastiwin would not constitute a geographical cluster (according to Porter). As it is distributed all over the Walloon region
but localised in two main areas, these would resemble more an industrial district (according to Marshall). Nonetheless, as the Regional
Government has an official policy of industrial development based on clusters and due to the fact that Plastiwin’s origins came from intra
firm arrangements, we consider this as a suitable case study of clusters of new creation.
84
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associations from the Brussels region are also members. Part of the knowledge base is
provided by a number of training and research centres.
Short history of the Plastiwin cluster
The second industrial revolution (in chemicals) began 1861 in Belgium (Couillet, Wallonia)
with the Solvay process for soda ash production, and in 1906, the first composite material of
modern history (Bakelite) was there invented and produced. Under the lead of Solvay, the
Walloon chemical industry started to diversify and moved to the manufacturing of plastics in
the early 1950s. This tendency continued due to the cyclical nature of the chemical and
petrochemical industry and the oil crises, and in the early 2000s the development and
production of high value speciality polymers (advanced polymers) started. This was the start
of the now evolving advanced materials cluster.
The Plastiwin cluster was formally started in 2007 as part of the cluster initiative supported
under the Walloon Marshall Plan, with the aim to stimulate innovation. The cluster was then
formalised by the Walloon Government’s cluster programme in 2008. Hence, whereas the
cluster develops upon the foundation of an old developed industry, and strong industry
relationships in the area, the cluster itself is emerging out of these ‘old structures’. We
therefore categorise the cluster as emerging and regeneration at the same time.
System failures and system drivers for growth
Infrastructure
As is the case in all clusters so far, there is a very strong and well developed knowledge
infrastructure in the area. The Walloon region has 9 universities and 13 higher education
colleges with courses related to applied sciences. These knowledge institutes have developed
relationships with the local industries over time, but will still have to adjust their research to
the new developments.
Furthermore, The Walloon region has 220 business parks and 6 science parks. The
infrastructure is managed by the economic development agencies. Of particular relevance is
the SPoW (Science Parks of Wallonia), which is a network of Belgian science and technology
parks which host companies that focus on high tech business-university relationships. These
are managed by Universities and local development agencies.
There is also a network of business incubators or shared infrastructures located in Universities
and/or Science Parks to facilitate start-up companies. In addition, 3 public training centres and
3 research centres contribute to the knowledge base of the cluster. These are specialised R&D
centres related to material science, biotechnology, nanotechnology and polymers.
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A special feature of this cluster is that there is also a physical infrastructure in place that
warrants cost efficient access to a pipeline distribution network for basic raw materials
(olefin, hydrogen, oxygen, nitrogen) and energy fluids (natural gas).
Institutions
Rules and regulations: As the advanced materials in the Plastiwin cluster are closely related
to the chemicals industry, there are a lot of regulations to comply to with regards to hazardous
materials and pollution. The REACH regulation (EC 1907/2006) is expected to have impact
the innovative efforts of the cluster. A large number of examples can be found in a number of
companies’ website where statements are being made around the message that “REACH is an
important driver for environmental responsibility in our company”. As a result, they are
actively sourcing alternative “greener” substances and materials. A smaller number of
proactive firms are currently assuming an anticipatory position and are engaged into basic and
applied R&D for developing advanced eco-materials. The European and Belgium patent Law
and fiscal and tax incentives are also important factors hampering or enabling the innovative
efforts of firms in advanced materials.
Norms and values: In terms of informal rules, values and norms, the long tradition of the
Walloon region for chemicals manufacturing and a strong identity and values aligned to
sustainability and local development may have created a sense of identity in people working
in the industry. This is perhaps one of the reasons why the Walloon workforce is considered
of high quality and performance. The education standards (widely recognised university
qualifications) and (technical) training might be also contributing to create shared values and
behavioural patters. It is estimated that the level of productivity of Wallonia workforce in the
chemicals industry (hourly productivity levels) is ranked second at the global level), which
can be translated into highly motivated managers and employees and successful mobility and
training programmes.
Public policy
The Walloon government decided to address the critical situation of international competition
and saturation of its old industrial structure by launching, in August 2005, an action plan
aiming to reinvigorate the regional economy. The government presented its objectives in a
document entitled ‘Priority actions for the future of Wallonia’ –subsequently called the new
‘Marshall Plan Wallon’ with a budget of €992,5 m (Gouvernement Région Wallonne,
2005a,b). This plan aims to boost investment in firms by: facilitating access to investment
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grants; reducing tax for firms; developing industrial research and partnerships between
universities and firms; and developing and improving access to vocational training.86
As a result of the implementation of the new Walloon industrial policy, there is now a specific
promotion of investment package for attracting new firms to the Plastiwin cluster. Among the
measures for supporting this policy is the preferential access to risk funding (through SRIW
and Sowalfin), a number of fiscal incentives (see next section), tax and social-security
incentives (reduced social-security contributions, cash recruitment grants, training subsidies,
etc.)87, support for outstanding scientific research (linkages to Universities), facilitation (if
entitled) to European subsidies, and a personalised and speedy following up from public
agencies and regional authorities.88 89 90
Funding
The role of public funding has been vital for the development of the Walloon industry since
the 1970s, when Belgium experienced the decline of its traditional industries. The Economic
Reorientation Act of 1978 led to the creation of the regional development companies,
entrusting them with a threefold mission: to finance developing companies, set up new
companies, and carry out intervention operations in the industry. The Société Régionale
d'Investissement de Wallonie91, SRIW and Sowalfin92 are the most prominent regional
investment agencies. There is a wide variety of funding opportunities from the European,
national and regional agencies aimed at technology development, basic research, and
collaborative high tech ventures. In addition, there are a number of local investment
companies and there are several sources of private funding, loans and seed capital specially
aimed at SMEs.93 There is a considerable presence of well established angel and venture
investors and holding groups in the Walloon region. Walloon and Belgium venture capital
firms are represented by the Belgian Venturing Association (BVA). Recent federal legislation
introduced PRIVAK (Private Equity Investment Fund - Investment in non-traded companies),
which encourages private investors to invest in non-traded venture capital, while benefiting
from a tax-free status. Business angels provide start-ups with risk capital and coaching, and
Be Angel is an investment structure which includes 25 business angels that help entrepreneurs
to develop new businesses.94
86
http://www.eurofound.europa.eu/eiro/2009/05/articles/be0905019i.htm
87
http://www.investinwallonia.be/ofi-belgium/investir-en-wallonie/environnement-des-affaires/acces-aux-capitaux.php
88
http://www.investinwallonia.be/ofi-belgium/10-reasons-invest-wallonia.php
89
http://www.investinwallonia.be/ofi-belgium/investir-en-wallonie/opportunites-affaires/chimie-siderurgie-verre-textile.php
90
http://www.investinwallonia.be/ofi-belgium/investir-en-wallonie/environnement-des-affaires/acces-aux-capitaux.php
91
http://www.sriw.be/fr/Principes-generaux-9.html
92
http://www.sowalfin.be/info.php
93
http://www.investinwallonia.be/ofi-belgium/investir-en-wallonie/environnement-des-affaires/acces-aux-capitaux.php
94
http://www.walloniatech.org/VentureCapital.html
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Fiscal measures are also important for industry and cluster development, and incentives in the
region of Walloon include:95 contribution with up to 20 percent to the cost of setting up a
business, lower tax and social cost, support for hiring and staff training and consultancy
services, support with export plans, and promotion of renewable energy use and environment
initiative. As noted above, the Wallonia government defined economic redevelopment areas
(competitiveness hubs) which now receive special tax incentives for existing economic
activities in those communities and any future activities such measures may attract. Current
investment grants may be increased by 25 percent or even 40 percent for these areas. In
addition to fiscal incentives, the Wallonia Government has taken a number of tax-related
measures aiming to making Wallonia the least taxed region in both Europe and Belgium,
through the suppression of tax on energy, exemption of real estate tax for a maximum of five
years during the creation of a company, and exemption of real estate tax for seven years on
material and equipment.
Interactions
In spite that it has been reported that cooperation between firms and universities in the
Walloon innovation system is below the European and Belgium average (Biatour et al., 2010),
and that recurrent cooperation problems do exist among Walloon chemical firms (Verhoyen
and Phillipe, 2009) there are successful cases within the Plastiwin cluster that highlight the
positive interaction between entrepreneurs, Universities, public agencies and private investors
in the cluster. In 2002 for instance, Nanocyl was founded as a spin-off from the Universities
of Namur and Liège with the support of private investors96 The firm received seed funding
and venture capital to prove the commercial viability of carbon nanotubes and nanopowders
for flat screens applications (Eco-innovation Futures TNO, 2010). Nanocyl is one of the few
highly innovative SMEs in the cluster.
The cluster platform, which is aimed at stimulating the development of technology,
collaboration and international reputation of the cluster, has been formed with an
administrator (coordinator) and a board of 8 members. Regular meetings are held, and topics
discussed. As the platform is still young, we cannot say much about how it does in facilitating
the interaction in the cluster.
Capabilities
Wallonia was the cradle of the European chemical industry; and a long story of accumulation
of technological, organisational, management, and engineering capabilities which can be
found in the regional chemical industry. However, The Walloon region still has only 1.5
95
http://www.walloniatech.org/FinancialIncentive.html
96
http://www.nanocyl.com/en/About-Us/History
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percent employed people in R&D functions, which is below the Belgium and European
(EU15) average (Biatour et al., 2010). Within the large chemical companies there will be a
rich source of capabilities in all domains (technology, organisation, marketing). The challenge
however lies in the transformation of these capabilities to serve the reorientation of the area
towards advanced materials.
Market failures and drivers for growth
Market structure
The Plastiwin cluster has various large firms in the chemical-plastics-rubber-oil-health such
as Solvay, Prayon, Total, Clariant, Nexans, Baxter, and BASF. A number of highly innovative
SMEs are also part of the cluster. Some of the firms have in-house R&D facilities (both large
and SMEs), nonetheless the number of medium and low innovative firms is rather high. A
good feature of the cluster is that it includes, from the start, also complementary service
providers and specialists such service providers and specialised recycling and engineering
consultancy companies. Finally, a handful (rather small) training centres in plastics and
chemistry support competences development of related firms. Hence, there is a good mix of
large and small firms, and the cluster is open to a variety of complementary and divers actors
Market demand
The chemical sector in Wallonia – in which the Plastiwin cluster is embedded - is highly
export-oriented (around 75 percent of exports rate. The chemical sector as a whole in
Wallonia can be considered as successful in terms of revenues, confirming high market
demand, but the share of advanced materials in this (advanced polymers, biomaterials, and
composites) is unknown. There is a number of industries which are lead users of these
products, but this is due to the position of the chemicals-plastics-rubber industry in the value
chain. No clear role of government as a lead user (e.g. through public procurement), since
most of the products of this sector are raw or intermediary materials..
Conclusion
The Plastiwin cluster is a young cluster that is emerging as a KET cluster from the strong
foundations of the Walloon chemical industry. Here lies a chance, but owing to path
dependency also a challenge as the regeneration of the cluster towards new technology
applications might prove difficult.
The cluster has a promising combination of firms in the chemicals and plastics value chain,
but the road to advanced materials still needs to be further developed. We see that whereas the
large leading firms have high capabilities, most smaller firms have moderate innovation
capabilities, and only a handful of firms are highly innovative embracing other areas of
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advanced materials (in particular biomaterials and advanced composites). An important step
has been given to facilitate a closer interaction among private and public agents, trust building
and sharing a common agenda.
Public funding: The role of the public intervention has been decisive, not only in terms of
infrastructure, regulation and incentives, but also providing risk capital needed for
entrepreneurship and business creation. As a result of the implementation of the new Walloon
industrial policy, there is now a specific promotion of investment package for attracting new
firms to the Plastiwin cluster. (European and regional) public funding has proven to be
effective for the development of highly innovative firms (e.g. Nanocyl), but academic
entrepreneurship should be promoted to a higher scale. The chemical-plastics industry
traditionally spends a large share of in-house R&D paid with own funding, but the endevours
required by the materials revolution require cooperation under a more open innovation model.
Tax incentives: The ambitions of the Walloon Government to become a tax-friendly region
and the availability of (investment) support measures seems to be creating ideal conditions of
tax-related measures aiming to making Wallonia the least taxed region in both Europe and
Belgium, through the suppression of tax on energy, exemption of real estate tax for a
maximum of five years during the creation of a company, and exemption of real estate tax for
seven years on material and equipment.
Public procurement and lead markets: Although, like in most clusters we could not specify a
particular role for public procurement or lead market, the cluster does get much of its
competitive edge through the presence of large lead companies that can and will serve as lead
customers (e.g. Solvay). That lead markets are difficult to identify is not surprising as the
products sell internationally (75 percent) and almost always are intermediate products.
7.3.2. Technology cluster non-Europe: Changsha material cluster
Introduction
Changsha, capital of Hunan province, is located in south-central China. The origin of the
Changsha cluster as a high-tech base was first developed since 1989 for the machinery sector,
with further upgrades in the other related sectors, including advanced materials. Following the
implementation of policies from the Central Government of China, the Ministries of
Commerce, Industry and Information Technology and Science and Technology jointly
announced in December 2007 their ambition to make Changsha the outsourcing services
centre of China (KPMG, 2009). In order to encourage the development of the services sector,
the Changsha regional government has set up an ad hoc number of outsourcing
conglomerations and formulated preferential policies (e.g. financial policies or tax incentives)
aiming to promote the development small and medium-sized high-tech companies. The target
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sectors are related to the creative industry, advanced materials, and university-industry parks
(science parks). In addition, Changsha also hosts a number of clusters in the areas of
industrial engineering and mechanics, automobile industry, household appliances, electronic
and optical equipment, and bio-medicine. Of particular interests is the development of an
advanced materials cluster, which has over passed the growth and expectations. The
Changsha advanced materials cluster is geographically concentrated, and is mainly located in
Changsha Economic & Technological development area and the Changsha new and hi-tech
industrial park (see Figure 7-21).
Figure 7-21: Geographical location of the Changsha Cluster
Source: KPMG (2009)
Changsha saw the naissance of an industry oriented to the internal market in the early 1980s.
The Changsha development zone was originally developed (in the early 1990s) as an
important cluster for the machinery industry (Li and Ya-Qing. 2006). By mid 2000s the
Changsha cluster was considered one of the most important economic and technological
development areas, primarily based on the impact of the machinery and the electronic and
ICT industries on regional and national industrial development.97 Nonetheless, and given the
quick development pace of the advanced materials industry, Changsha has recently seen a
speedy increase of the latter industry which now constitutes its most competitive enabling
industry. It is expected that the development the Changsha advanced materials cluster will
strengthen the integration of industry, learning and research, at the time it uses and increases
the innovation capacity of the Central South University and Hunan University.98
97
http://www.fdi.gov.cn/pub/FDI_EN/StateDevelopmentZone/NewsUpdate/NewsUpdateContent/t20060404_70863.htm
98
http://www.csinvest.gov.cn/jjcs_cssyscy_6.asp
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Short history of the Changsha Cluster
The origin of the Luy Valley as a centre for high-tech industrial development of Chansha is
dated way before the State Council officially included it as National Economic and
Technology Development Zone.99 A machinery cluster in Changsha burgeoned in early
1990s, when the industrial cluster was formed around the two industrial leaders: Zoomlion
Heavy Industry Co., Ltd and Sany Heavy Industry.
Advanced material (and intelligent) manufacturing is one of the eight key areas for economic
development for the Chinese government for the modernisation of their economy by 2050. By
2020 the goal is to get breakthrough developments in advanced materials, also contributing to
energy saving, low pollution manufacturing, manufacturing technologies of giant and super-
giant structural components, and e.g. composite materials. By around 2050 the accurate
design and control and the related environmentally sound design of materials structure
properties and service properties ought to be accomplished (Lu, 2010).
It is within this framework and within these goals that the Changsa cluster is developing, and
its development is going fast. Up to mid 2000s, over 14 small and 6 medium and large
engineering machinery manufacture firms were aggregated around Changsha. In 2007, the
industrial output value of Changsha advanced materials industries represented 17.37 billion
CYN (around €1.85 billion at current prices), representing an increase of 38.3 percent
compared to the previous year. Among the main products of this cluster are power, fuel and
solar energy batteries, continuous band-shaped nickel foam, cobalt oxide, new construction
materials, etc. A number of firms in the Changsha materials cluster are now national and
global leader in specific traditional and new advanced materials sectors
Following a low operational cost strategy, the Changsha ETDZ has seen the event of a
particularly strong and continuous economic development in recent years. In 2008, the city's
economy grew at an annual rate of 15.1 percent and had a GDP per capita of about $6,700. By
the end of 2008, over 2,900 foreign firms had been established. including 26 firms in the
Fortune 500 list (e.g. Mitsubishi, Cocacola, ArcelorMittal, Bosch and Hitachi) Changsha also
ranked 10th most competitive city, according to the “Annual Report on Urban
Competitiveness” published by the Beijing International Institute for Urban Development
(KPMG, 2009). In 2007, the Changsha city government reported improvements in the
regional innovation system, by actively promoting the transformation of science and
technology achievements and industrialisation.
99
It is important to note that what High Technology means for the Chinese government may differ from what most Western
countries.
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System failures and system drivers for growth
Infrastructure
The Changsha city government has set up a long practical strategic partnership with the
region’s universities and other scientific research institutes to effectively promote the
technology breakthrough. The constructions of several platforms (information, technology,
services and financing) have achieved remarkable results. The number of professional
technology intermediary agents has increased as well as the number of science and
technology business incubators (Liu, 2007).
Changsha is one of the key higher education and research bases in China. There are many
new and well established universities. The universities are expected to function as anchor
entities for cluster and regional (innovation) development. Changsha universities also
promote entrepreneurship and new business development (through incubators), assist in
technology transfer, and spin-off companies which are established in the university industrial
parks. One example is the firm Boyun New Material Co as a spin-off firm for the
manufacturing of high-performance composite material.100
Furthermore, there are 45 higher education institutions, 76 special training agencies, over 120
research institutions, 47 national and provincial key labs, 46 academies and 340,000
technological staff.101 In terms of specialised equipment available to firms in the cluster, the
two high-tech zones of Changsha account with about 44 highly specialised large-scale
instruments/equipments that can be used by any firm established in the area upon payment of
a fixed/negotiated fee. The list of equipment ranges from spectrophotometers and
chromatographers to laser and plasma devices, often located at (one of) the University’s
facilities.
There is also a number of business development and business incubation centres (both public
and private). Among these centres are the Changsha Technical Assessment and
Demonstration Centre, their High-tech Business Incubation Service Centre (governed by the
Changsha administration of Science and Technology and with more than 300 success cases
which represented the creation of 27,000 jobs), the Business Incubation Service Centre of the
Changsha High-tech Industrial Development Zone (specialised in supporting academic
entrepreneurship of returning students, young PhDs and post-docs, with more than 100 SMEs
created by around 250 young talents), the Hunan Xinjinrong Technical Incubator and the Oak
Garden Enterprise Business Incubation Service. In addition, the cluster also has intermediary
100
http://www.cshtz.gov.cn/webkey/index.do?templet=Eindustrystructure&id=3483
101
http://www.csinvest.gov.cn/jjcs_fwwb.asp
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organisations for (intangible) assets evaluations, auditing processes and a number of quality &
productivity testing/inspection.
Changsha provides sound infrastructure and facilities to companies at comparatively low
rates. The region and the city have a sizeable workforce (around 190,000 people enter the
regional job market every year) and maintains cost advantages over other inland cities
(KPMG, 2009).
Public policy and funding
Public policy: China’s policy framework for industrial development, high tech zones and the
support of specific technology areas is considered to be very supportive of the cluster (Ding,
2007). It has been suggested that the success of regional development model based on a
combination of science and technology and industrial policies have had three major
institutional drivers: the Central government provides infrastructure and resources needed for
supporting innovation and business development (e.g. science parks, industrial parks, and
incubators). Secondly, it has enabled foreign direct investment at the time it has promoted
closer and more effective industrial and technological links with neighbouring countries for
supporting technology transfer, capabilities and skills development and access to global
markets. Thirdly, an explicit policy of industrial development through clusters (Sigurson,
2004). The local government in Chinese provinces and cities has been seen as the key enabler
for the success of regional and local industrial development of modern China, as the operation
of the funds and all the aspects for new business development are carried out at the local
level, in close cooperation with entrepreneurs, regulators, cluster management, and financing
bodies (Ding, 2007)
Funding: Both the Central and Local government have played a key role in the provision of
public funding for cluster development. At the Central Government level, the Central Council
dictates where money should be invested, and a number of plans and funds have been created.
Privately-owned banks also respond to these ambitions by facilitating loans to those projects
that the central Government favours.102 The largest financial institutions, e.g. China
development Bank, China construction bank, ICBC, and China Merchants Bank, have a
leading role in providing financial support to those projects. Other entities of the financial
system include the China Investment Corporation (CIC) and the China International Capital
Corporation (whose seed capital was provided by Morgan Stanley back in 1995), the latter
providing additional funding. The role of large Banks is particularly relevant, since around
102
Albeit these Banks are not explicitly run by the Government, regulators often attend board meetings and senior
management often includes a senior manager known as ‘Head of discipline’ who represents the Communist party
(Economist, 2010).
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fourth fifths of the assets in the Chinese banking system is controlled by 17 institutions (from
a total of 70 State-owned banking institutions) (EIU, 2010).
At the local and provincial level, the regional and local administration of the high tech and
economic and technology development zones has set up funds of over 50 million Yuan for
supporting new business development and restructuring of existing ones. Private equity
capital is provided by firms and at the local level there are also Venture capital providers.
Large leading machinery firms had no finance difficulties for its continuous development,
also thanks to close links with the government supportive of the cluster’s development. But as
to the whole cluster, some other firms are short of capital because of inadequate finance
channels (Li and Ya-Qing, 2006).
Interactions
Relationships in China are of a specific nature due to the many changes the country has gone
through over the past hundred years from a centrally planned economy (until 1978), the
reform period (1978-2000) and after that the opening of the economy (Liu and White, 2001).
The differences in the type of interaction in the command era versus in the transition era are
depicted in Figure 7-22.
Figure 7-22: Interactions within the different actors in the Chinese national and regional
innovation system
Source: Liu and White (2001)
Following the experience of leading examples of high-tech cluster development in the USA,
Chinese universities and research institutes have been encouraged to play a leading role for
scientific and technological development linked to economic development through
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collaborative relationships between industry and science (Chen and Kenney, 2007).
Interactions between well trained graduates, returning graduates (from abroad), academic
entrepreneurs, firm employees, government representatives and strategic investors have
become more effective throughout time. An example of this is the evolution of the Hunan
Taijia New Material Science and Technology Co. Funded by returning graduates from abroad
it is now a Sino-China joint venture specialised in the manufacturing of composite materials
with annual sales of 500 million Yuan. At the international level, Changsha Universities and
research institutions have established ambitious cooperation programmes with top centres in
the industrialised and industrialising world (e.g. MIT in the USA, Cambridge, etc.).
Capabilities
China has advanced its innovation capabilities from imitation to innovation in the last 20
years (Altenburg et al., 2008; Dobson and Safarian, 2008). For the Changsha’s cluster,
however, little information is available for the advanced materials cluster. What can be said,
however, is that the central role of the two major Universities and a number of research
centres and large advanced material firms very probably warrants a very high level of
capabilities.
Market failures and drivers for growth
Market structure
A total of 136 companies are established in the cluster (Changsha Commerce Bureau
2010b).103 There are many large companies that play a dominant role. That, combined with
the lesser access to resources for smaller firms, makes that the market will be less dynamic
and less accessible for new entrants.
Market demand
The advanced materials cluster is oriented to the development and production of new
materials related to advanced batteries. For example, the Changsha Liyuan New Materials
firm has now exceeded the previous national leader Sumitomo Company in making material
for batteries. Another example is Hunan Reshine New Material Co. which is now the
domestic leader in lithium ion cathode material production. All in all, the cluster has got
companies that are leading in the growing international markets for both batteries and other
advanced materials.
103
http://www.csinvest.gov.cn/jjcs_cssyscy_6.asp
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Conclusion
Changsa is a fast growing cluster in advanced materials that serves a fast growing
international market, e.g. batteries. The cluster has been strongly stimulated by the
government, both financially and by other guiding policies.
Strengths of the cluster are the strong knowledge infrastructure and the presence of large
companies that play a leading role in the cluster. The collaboration between government,
universities and industry, and the strong government guidance in these processes (e.g. by
deciding who will get funding) is a strength for the Chinese example but is a strength that will
not be easily transferable to other countries as they have different cultures and industry policy
traditions.
A weakness of the cluster can possibly be the relative weak position of smaller and supplier
firms to the large companies. As they have a lesser position in the system, the collaboration
between these parties will be more prone to distrust which will be detrimental for
collaboration and innovation. Their restricted access to funding on top of that means that the
dynamism and accessibility of the cluster can be restricted which can be harmful for the
healthy mix of actors in the cluster, and hence hinder the further growth of the cluster.
However, all needs to be considered in the light of international competition as well. The
growth and the development of cluster will also largely be determined by the relative
production costs of China versus other parts of the world.
Public procurement and lead markets
Like in the Canadian Ontario microelectronics cluster, the Chinese government uses public
procurement policies: they source materials within the region. Like in the Canadian example
though, we have no further information on how this policy is implemented and what the
results of it are. Like in most other clusters, lead firms play an important role in the cluster.
They are important actors for the growth, critical mass and internationalisation of the cluster.
7.3.3. Conclusion on Advanced Materials Cluster Comparison
Strengths and weaknesses
The advanced materials clusters in Wallonia and Changsha are in some ways comparable. The
completely different cultures and structures of both countries make a real comparison hard to
make though.
Similarities include that they are young clusters, but growing on the foundations of a long
industrial tradition, and that both clusters are embedded in a strong knowledge infrastructure.
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Also, both clusters have relative large firms in them, which increase the likeliness of critical
mass and internalisation of the clusters.
The role of SMEs should be considered more favourable in Belgium though as the smaller
firms in China have a lesser position in the economy, giving them less power and hence less
freedom to innovate and creatively contribute to the dynamism and growth of the cluster. The
problem with the smaller firms in the Walloon cluster is that they have less developed
capabilities and are hence less likely to come with ground breaking new technologies.
Both clusters do facilitate the development of start-up companies though through a network of
business incubators and shared infrastructures. In addition to this, both countries provide a
large number of different tax incentives for start-ups, regional development and technology
development. Finally, there is a considerable presence of well established angel and venture
investors in both locations.
Public policy, funding and tax incentives
From a geographical point of view, the Walloon cluster is highly spread over five provinces,
in comparison to the Changsha cluster, which is highly concentrated. But the largest
differences are related to government involvement. While the Walloon advanced materials
cluster was created to support and develop the existing traditional chemical industry,
Changsha decided to give advanced materials more priority and thus planned its cluster from
scratch. The dominant role of the Chinese government is also visible in many other occasions,
such as setting up strategic partnerships with local universities and business, providing most
of the research funding, acting as a lead customer, and promoting the creation of high-tech
SMEs within the Changsha cluster. In the Walloon cluster on the other hand, the Plastiwin
initiative as a separate cluster organisation is in charge of cluster coordination, internal and
external relationships and building collaboration opportunities. Furthermore, the Belgian
government plays no major role, except of providing public funding for research and
development. Another difference is that in Changsha, universities act as anchor entities for
cluster and regional (innovation) development, while in Wallonia large firms execute this
function.
Lead markets: The role of lead actors / anchor firms
In both clusters large firms play an important role. They are not explicitly mentioned as
playing a role as anchor firm though, nor as lead customers. The reason why we do not
earmark the firms as anchor firms is because there is no evidence that they create dynamism
in the cluster by for example spin-offs, nor is it their knowledge base that is intensively shared
with smaller firms in the cluster leading to a dynamic innovation milieu.
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The companies do serve as lead customers though. They are large buyers with high quality
demands that will increase the level of quality and capacities of its supplying firms. This will
be beneficial for the clusters’ development.
Table 7-8: Summary of findings from advanced materials cluster comparison
Plastiwin cluster, Belgium Changsha material cluster, China
History Dates back to establishment Solvay 1861
2007 establishment of cluster platform by
group of firms
Dates back to 1990 as machinery cluster
Officially established as development/
cluster region around 2000
Size 44 firms (70 percent SMEs)
10,000 employees
€5.6 billion annual sales
136 companies
340,000 technical staff
Classification Emerging new cluster / revitalisation of old
cluster
Fast growing
Infra-structure Strong knowledge infrastructure with many
universities and colleges for applied science.
Wallonia has 6 science parks, SPoW
(Science Parks of Wallonia is network of
high tech business parks
Provided are physical and internet
infrastructure as well as shared research
facilities
Pipeline for raw materials transport (e.g.
hydrogen) and energy supply (e.g. gas)
Strong knowledge infrastructure with many
higer education institutes and training
facilities, research institutes and labs
Institutions Highly regulated industry as chemicals play
a large part in new materials
Centrally planned society, making direct
planning more possible
Public policy /
funding / tax
Cluster platform initiated by group of firms
Cluster platform is part of larger cluster
initiative Plan Marshall Wallon to stimulate
innovation by access to funding, reducing
tax for firms, developing industry-science
collaboration, training
Regional development agencies provide
infrastructure and start-up support through
incubators and shared infrastructure (e.g.
labs)
Active regional development agencies
Finance
Financial support from European, national
and regional funds
Tax, financial and social security incentives
for existing firms
Tax incentives and grants to attract new
firms to the cluster (up to 20 percent of set
up costs)
Strong support of national and regional
government providing funding, stimulating
industry-university collaboration,
stimulating private and providing public
funding for research, development and
commercialisation
Interactions Not much known on interactions Interaction hindered by old culture and
relative distrust between larger and smaller
actors in the cluster
Capabilities Building upon long history in industry
Smaller companies have relative weaker
innovation skills
Large companies, in collaboration with
universities, represent strong innovation
skills
Market demand 75 percent of output is for export Fast growing cluster with strong export
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Large companies can serve as lead users
Not clear what is percentage of advanced
material in total output cluster
product such as advanced batteries
International demand through relative low
production and labour costs in China
Market structure 70 percent SME’s
Large firms are e.g. Solvay, Total, BASF,
Prayon, Nexans and Baxter.
Cluster originated around 2 anchor firms in
1990s
Smaller firms and new entrants are
disadvantaged compared to well connected
large firms
Source: TNO compilation.
7.3.4. Factors influencing the future development of advanced materials
Factors influencing the future market potential of advanced materials
Radical developments in advanced materials technology are viewed as trigger for further
innovations with the potential for major economic impact across a broad range of industries
and applications (MTC and NSTI, 2004). Advanced materials are attracting both government
interest and new entrants. Because of their general purpose character companies and research
facilities developing advanced materials need access to financing and the establishment of
effective alliance partners. These are required in order to demonstrate value in specific market
applications, a necessary intermediate step for an advanced materials venture to create and
capture value (Maine and Garnsey, 2006). Cooperation networks will arise in order to realise
these values.
Preferences of the society will influence the future development of research in new materials
and their application. Society’s demand of advanced materials included in new technologies,
products and services is affected by a variety of factors and is influenced by development s in
many other technologies (especially other KETs) and industries, as mentioned before.
Evaluating foresight studies of the EU the priorities regarding new and advanced materials are
directed firstly to “Better Life” which includes materials used in medicine, security and
convenience (Schumacher et.al., 2007). High tech textile materials and smart materials belong
to this category as well as implant and new surface materials, and regenerative medicine. The
second highest priority for advanced material applications is “Security”, which mainly
includes nano and smart materials for non-stop protection, identity proof systems and alarm
systems included in surfaces. The foresight studies indicate at the third place of priorities
within advanced material research and development, the problem of “Energy Saving”. To this
group belong solar materials, fuel cells and materials for energy efficiency. Sustainable
solutions improving environmental saving technologies is expected to be a powerful demand
of advanced materials.
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Contribution of advanced materials to social wealth
Wealth effects are obvious in the application of new products for life style, medicine and
environmental techniques. Shape memory alloys (e.g. Nickel-titanium alloy) open many
opportunities to improve the convenience and to extend the durability of implants, stents and
prostheses. In combination with new diagnostic technologies which are strongly driven by
other KETs -such as nanoelectronics, biotechnology and photonics- the opportunities for new
applications will rise. Additionally, it is evident, that the appropriation of new and advanced
materials focuses on central needs of the society, such as sustainable environmental
technologies and energy efficiency goals. The awareness of the special characteristics of
certain advanced materials opens a huge range of appropriation of material to diverse wealth
enhancing purposes.
The role of public support
There are complementary effects obvious in two directions. First, advanced technologies in
energy production and storage (e.g. fuel cells), or in medicine (e.g. new organic materials) call
for new materials which are applicable to high temperatures and high pressures. Secondly,
production technologies for those advanced materials are necessary to produce those materials
with reasonable costs. Substitution effects exist in cases where old materials are replaced by
new, smart and highly advanced ones, such as of aluminium and other materials with high-
energy-consuming production technologies. In order to realise those complementary and
substitution effects in a desirable way, public programmes should support collaboration
between research institutions and companies. National programmes at the federal level as well
as EU programmes are shaped to improve such collaboration.
In Germany, the Federal Ministry of Education and Research, BMBF supports certain fields
of material technology and selected main areas of chemical technology in differently oriented
programmes, “MaTech – New Materials for Key Technologies of the 21st Century” and
“Chemical Technologies. MaTech induced with a funding of €530 million a total mount of
investment of almost €1 billion within the time period 1994 to 2003. A long term framework
programme for funding and supporting research and development of new materials and their
application in diverse implementations in technologies WING integrates these programmes
(see BMBF, 2003). This has a particularly pronounced effect on cooperation between
universities and small and medium-sized companies. The latter often do not have the human
or financial resources for intensive materials research. Publicly funded collaborative projects
can close this gap and enable education and further training on a project-specific level (see
Schumacher et.al., 2007).
In Great Britain the Associate Programme of the Institute of Materials (IoM) was launched in
1999 with the objective of consulting and engaging the materials community in the
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FORESIGHT process. In all cases, the process involved end-users, manufacturers and
suppliers from different value added chains. The following areas were selected for action:
Crime Prevention, Sustainable Development, Finance and Innovation Technical Textiles,
Packaging, Process Modelling and Simulation. Education and collaboration between research
institutions and companies play a key role within the action of this programme (see Foresight
Panel UK, 2000).
The 7th framework programme of the EU directs in their activity in similar areas. Research
will focus on developing new multifunctional surfaces and materials with tailored properties
and predictable performance for new products and processes as well as for their repair.104
Huge efforts have been made to trigger a fruitful and economic relevant amount of
cooperation between research institutions and companies which appropriate the results in
material research. However it is not clear how these will influence the market potentials and
production capacities of advanced materials within the EU.
7.4 Conclusions and Policy Implications
State of technology
Innovation in material technology has a long history. Several waves of technological advance
have emerged during the past centuries. The past two decades saw a new surge in
technological developments in new materials, driven by different factors. On the one hand,
further progress was made in traditional areas of material technology, including innovation in
advanced metals, advanced polymers and advance ceramics. On the other hand, some new
fields of material technologies developed rapidly, opening up entirely new areas of material
innovation. One driving force is nanotechnology which allows to scaling down materials into
a size that result in different material properties. Another driving force is smart materials,
i.e. complex materials that combine structure characteristics with specific physical and
chemical properties. A further new development in materials technology refers to
bioconceptual materials, i.e. materials based on biological technologies.
Advances in materials primarily attempt to improve critical performance characteristics of
materials compared to conventional materials. Such improvements can result in a wider
applicability of materials in very demanding environments (e.g. in terms of temperature and
humidity), in allowing more demanding processing of materials (e.g. in terms of capacitance,
miniaturisation) and in utilising better physical-chemical properties (e.g. conductivity, weight,
durability). Research in new materials currently focuses on the biomaterials, super alloys,
104
http://ec.europa.eu/research/fp7
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advanced ceramics, engineering polymers and advance composites, organic polymer
electronics and other advanced electronic materials, advanced coatings, nanopowders,
nanocarbon and nanofibers, thin films, and technical textiles.
Current major trends in advanced materials cover both improvements of traditional material
technology such as layered materials, high-performance materials, tailored macroscaled
materials, new alloys and energy-efficient materials as well as the application of
nanotechnology in various fields of material sciences. Improvements of traditional material
technology follow a steady path of rather incremental, though still significant technical
progress that gradually substitutes older materials by new materials with higher performance
characteristics. Nanotechnology represents a more disruptive technological change. Advanced
materials based on nanotechnology are expected to change the material world quite radically,
opening up entirely new fields of application.
Europe’s technological position
Europe’s share in the global production of new technological knowledge in advanced
materials -as revealed by patent statistics- has fallen from more than 35 percent in the 1990s
to 31 percent in 2005. While North America lost market shares at a similar pace, East Asia
could significantly strengthen its position in advanced material technology, raising its market
share from 25 percent in the mid 1990s to 37 percent in 2005. Patent intensity in advanced
materials -that is the number of patent applications per GDP- is more than 50 percent higher
in East Asia compared to Europe and North America. While patent output per GDP shows an
increasing trend in East Asia, patent intensity is stable over time in Europe and North
America. It is thus fair to say that the main geographical focus of technological advance in
materials has shifted towards East Asia over the past two decades.
Europe has lost market shares in all subfields of advanced materials, though it still holds a
strong position in macroscaled materials and layered materials. Both subfields are closely
related to traditional chemical technology. Europe’s position is weaker -in terms of its share
in total patent output- in nanomaterials, magneto/piezo materials and high-performance
materials. In recent years, Europe could increase its output in nanomaterials and high-
performance materials at a higher rate than North America and East Asia, reflecting a slow
catching-up in these two fields. Within Europe, Germany is the single most important location
for producing new materials technology (42 percent of all inventors of advanced materials
patents) though smaller European economies were able to increase their patent output in
recent years substantially.
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Links to disciplines, sectors and other KETs
Advanced materials are used in virtually all manufacturing industries. They drive both
product and process innovation in many sectors. The most important application areas for new
advanced materials are currently semiconductors, automotive and aircraft, energy and
environment, medicine and health, construction and housing, and various process
technologies (including mechanical engineering and automation, packaging and logistics,
textiles and clothing). Another major application area is defence and security.
The chemical industry is the most important source of advanced materials patents (about 50
percent), followed by electronics, the oil industry and metal production. In Europe, the
chemical industry has a particularly high share in total patent output (62 percent) which is
directly linked to Europe’s focus on macroscaled materials and layered materials. Over time,
the role of the chemical industry as most important patent applicant has diminished in all
three main world regions while the plastics industry and public research have gained in
significance.
Although R&D in advanced materials rests on a broad spectrum of scientific disciplines,
including material sciences, chemistry, physics, nanosciences and biology, the role of public
research as a direct source of technological advance in materials is rather limited. In the past
ten years, just 6 percent of all advanced material patents originated from public research
institutions. The growing share of public research basically relates to the field of
nanomaterials where public research institutions are the single most important group of
applicants. Public research is particularly important as producer of nanomaterial patents in
North America and less in East Asia while its share in Europe is 26 percent.
The particular importance of advanced materials as a KET is that they are essential for many
other KETs. For example, innovation in micro- and nanoelectronics heavily depend on
materials with improved performance characteristics (both for end products and
manufacturing processes) to further miniaturise electronic devices. New materials are also
essential in advanced manufacturing technologies and photonics. Increasing energy efficiency
is particularly depending on progress in material technologies, including new ways of
producing and storing energy (e.g. fuel cells, wind energy, solar energy, batteries) and
reducing energy consumption in housing and transportation (see Schumacher et al., 2007).
Direct technological overlaps in the way that advanced material patents are at the same time
assigned to other KETs are rare, however. Only 11 percent of all advanced material patents
overlap with other KETs, particularly with nanotechnology, microelectronics and photonics.
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Market prospects and growth impacts
The world market for materials is huge with annual sales of several trillion US-$. Advanced
materials constitute only a small fraction of this market. Depending on the exact definition of
advanced materials, current market volumes are likely to be between $100 and 200 billion.
Most advanced materials are substitutes for established materials, offering better performance
characteristics and widening the scope of application. Nanotechnology based advanced
materials, which can be regarded as the subgroup of advanced materials that is likely to open-
up new markets and has the potential to generate net growth, are currently sold at annual
figures of around $20 billion.
For most advanced materials, market growth is expected to be slightly above the average
growth of the world market for goods, which can be used as a reference for the likely market
growth for the entire materials market. Expected average annual growth rates of 5 to 6 percent
are rather low compared to other KETs and reflect that most advanced materials are diffuse
slowly because of high opportunity costs in substituting established by new materials and
often rather low price-cost advantages of more advanced materials. The situation is different
for advanced materials based on nanotechnology. Most market forecasts expect compound
annual growth rates of 20 to 30 percent over the next 10 to 20 years.
Growth impacts of advanced materials are twofold. For most advanced materials, net growth
effects tend to occur in the user industries as long as new materials help to increase
productivity or enable new products with superior characteristics that generate additional
demand. These user industries include electronics, medical instruments and health services,
automotive, energy production and distribution, construction, textiles and clothing, and
various material processing industries. The manufacturers of these advanced materials are less
likely to experience net growth as new materials typically substitute established ones. A
second source for net growth is certainly nanomaterials. The expected strong growth in
demand for nanomaterials will most likely give ground for new producers and additional
production facilities. Nanomaterials can contribute to net growth in the material producing
sector since their value added tends to be higher than for traditional materials resulting in a
higher share of material input in total production value.
Success factors, market and system failures
Advance materials are a special kind of general purpose technology. Advanced materials can
be applied widely across all manufacturing industries, but also emanating into service sectors
such as health, software, architecture and construction, telecommunication and engineering
services, contributing to both product and process innovation. Like other general purpose
technologies, the diffusion of advanced materials generates network and learning effects
among users. As a consequence, diffusion of new materials is accelerated when a certain level
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of diffusion is reached. However, if users are reluctant to adopt new materials it can take long
time until new materials reach sale figures that allow for profitable production. Securing a
broad adoption of advanced materials early after introduction can thus be vital for advanced
materials producer, and the lack of it can hinder further advance.
New application areas of advanced materials often emerge during their use and may
developed by actors other than those who have originally developed a certain advanced
material (e.g. by users, competitors or other material suppliers). A rapid diffusion of advanced
materials is thus likely to result in opening-up more and more fields of application, generating
a positive feedback in the demand for the respective material.
Advanced materials are characterised by an extreme variety of individual products and
material solutions. The large variety of advanced materials, many tailored to specific
application purposes, restrict economies of scale in their production. In order to achieve cost-
efficient production volumes, producers of advanced materials have to go beyond
geographical market borders early and serve global markets. Furthermore, specialisation and
concentration among advanced materials producers is likely to occur. This can complicate the
development of new application areas and advances in material technologies at the crossroad
of different approaches in material sciences (e.g. for smart materials) and calls for co-
operation among producers with different sector and material technology background.
Clusters of actors engaged in R&D, production and the use of advanced materials can be
helpful in this respect.
Both the development and the diffusion of new materials takes particularly long periods, often
decades. Considerable research efforts are needed until new materials comply with the
requirements of users in terms of reliability, stability, cost-efficiency, recyclability and safety.
Product regulation typically demands time-consuming procedures for each field of application
until new materials are approved for commercial use in the respective application area. Using
new materials most often requires substantial adaptations in production and distribution
processes of users along the value chain, including changes in process technology, product
design, delivery mechanisms, recycling etc. and may involve high investment by users.
Policy options
Developing and commercialising advances in material technology is by and large the business
of a large number ob enterprises engaged in various sectors of processing raw materials and
producing more complex materials as inputs for other manufacturing industries. Since
material development is one of the most longstanding industrial activities and most critical to
all manufacturing sectors, a large materials industry and a well-developed network between
producers and users of materials -including advanced materials- has emerged over time. Since
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new materials are often a key component of new products, many producers of end products
also engage in R&D on advanced materials.
At the same time, developing advanced materials is challenging as it typically requires to
integrate findings from basic research (public science), in-depth knowledge of specialised
material producers (e.g. from the chemical, metals, glass/ceramics or textile industry),
requirements of end product producers and other users down the value added (e.g. automotive
or semiconductor industry), process technology knowledge from equipment producers (e.g.
machinery and instruments industry) and demands of regulatory bodies and other public
authorities which have to guarantee that new materials do not harm health or the environment.
In this situation, public policy can support the advance in material technologies through
various activities:
Linking public research and industry is critical for this KET, as it is for all other KETs. In
contrast to other KETs, public research is less important as producer of knowledge that
can be commercialised directly but rather focuses on basic research, preparing the
scientific ground for future material technologies. Linking industry and science should
thus focus on a smooth exchange of knowledge through personal networks (including
mobility of researchers between science and industry) and long-term co-operative projects
that combine basic and applied research. Both cluster initiatives and established R&D
programmes (such as the EU FP) are important instruments in this respect. Research
mobility programmes can offer further incentives to knowledge exchange.
Promoting a rapid diffusion of advanced materials through early and flexible regulation of
new materials and the process of manufacturing them. While regulations have to be strict
in terms of protection negative impacts on safety, health and environment, they should
specify technical requirements to materials and processes early and with a long-term view
in order to reduce uncertainty at the side of producers and users of advanced materials. At
the same time, regulations should be flexible, i.e. reviewed regularly with respect to
changes in material technologies, allowing for innovative advance in new materials and
their use.
R&D in advanced materials is associated with high costs and risks and long amortisation
times for new materials. As a consequence, business R&D in advanced materials is
concentrated on large companies which can afford the high investment needed. For
upcoming fields in material technologies, young firms could play an important role, too.
This is particularly true for nanomaterials. Providing funding for start-ups and SMEs
either through grants for R&D projects or venture capital is critical for a vital small
business sector in this KET. So far, start-ups and SMEs rarely appear among the more
important producer of new technological knowledge. This is in sharp contrast to the
situation in nanotechnology and industrial biotechnology, but also the field of photonics.
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More emphasis on funding research-based start-ups and incorporating R&D performing
SMEs in clusters and co-operations could help in this respect.
Policy intervention should generally focus on those subfields of advanced materials that are in
their early stages since links to science are particularly important in this stage, and costs
and risks of R&D are high while returns from sales of new products may be still out of
sight. This is currently true nanomaterials and biomaterials as well as energy-efficient
materials and high-performance materials. Traditional areas of advance in material
technology such as macroscaled materials, alloys and layered materials tend to require
less support from governments as markets have already been established.
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8 ADVANCED MANUFACTURING TECHNOLOGIES
The chapter on advanced manufacturing technologies differs from the other five chapters on
KETs. It was agreed to refrain from conducting analyses of successful clusters in this KET
but solely focus on quantitative analyses based on patent data. This decision reflects the
specific nature of this KET (see the following section for more detail) which implies different
mode of generating and diffusing technologies and less significance of clusters for
technological advance in this KET. As a consequence, analysis of success factors, barriers,
market and system failures are missing. The final chapter of this section still makes an attempt
to summarise some of the main issues on drivers and barriers for developing and
commercialising advanced manufacturing technologies and what the role of public policy
could be.
8.1 Definition and State of Technology
Advanced manufacturing technologies (AMT) comprise all technologies that significantly
increase speed, decrease costs or materials consumption, and improve operating precision as
well as environmental aspects like waste and pollution of manufacturing processes. In
contrast to the five other fields of technology considered in this study, advanced
manufacturing technologies are not a single field of technology, but rather a combination of
different technologies and practices that aim at improving processes of manufacturing goods.
These technologies comprise, among others, material engineering technologies (e.g. cutting,
knitting, turning; forming, pressing, chipping), electronic and computing technologies,
measuring technologies (including optical and chemical technologies), transportation
technologies and other logistic technologies. A major trend in AMT for more than four
decades has been the integration of numerically controlled, i.e. computer-integrated,
technologies into manufacturing processes that allow for a vertical integration of planning,
engineering design, control, production and distribution processes. A further major trend is
automation that allows to performing increasingly complex manufacturing processes without
manual intervention. Robotics, automation technologies and computer-integrated
manufacturing are the keywords for AMT.
Industries in which AMT are important can thus be characterised as capital intensive with
complex assembly methods. In this respect, AMT enable an intelligent control of processes as
well as automation for modelling and production which eventually brings down the costs
associated with production and increases the quality of products. Today, AMT are responsible
for 10.5 percent of the EU’s industrial production and associated 2.2 million jobs. They
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account for 19 percent of EU exports and over 40 percent of EU private sector R&D
expenditure (Manufuture, 2010).
Innovation in AMT is rather based on incremental technological progress than on radical
change, though the latter occurs from time to time when general purpose manufacturing
technologies emerge (e.g. steam engine, electrical motor, computing). In this respect, AMT
can be characterised as the oldest key enabling technology in human history. Furthermore,
innovations in AMT are not only developed by specialised technology producers (e.g.
mechanical engineering firms), but also by users (i.e. any type of manufacturing firm). As a
consequence, the market for AMT is restricted due to the need for user-specific design. This
limits the opportunities to deploy identical technology in many different companies. For some
manufacturing industries, no external AMT providers exist, which forces manufacturing firms
to advance manufacturing methods on their own. Smaller firms typically rely on external
AMT providers since they do not have the necessary technology competencies for developing
AMT themselves.
There are several barriers to the diffusion of AMT. First of all, investment costs are high, and
they are combined with uncertainty over the advantages of new generations of manufacturing
technologies (i.e. degree of cost savings and other efficiency gains unclear at the time of
investment). Moreover, there is considerable need for tailor-made adjustments, which are
costly. Adjusting and using AMT also requires in-house capabilities for dealing with new
technologies (skills of workers, coordination among departments, integration of suppliers and
customers). Adjustments to AMT may as a result lead to adjustments to the product produced
which may result in complex changes in a firm’s internal and external organisation (involving
marketing and users).
The future development of AMT receives considerable policy support, for example in the
form of the European Robotics Technology Platform (EUROP) which is an industry-driven
platform comprising the main stakeholders in robotics in Europe. EUROP was established in
2004 and aims at strengthening Europe’s competitiveness in robotics R&D and global
markets. Since October 2005, EUROP has become a European Technology Platform (ETP).
The use of robots is in fact dramatically increasing, from 6.5 million robots in operation in
2007 to an estimated number of 18 million robots in 2011 (World Robotics, 2009). Over the
next few years, robots are expected to become much more flexible and easy to use, laying the
ground for a new era which is characterised by robots as ubiquitous helpers improving the
quality of life by delivering efficient services. In the industrial application, robots are
expected to combat the expected shortage of 6 million skilled labourers by 2020. Moreover,
there is a pressing requirement for increasing productivity through robot usage as labour costs
are and will remain high in Europe. In this respect, important trends are the miniaturisation of
robotic technologies and the development of sophisticated sensing capabilities. This will for
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example enable the use of robots in small-batch production facilities. Furthermore, new
developments in robotic technologies mean that they can assist in operations under hazardous
conditions, for example in space, deep sea, or mining and mineral extraction (EUROP, 2009).
8.2 Technological Competitiveness, Industry Links and Market Potentials
8.2.1. Technological Competitiveness
Market shares
We analyse technological competitiveness of advanced manufacturing technologies (AMT)
based on patent data. AMT patents are identified through a combination of IPC classes (see
section 2.2). Measured in terms of patents applied at EPO or through the PCT procedure
(EPO/PCT patents), the number of AMT patents applied for per year by European applicants
increased markedly since the mid 1990s, exceeding almost 3,000 patents per year in 1999
(Figure 8-1). Over the entire period from 1981 to 2005, more than 131,000 AMT EPO/PCT
patents were applied for. Europe exhibits a significantly higher number of patent applications
compared to North American and East Asian applicants which applied for a rather similar
number of patents each year. Applicants from other regions than Europe, North America and
East Asia are of little significance.
Figure 8-1: Number of AMT patents (EPO/PCT) 1981-2005 by region of applicant
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
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In 2005, European applicants had a share of almost 50 percent in total AMT patent
applications at the EPO/PCT, compared to below 30 percent for North American and slightly
more than 20 percent for East Asian applicants (see Figure 8-2). Over the past 15 years,
market shares have remained relatively constant but Europe’s share has moderately increased
in recent years.
Figure 8-2: Market shares of AMT patents (EPO/PCT) 1991-2005, by regions (percent)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
Source: EPO: Patstat, ZEW calculations.
Market shares differ significantly when looking at regional patents (Figure 8-3). When only
looking at EPO patents, European applicants show a huge head start over applicants from
North America and East Asia. For USPTO patents, North American applicants outperform
those from Europe and East Asia. However, this advantage has considerably decreased in
recent years and has almost disappeared in 2005. Among the patents applied at JPO, East
Asian applicants are clearly ahead of European and North American applicants When looking
at triadic patents, i.e. patents applied at patent offices in all three regions, market shares for
European, North American and East Asian applicants are at a similar level. While Europe
shows a constant share, East Asian applicants could raise their share in all triadic AMT
patents significantly, while North American applicants lost shares.
The very different pictures for national patent applications compared to triadic applications
reveals that AMT patenting is less global than in other KETs. Most AMT patents remain in
the applicant’s home region and only a small fraction is patented in other world regions.
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Figure 8-3: Market shares in AMT patents 1991-2005 for national applications and triadic
patents (percent)
a. Europe1)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia RoW
b. North America2)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
c. East Asia3)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
d. Triadic4)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia RoW
1) EPO applications
2) USPTO applications
3) JPO applications
4) Patents for which 1), 2) and 3) applies
Source: EPO: Patstat, ZEW calculations.
In order to determine the relative importance of AMT patents for a region, patent intensities
can be calculated. These relate the number of patents per year form applicants of a certain
region to the GDP of that region (Figure 8-4). This type of specialisation indicator shows that
regarding EPO/PCT patent applications, Europe clearly produces more AMT patents per GDP
than North America and East Asia. This situation is somewhat different when triadic patents
are considered. It turns out that East Asian applicants exhibit the highest patent intensity,
followed by European and North American applicants. While both East Asia and Europe
increased patent intensities in AMT over time, patent intensities of North America remained
constant (though they grew slightly in most recent years).
European Competitiveness in KETs ZEW and TNO
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Figure 8-4: AMT patent intensity 1991-2005 for EPO/PCT and triadic patents (number of
patents per 1 trillion of GDP at constant PPP-$)
a. EPO/PCT
0
100
200
300
400
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Europe North America East Asia
b. Triadic patents
0
30
60
90
120
150
180
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Europe North America East Asia
Source: EPO: Patstat, OECD: MSTI 02/2009. ZEW calculations.
Patenting by subfields
The further analysis is structured by distinguishing six subfields of AMT which are defined
by IPC classes or a combination of these:
robotics (B25J)
measuring of industrial processes (G01D, G01F, G01H, G01L, G01M, G01P, G01Q)
controlling industrial processes (G05B, G05D, G05G, G08C)
regulating industrial processes (B03C, B06B, B07C, G05F, G06M, G07C)
machine tools (B23H, B23K, ,B23P, B23Q)
computer integrated manufacturing (G06 and at least one of the following classes: A21C,
A22B, A22C, A23N, A24C, A41H, A42C, A43D, B01F, B02B, B02C, B03B, B03D,
B05C, B05D, B07B, B08B, B21B, B21D, B21F, B21H, B21J, B22C, B23B, B23C,
B23D, B23G, B24B, B24C, B25D, B26D, B26F, B27B, B27C, B27F, B27J, B28D,
B30B, B31B, B31C, B31D, B31F, B41B, B41C, B41D, B41F, B41G, B41L, B41N,
B42B, B42C, B44B, B65B, B65C, B65H, B67B, B67C, B68F, C13C, C13D, C13G,
C13H, C14B, C23C, D01B, D01D, D01G, D01H, D02G, D02H, D02J, D03C, D03D,
D03J, D04B, D04C, D05B, D05C, D06B, D06G, D06H, D21B, D21D, D21F, D21G,
E01C, E02D, E02F, E21B, E21C, E21D, E21F, F04F, F16N, F26B, G01K, H05H)
The largest subfield is measurement, followed by tools and controlling (Figure 8-5), each
account for 22 percent to 29 percent of all patent applications. Generally speaking, there
appears to be only little specialisation as all subfields are almost equally distributed among
the world regions. Some of the slight differences include a rather high share of robots in East
Asia and a high share of measurement in Europe. North American applicants are particularly
strong in CIM.
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Figure 8-5: Composition of AMT patents (EPO/PCT) by subfields (per cent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
RoW
Total
Robots Measuring Controlling Regulating Tools CIM
Source: EPO: Patstat. ZEW calculations.
When looking at the technology market shares by subfield over time (Figure 8-6), Europe
shows rather high, though in all subfields except for robots and CIM falling market shares.
Europe’s market shares are highest in measuring, controlling, regulating and tools with
around 50 percent each. North American applicants are particularly strong in CIM while East
Asian applications show a rather high market share in robots.
European Competitiveness in KETs ZEW and TNO
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Figure 8-6: Market shares for AMT patents (EPO/PCT) 1991-2005, by subfields (percent)
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Europe North America East Asia RoW
Robots
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Measuring
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Controlling
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Regulating
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
Tools
0
10
20
30
40
50
60
'91-
'93
'94-
'96
'97-
'99
'00-
'02
'03-
'05
CIM
Source: EPO: Patstat, ZEW calculations.
When the development of the composition of patent applications in AMT are analysed over
time, no significant differences can be observed between the three world regions (Figure 8-7).
Europe and North America turn out to have focused less on measuring, while the
specialisation of East Asia did not change in a clear direction. All three regions have
considerably expanded their patenting activity in CIM.
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Figure 8-7: Composition of AMT patents (applications at home patent offices), by region,
subfield and period (percent)
0 10 20 30 40 50 60 70 80 90 100
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
90/93
94/97
99/01
02/05
Eu
ro
pe
No
rth
Am
e
ric
a
Ea
st
As
ia
Robots Measuring Controlling Regulating Tools CIM
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
Dynamics in AMT patent applications at the regional home offices differ by subfield and
region. In the most recent period (1998/01 to 2002/05), East Asia increased the number of
annual patents in measurement at a high pace while Europe and North America have been
lagging behind (Figure 8-8). All three regions show high growth in CIM and, to a somewhat
lesser extent, in controlling.
European Competitiveness in KETs ZEW and TNO
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Figure 8-8: Average annual rate of change in the number of AMT patents (applications at
home patent offices), by region, subfield and period (percent)
-5
0
5
10
15
20
25
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
Robots Measuring Controlling Regulating Tools CIM Total
Europe
-5
0
5
10
15
20
25
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
North America
-5
0
5
10
15
20
25
90/93 - 94/97 94/97 - 98/01 98/01 - 02/05
East Asia
90/93: average of the four year period from 1990 to 1993.
94/97: average of the four year period from 1994 to 1997.
98/01: average of the four year period from 1998 to 2001.
02/05: average of the four year period from 2002 to 2005.
Source: EPO: Patstat, ZEW calculations.
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Patenting at the country level in Europe
Shedding light on the AMT patenting within Europe, applicants from Germany represent by
far the largest group of AMT patentees (Figure 8-9). From 1981 to 2005, 47 percent of all
AMT patents at the EPO stem from German applicants, followed by France (14 percent), the
United Kingdom (10 percent) and Italy (6 percent). There has been a particularly fast growth
of German patent applications from 1993 to 2005 with a short pause between 2000 and 2002.
Figure 8-9: Number of AMT patent applications (EPO and PCT) 1979-2005 by European
applicants, by country
0
500
1000
1500
2000
2500
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
DE FR
UK IT
NL SE
CH AT
RoE
Eight European countries with the largest number of AMT patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
The economic significance of AMT patenting differs substantially by country (Figure 8-10).
AMT patent intensity -that is the ratio of the number of AMT patents to GDP- is highest in
Switzerland and Germany, but also Sweden reports a high patent output per GDP. All other
European countries clearly fall behind and show AMT patent intensities below the European
average (which is strongly driven by Germany as the largest AMT patent producer). AMT
patent intensity in France, the Netherlands and Austria is close to the European average while
the UK, Italy and the group of countries not belonging to the eight largest AMT patent
producers in Europe show low patent intensities.
Figure 8-10: Patent intensity in AMT 1991-2005 of European countries (EPO/PCT patents)
European Competitiveness in KETs ZEW and TNO
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0
100
200
300
400
500
600
700
800
DE FR UK IT NL SE CH AT RoE Europe
total
Patent intensity: number of EPO/PCT patents applied between 1991 and 2005 per trillion GDP at constant PPP-$ in the same period.
Eight European countries with the largest number of AMT patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
The differences in the absolute number of AMT patents and in patent intensities have to be
kept in mind when looking at patenting dynamics since countries with low patent activities
can more easily generate high growth rates. Among the eight countries that produce the
largest number of AMT patents, Austria could increase its patent output at an annual growth
rate of 11 percent between the first half of the 1990s (1991-95) and the first half of the 2000s
(2001-05) followed by the Netherlands and Germany (9 percent) (Figure 8-11). The highest
growth rate was experienced by the group of European countries not qualifying for the eight
largest patent producers in AMT. Sweden, Italy and Switzerland report growth rates close the
European average whereas AMT patent dynamics in France and the UK were rather modest.
AMT patent output in EuropeERROR - FlateFilter: stop reading corrupt stream due to a DataFormatException
grew at an annual rate of 8 percent both in the 1990s (1991/95
to 1996/00) and in the early 2000s (1996/00 to 2001/05). Sweden, Austria and Germany show
high growth rates in the former period while the Netherlands, Austria and France report the
highest growth rates for the latter period.
Figure 8-11: Change in the number of AMT patents between 1991/95 to 1996/00 and 1996/00
to 2001/05, by country (EPO/PCT patents; compound annual growth rate in
percent)
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0
2
4
6
8
10
12
14
DE FR UK IT NL SE CH AT RoE Europe
total
91/95-96/00 96/00-01/05 91/95-01/05
Eight European countries with the largest number of AMT patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
Figure 8-12 provides a more detailed picture of country-specific specialisation by subfield
within AMT. Considerable differences become apparent. Germany is specialised on patenting
in measuring, controlling and machine tools whereas AMT patenting in France by subfields is
quite similar to the European average, except a lower share for machine tools. The UK is
strongly specialised on measuring and CIM while Italy has a clear priority in machine tools.
The Netherlands are very strong in the field of regulating, and Sweden has a pronounced
specialisation on robots. Switzerland and Austria are both specialised on machine tools, and
Austria has also a priority in the field of regulating.
Figure 8-12: Specialisation patterns of AMT patenting in Europe, by subfield and country
(percent)
European Competitiveness in KETs ZEW and TNO
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-8 -6 -4 -2 0 2 4 6 8 10
DE
FR
UK
IT
NL
SE
CH
AT
RoE
Robots
Measuring
Controlling
Regulating
Tools
CIM
Difference between the share of a subfield in a country’s total AMT patents and the respective share for Europe total.
Eight European countries with the largest number of AMT patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
Trends in AMT patenting by country and subfield differ considerably (Table 8-1). When
comparing the growth in the number of patents applied by subfield for the 1990s (i.e. between
the number of patents over the 1991-95 and the 1996-2000 periods) and the early 2000s (i.e.
between 1996-00 and 2001-05), one can see a high growth in the field of CIM. Patent output
in this subfield increased in the early 2000s at a higher pace than during the 1990s. This trend
can be seen for all countries except Italy and the “rest of Europe”. Patenting in the subfield of
regulating also shows a higher growth rate for the more recent period, driven by increased
patenting in Germany, France, the UK, Italy and the Netherlands. France, the UK, the
Netherlands as well as Switzerland were also able to achieve a higher growth rate in the field
of machine tools in the more recent period while Sweden and Austria report declining growth
rates. France, Italy, the Netherlands, Switzerland and Austria show higher growth rates in the
subfields of robots, measuring and controlling in the early 2000s compared to the 1990s.
Table 8-1: Change in the number of AMT patents between 1991/95 to 1996/00 and 1996/00
to 2001/05 by subfield and country (EPO/PCT patents, compound annual growth
rate in percent)
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DE FR UK IT NL SE CH AT RoE Europe
total
a b a b a b a b a b a b a b a b a b a b
Robots 15 11 3 13 9 3 -3 12 1 9 25 9 6 10 0 26 7 21 11 11
Measuring 11 6 0 11 4 6 9 9 4 14 9 5 8 10 5 11 12 10 8 8
Controlling 12 8 8 13 10 8 8 11 5 13 12 8 4 15 13 14 15 13 11 10
Regulating 4 6 0 11 -1 10 -3 8 7 14 13 -2 6 3 9 8 8 13 4 8
Tools 9 9 4 7 3 6 8 8 5 7 13 0 3 7 18 9 8 10 7 8
CIM 17 18 7 24 7 20 22 16 8 22 15 21 23 15 0 25 24 18 14 19
AMT total 10 7 3 10 4 7 7 9 6 12 13 4 6 9 11 11 11 11 8 8
a: compound annual growth rate of patent applications between 1991/95 to 1996/00
b: compound annual growth rate of patent applications between 1996/00 to 2001/05
Eight European countries with the largest number of AMT patents (based on inventors’ locations) from 1981-2005. “RoE”: all other
European countries.
Source: EPO: Patstat, ZEW calculations.
8.2.2. Links to Sectors and Fields of Technologies
Technological links to sectors
When linking AMT patents to industrial sectors based on the IPC classes to which a patent
was assigned (so-called “technological sector links”), we find a rather focused sector
relevance of AMT (Table 8-2). 28 percent of all AMT patents are linked to the instruments
sector, followed by machinery (26 percent), electronics (21 percent) and vehicles (14 percent).
The remaining sectors are only of minor importance. Moreover, patents from East Asian
applicants show a significantly higher association with the electronics sector than North
America and Europe. In contrast to this, European applicants’ AMT patents are more
frequently associated with the machinery sector than patents from North American and East
Asian applicants.
Table 8-2: Technological sector affiliation of AMT patents (EPO/PCT), by region (average
of 1981-2007 applications, percent)
Europe North America East Asia AMT total
Food 0 0 0 0
Textiles 0 0 0 0
Wood/Paper 1 1 1 1
Chemicals 2 2 2 2
Pharmaceuticals 0 0 0 0
Rubber/Plastics 3 2 2 2
Glass/Ceramics/Concrete 1 1 1 1
Metals 5 4 4 4
Machinery 28 25 24 26
Electronics 17 22 28 21
Instruments 28 28 25 28
Vehicles 15 14 15 14
Total 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
European Competitiveness in KETs ZEW and TNO
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Patents in the field of robots are primarily linked to the machinery industry as well as to
electronics and instruments (Table 8-3). Measuring has strong technological links to the
instruments industry important ones to the electronics and vehicles industry. Controlling
patents are most important for the instruments industry, followed by electronics, vehicles and
machinery. Regulating and CIM patents are strongly linked to the electronics industry,
followed by machinery, instruments and vehicles, while patents on tools are important for the
machinery industry, followed by metals and electronics.
Table 8-3: Technological sector affiliation of AMZ patents (EPO/PCT), by subfield (average
of 1981-2007 applications, percent)
Sector
Robots Measuring Controlling Regulating Tools CIM AMT
total
Food 0 0 0 0 0 0 0
Textiles 0 0 0 0 0 0 0
Wood/Paper 2 1 1 2 1 2 1
Chemicals 1 2 2 4 2 1 2
Pharmaceuticals 0 0 0 1 0 0 0
Rubber/plastics 2 3 2 1 3 1 2
Glass/ceramics 0 0 0 0 3 0 1
Metals 3 2 2 1 12 1 4
Machinery 51 9 16 27 54 12 26
Electronics 15 15 23 40 12 48 21
Instruments 18 50 32 13 8 25 28
Vehicles 8 17 22 10 5 9 14
Total 100 100 100 100 100 100 100
Source: EPO: Patstat. Schmoch et al. (2003). ZEW calculations.
Sector affiliation of applicants
Regarding the sector affiliation of AMT patent applicants, it turns out that almost 80 percent
of AMT patenting takes place in three sectors: machinery, electronics and vehicles (Figure
8-13). While a high share for machinery firms is straightforward and simply reflects that
developing AMT is at the core of this industry, the high shares for vehicle and electronics
manufacturer are more interesting. In the vehicles industry (particularly in automobile
manufacturing), firms have to combine high quality and a high degree of product novelty
(owing to short life cycles) with high cost efficiency. This situation requires continuous
updating of process technologies. Since achieving high quality and low unit costs is a key
competitive factor in both industries, most manufacturers are keen to develop in-house
competencies in these technologies in order to avoid a too strong dependence upon external
technology suppliers.
A similar situation is with the electronics industry. The high share of AMT patenting in this
industry is also associated with the production of electronic components for AMT,
particularly sensors for measuring, controlling and regulating processes, as well as for
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computer-integrated manufacturing and robotics. What is more, a number of large electronics
companies have important automation businesses (e.g. Siemens, ABB, General Electrics).
Figure 8-13: Sector affiliation of AMT patent applicants (EPO/PCT), by region (average of
1981-2007 applications, percent)
0 10 20 30 40 50 60 70 80 90 100
Europe
North America
East Asia
Total
Machinery Electronics Instruments Vehicles
Defence Chemicals/pharma Others Public research
Source: EPO: Patstat, ZEW calculations.
The sector composition of AMT patents does not differ a lot across the three regions. In
Europe, public research has a somewhat more important role than in North America and East
Asia, though its share is still very low compared to other KETs. This reinforces the special
character of this KET compared to the five other analysed in this report.
Current sector dynamics in AMT patenting show increasing shares for the vehicles industry in
all three regions and declining shares for the electronics industry (Figure 8-14). Machinery
has strongly gained in relative importance in North America, but lost in East Asia (at the
expense of the electronics industry). Public research shows a declining share in AMT
patenting particularly in Europe when the situation before and after the year 1999 is
compared.
European Competitiveness in KETs ZEW and TNO
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Figure 8-14: Change in the sector affiliation of AMT applicants before and after the end of
1999 (EPO/PCT), by region (percentage points)
-12
-8
-4
0
4
8
Europe North America East Asia Total
Machinery Electronics Instruments Vehicles
Defence Chemicals/pharma Others Public research
Source: EPO: Patstat. ZEW calculations.
The electronics industry is the most important applicant sector for most subfields in AMT. 55
percent of patents in the field of regulating and 44 percent of all CIM patents were filed by
companies from this industry (Table 8-4). Electronics is also a main source for patents in the
fields of robots and controlling. The majority of measruing and machine tools patents is
produced by companies from the machinery industry which is also a main sourdce for patents
in the field of controlling and CIM. The vehicles industry (automotive, aircraft, railway
vehicles, ships) is an important AMT patent producer in the fields of measuring, controlling,
tools and robots. Another important AMT patents producing sector is the instruments
industry, particularly for the field of measuring. Public research is of limited significant for
AMT patenting.
Table 8-4: Sector affiliation of applicants of AMT patents (EPO/PCT), by subfield (average
of 1981-2007 applications, percent)
Robots Measuring Controlling Regulating Tools CIM
Machinery 36 25 31 15 35 23
Electronics 36 24 34 55 22 44
Instruments 4 11 6 7 7 7
Vehicles 12 24 19 7 15 13
Defence 2 3 3 3 3 4
Chemicals/pharma 1 4 4 5 5 4
Others 2 4 2 5 8 3
Public research 6 4 2 4 4 2
Total 100 100 100 100 100 100
Source: EPO: Patstat. ZEW calculations.
The list of the 25 largest AMT patent applicants (in terms of the number of patents applied
since 2000) is given in Table 8-5 for information purposes. Applications by subsidiaries are
assigned to the parent company. Patents applied by firms that later have been acquired by
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other companies are assigned to the latter. For patent applications by more than one applicant
fractional accounting applies. The list for Europe is led by three German companies: Siemens,
Robert Bosch and Continental. In North America, Honeywell occupies the top position while
in East Asia Fanuc applied for most patents.
Table 8-5: 25 main patent applicants in AMT by region (EPO/PCT patents, 2000-2007
applications)
Europe North America
Rank Name Country Sector No. of patents Rank Name Country Sector No. of patents
1 Siemens DE electronics 1847 1 Honeywell US machinery 573
2 Robert Bosch DE vehicles 1348 2 General Electric US electronics 515
3 Continental DE vehicles 635 3 Delphi US vehicles 250
4 Endress + Hauser CH machinery 589 4 United TechnologiesUS machinery 201
5 ABB CH electronics 555 5 Rosemount US machinery 157
6 EADS FR defence 274 6 Boeing US defence 141
7 Daimler DE vehicles 270 7 Rockwell AutomationUS machinery 140
8 Philips NL electronics 254 8 Illinois Tool WorksUS machinery 126
9 STMicroelectronics IT electronics 189 9 Agilent TechnologiesUS machinery 126
10 Heidenhain DE machinery 171 10 3M US chemicals 108
11 Thales FR defence 169 11 Lincoln Global US electronics 99
12 Fraunhofer DE research 164 12 Hewlett-Packard US electronics 93
13 Comm. a l'energie atom. FR government 164 13 Ford US vehicles 88
14 Trumpf DE machinery 159 14 Black & Decker US machinery 79
15 Rolls-Royce GB machinery 140 15 Johnson ControlsUS vehicles 71
16 Valeo FR vehicles 139 16 Micro Motion US machinery 71
17 ZF Friedrichshafen DE vehicles 134 17 John Deere US machinery 69
18 Renault FR vehicles 124 18 Newfrey US machinery 67
19 KUKA DE machinery 124 19 Xerox US instruments 66
20 Carl Zeiss DE instruments 123 20 Pitney Bowes US machinery 60
21 SNECMA FR defence 122 21 Texas InstrumentsUS instruments 60
22 BMW DE vehicles 121 22 Microsoft US software 60
23 Alstom FR electronics 121 23 Motorola US electronics 59
24 Infineon DE electronics 121 24 Eaton US machinery 58
25 VEGA Grieshaber DE instruments 121 25 General Motors US vehicles 53
East Asia
Rank Name Country Sector No. of patents
1 Fanuc JP machinery 574
2 Matsushita Electric JP electronics 504
3 Honda JP vehicles 344
4 Hitachi JP electronics 338
5 Samsung KR electronics 294
6 Toyota JP vehicles 262
7 Sony JP electronics 243
8 JTEK JP vehicles 215
9 Fujitsu JP electronics 177
10 Alps Electric JP electronics 168
11 Seiko JP instruments 165
12 Canon JP instruments 163
13 Nissan JP vehicles 159
14 LG Electronics KR electronics 159
15 Omron JP machinery 155
16 Denso JP vehicles 145
17 Toshiba JP electronics 125
18 Mitsubishi Motor JP vehicles 125
19 Fujifilm JP chemicals 101
20 Mitutoyo JP instruments 100
21 Sumitomo Rubber JP materials 83
22 Yamaha JP vehicles 81
23 NEC JP electronics 77
24 Yamazaki Mazak JP machinery 75
25 NGK Insulators JP instruments 75
Source: EPO: Patstat. ZEW calculations.
The concentration of patent applications on a few applicants can be quantified by using
concentration measures. Figure 8-15 shows the concentration of patenting activity in AMT on
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the basis of five concentration measures indicating the share of patents for which the 5
percent (CR5), 10 percent (CR10), 15 percent (CR15), 20 percent (CR20), and 25 percent
(CR25) most patenting active firms account for.
Figure 8-15: Concentration of patenting activity in AMT (EPO/PCT patents, 1981-2007
applications; percent)
0
10
20
30
40
50
Europe North America East Asia
CR5 CR10 CR15 CR20 CR25
Source: EPO: Patstat. ZEW calculations.
Links to other KETs
Related to the issue of sector links is the degree to which AMT patents are linked to other
KETs. One way to assess likely direct technological relations is to determine the share of
AMT patents that are also assigned to other KETs (because some IPC classes assigned to a
AMT patent are classified under other KETs). The degree of overlap of AMT patents with
other KET patents is very low (Figure 8-16). Only 5 percent of all AMT patents have been co-
assigned to other KETs. This share is highest in the subfield of machine tools (almost 10
percent) and very low in CIM and controlling. This result indicates that patents in the other
five KETs are not directly related to process technology, though they have great potentials to
affect technological advance in AMT, e.g. by providing better materials, new approaches to
measuring through new photonics applications or more efficient microelectronics for
controlling and regulating.
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Figure 8-16: Share of AMT patents linked to other KETs by subfield (EPO/PCT patents 1981-
2007, percent)
0 10 20 30 40 50 60 70 80 90 100
Robots
Measuring
Controlling
Regulating
Tools
CIM
AMT total
Source: EPO: Patstat. ZEW calculations.
For those AMT patents that are linked to other KETs, one can see that the largest overlap is
with the field of microelectronics (more than 50 percent, with particularly high shares in the
fields of robots, controlling, CIM, measuring and regulating) (Figure 8-17). Almost 25
percent of AMT patents with co-assignment to other KETs are linked to photonics, and about
20 percent related to advanced materials. Overlapping with industrial biotechnology is
negligible. Out of the 10 percent of machine tools patents that overlap with other KETs, many
are linked to microelectronics and advanced materials.
Figure 8-17: Links of AMT patents to other KETs by subfields (EPO/PCT patents 1981-2007,
only patents with links to other KETs, percent)
0 10 20 30 40 50 60 70 80 90 100
Robots
Measuring
Controlling
Regulating
Tools
CIM
AMT total
Nanotechnology Micro-/nanoelectronics Industrial Biotechnology
Photonics Advanced materials
Source: EPO: Patstat. ZEW calculations.
8.2.3. Market Potentials
Market forecasts are available for different subfields of the AMT market. Common to all
these forecasts is the methodological challenge of how to delineate the market for AMT.
AMT are an integral part of manufacturing processes in a multitude of industries which
considerably complicates the delineation of a market. Table 8-6 follows a different approach
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and lists market sizes and forecasts for a number of subfields in AMT, including chemical
process monitoring devices, continuous monitoring, non-destructive testing, machine vision,
pharmacy automation, automotive sensor technologies, and robotics.
Table 8-6: Estimates and forecasts for the size of the global AMT market (billion US-$)
Subfield Source 2005/
06
2007/
08
2010/
11
2012/
13
~2015 Cagr*
Chemical process monitoring devices BCC (2005) 49.1 61.8 3.9
Continuous monitoring BCC (2005) 21.0 32.4 9.1
Nondestructive testing BCC (2005) 2.2 3.1 5.9
Machine vision BCC (2006) 8.1 15.0 10.8
Pharmacy automation BCC (2006) 2.1 3.6 9.4
Automotive sensor technologies BCC (2008) 12.0 19.0 5.9
Robotics BCC (2008) 17.3 21.4 3.6
Machine tools VDW 77.2
* Compound annual growth rate in nominal terms (percent).
Source: Compilation by ZEW based on the references quoted.
The collection of market estimates and forecasts can only highlight the expected development
in a selected number of subfields. Nevertheless, several interesting insights can be derived. In
this respect, it turns out that the average CAGR is estimated with about 7 percent which
signals an overall highly interesting market in terms of growth opportunities. The highest
growth rate is found in the machine vision subfield, followed by pharmacy automation and
continuous monitoring. The relatively low growth rate in robotics can be explained by the
already substantial use of robotics in modern manufacturing and the correspondingly high
level of the market size.
Owing to the cross-cutting nature of AMT, it is not possible to aggregate the numbers
presented in Table 8-6 in order to arrive at a consolidate figure of the market in AMT. In
addition, in Table 8-6 does not include market figures for all submarkets of advanced
manufacturing technologies. Nevertheless, one may estimate that the global market volume of
AMT in 2006/08 exceeded $150 billion. In 2015 one may expect this market to have risen to
more than $200 billion, assuming a rapid recovery of the market after the sharp downturn in
2009 and an average annual rate of growth of about 5 percent.
8.2.4. Factors influencing the future development of AMT
Factors influencing the future market potential of AMT
The previous chapters have made clear that AMT are a cross-sectional technology that is
important for a large number of manufacturing sectors. The future market development will
therefore depend on the market development in the sectors in which AMT are of central
importance. Innovation in AMT is typically characterised as incremental and it is immediately
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connected to the specific needs of the firm applying AMT. This customisation of AMT
reduces at the same time the risk that manufacturing technologies are easily copied by
competitors or substituted by competing technologies. At the same time, technology adoption
can be expected to increase in the future because of the need to produce even more cost
efficiently and in an environment friendly way.
The role of public support
Public support of AMT should particularly be centred on three policy fields. First, access to
technological information is important. Providers of highly advanced technological
information can typically be found among the universities and public research organisations
(PRO). As a result, it is important to facilitate the exchange between universities, PRO and
industry, for example by encouraging the creation of technology transfer offices at the
research institutes. Moreover, the functionality of markets for technology can be expected to
increase when intellectual property rights (IPR) are well-defined and assigned to the research
institutes such that technology transfer offices can engage in IPR sale or licensing
negotiations with interested industrial firms.
Second, AMT are largely dependent on a highly skilled workforce as they require a complex
set of flexible skills that include high technology as well as interdisciplinary skills that allow
for collaborative working. In this respect, public support will be particularly helpful in
launching measures that encourage young people to catch an interest in science, technology,
engineering and mathematics subjects. At the same time, additional places for students need
to be provided in these subject areas.
Third, AMT are characterised by the emergence of several new platform technologies that are
multifunctional and that have a range of manufacturing applications. These platform
technologies include for example plastic electronics, silicon design, renewable chemicals and
carbon fibre composites that may replace various metals. Despite their early stage of
technological development, these platform technologies potentially offer substantial economic
opportunities. Public support can specifically facilitate the further development and adoption
of these platform technologies through initiatives like grants for collaborative R&D, support
for knowledge transfer networks as well as for collaboration between small and medium sized
enterprises and large enterprises.
Contribution of AMT to social wealth
There are several potential contributions of AMT to social wealth. First of all, environmental
friendly manufacturing is hardly possible without an extensive use of AMT, which can be
assumed to increase the efficiency of the entire manufacturing process. By increasing
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efficiency, AMT may limit the consumption of raw materials and energy as well as decrease
the waste resulting from the manufacturing process.
AMT may also incur manufacturing processes to become more user-friendly as they reduce
the amount of hard labour that is needed in the manufacturing process and that is taken over
for example by robots. As a result, health of the employees can be expected to improve as
work-related accidents go down.
Importance of sustaining production capabilities
AMT have been characterised as requiring a solution tailored to a specific customer’s needs.
In this regard, production capabilities allow for an application of newly developed AMT and
facilitate experimental learning that can be assumed to be valuable in future technology
development efforts. Sustaining production capabilities can therefore be considered as utmost
important for R&D activities in AMT.
8.3 Conclusions and Policy Implications
Advanced manufacturing technologies can be characterised as all technologies that
significantly increase speed, decrease costs or materials consumption, and improve operating
precision as well as environmental aspects like waste and pollution of manufacturing
processes. They are a combination of different technologies and practices that aim at
improving processes of manufacturing goods. AMT are responsible for 10.5 percent of the
EU’s industrial production and associated 2.2 million jobs. They account for 19 percent of EU
exports and over 40 percent of EU private sector R&D expenditure.
Costs for investment into AMT are high, and they are combined with uncertainty over the
advantages of new generations of manufacturing technologies (i.e. degree of cost savings and
other efficiency gains unclear at the time of investment). Moreover, costly tailor-made
adjustments are necessary. Adjusting and using AMT also requires in-house capabilities for
dealing with new technologies (skills of workers, coordination among departments,
integration of suppliers and customers).
Europe’s technological position
Developing AMT is highly concentrated on the three global regions Europe, North America
and East Asia. European patent applicants dominate with a market share of almost 50 percent,
followed by North American (around 30 percent) and East Asia (around 20 percent). Market
shares have remained rather stable over the last decades. With respect to patents per GDP, it
turns out that Europe has a significantly higher patent intensity than East Asia and North
America.
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The largest subfield in AMT is measuring, followed by tools and controlling. The
composition of subfields does not differ considerably by region. European applicants tend to
have a higher share in tools while North American and East Asian applicants have higher
shares in CIM. However, Europe has improved its market share over time particularly in
CIM. When looking at the technology market shares by subfield over time, Europe shows
rather high market shares, though market shares are decreasing in all subfields except for
robots and CIM. Europe’s market shares are highest in measuring, controlling, regulating and
tools with around 50 percent each. North American applicants are particularly strong in CIM
while East Asian applications show a rather high market share in robots.
Links to disciplines and sectors
AMT is particularly relevant to the instruments, machinery, electronics and vehicles sectors.
Regarding the subfields, patents in the field of robots are primarily linked to the machinery
industry as well as to electronics and instruments. Measuring has strong technological links to
the instruments industry important ones to the electronics and vehicles industry. Controlling
patents are most important for the instruments industry, followed by electronics, vehicles and
machinery. Regulating and CIM patents are strongly linked to the electronics industry,
followed by machinery, instruments and vehicles, while patents on tools are important for the
machinery industry, followed by metals and electronics.
Current sector dynamics in AMT patenting show increasing shares for the vehicles industry in
all three regions and declining shares for the electronics industry. Machinery has strongly
gained in relative importance in North America, but lost in East Asia (at the expense of the
electronics industry). Public research shows a declining share in AMT patenting particularly
in Europe when the situation before and after the year 1999 is compared.
Regarding the concentration of AMT patenting among a few patent applicants, it turns out
that concentration is highest in East Asia, followed by Europe and North America. However,
East Asia shows a higher number of firms with substantial patenting activity than Europe.
Concentration in North America is generally lower.
Market prospects and growth impacts
Market forecasts are available for different subfields of the AMT market. Because of the
cross-cutting nature of AMT, it is not possible to simply aggregate the numbers in order to
arrive at a consolidate figure of the market in AMT. Moreover, delineating “advanced” from
less “advanced” manufacturing technologies is extremely difficult and highly subjective in
nature. By and large, any producer of manufacturing technology attempts to further advance
the state of technology by developing new equipment that enables more complex and higher
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quality processing of materials and tools. Tentative estimates for the total market of AMT
arrive at global sales (prior to the economic crisis of 2009) of more than 150 billion.
When growth in the different subfields is analysed, the compound annual growth rate ranges
between 4 percent and 11 percent which signals an overall interesting market in terms of
growth opportunities. The highest growth rate is found in the machine vision subfield,
followed by pharmacy automation and continuous monitoring. The relatively low growth rate
in robotics can be explained by the already substantial use of robotics in modern
manufacturing and the correspondingly high level of the market size.
Because of the cross-cutting nature of AMT, their future market development critically
depends on how other sectors where AMT are relevant develop and grow. It seems therefore
reasonable to assume that market prospects in AMT are pretty much tied to GDP growth in
general plus an additional factor that reflects the dynamics of AMT.
Success factors, market and system failures
AMT is a field of technology with a huge number of industrial companies engaged in various
subfields. Though AMT is perhaps the oldest KET in human history and is a key industrial
sector since the emergence of modern industry, the AMT industry did not undergo a
concentration process as many other high-technology industries did. Manufacturers of AMT
are mainly medium-sized firms, typically highly specialised on specific fields of application.
Research in AMT takes place in many different companies while public research plays a
rather small role compared to other KETs. A key success factor for technological advance in
manufacturing technologies is to combine new technological opportunities emerging from
different fields of technology (including most other KETs covered in this report, particularly
microelectronics, photonics and advanced materials, but also including software) with the
specific needs of users in specific industry. Developing AMT thus means to have a deep
understanding of the industry in which this technology will be applied, and which factors
dirve competitiveness in the user industries. Another main success factor is to balance user-
specific requirements with new technological opportunities yet out of sight of users.
A main barrier for commercialising AMT is potential users that hesitate to adopt new
manufacturing technologies. The reasons may be manifold:
Information asymmetries over the expected returns of AMT compared to established
technologies can result in low adoption rates (i.e. degree of cost savings and other
efficiency gains unclear at the time of investment);
high investment cost may exceed the available internal funds of users, particularly for SMEs,
while external financing through loans can be difficult if the technology is completely
new and no experience over the likely returns are available to banks;
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many AMT require tailor-made adjustments, which are costly and time-consuming;
in-house capabilities for dealing with new technologies -skills of workers, coordination
among departments, integration of suppliers and customers- may be missing and cannot
be built up in short term;
introducing AMT may need adjustments to the product produced which may result in
complex changes in a firm’s internal and external organisation (involving marketing and
users).
Developing AMT can be hampered by small market volumes for certain new applications,
particularly if user-specific designs are required. This limits the possibilities to employ the
identical technology in many different companies and reduces economies of scale both in
R&D and production of AMT.
Another peculiarity in AMT is the fact that AMT is not only developed by specialised
technology producers (e.g. mechanical engineering firms), but also to a great extent by users
(i.e. any type of manufacturing firm). The main reason for manufacturing firms to refrain
from purchasing AMT from external producers is their outstanding importance as competitive
factor in many industries. Sectors where production efficiency (i.e. unit prices) are the key
driver for commercial success, companies will attempt to control critical production
technologies and develop technological advantages over competitors.
Policy options
Policy intervention in favour of developing and commercialising AMT should not focus
primarily on the side of developing these technologies (which is the task of specialised firms),
but put equal emphasis on diffusing them. Supporting the development of AMT could rest on
a set of proven policy tools such as public-private partnerships in developing new
technologies (e.g. public co-funding of R&D) and programmes that bring together public
research and companies. In some countries, co-operative sectoral research initiatives have
been successful in this respect tool.
Innovation policy has also gained extensive experience in promoting the rapid and broad
diffusion of AMT. In the 1980s and 1990s several countries run programmes that supported
the diffusion of computer-integrated manufacturing technologies and other types of flexible
manufacturing (see Link and Kapur, 1994). Many of these programmes proved to be
successful (see Polt and Pointner, 2005; Arvanitis and Hollenstein, 1997, 1999; Arvanitis et
al., 1998; Shapira and Youtie, 1998). Common findings of evaluations include the role of
consulting, skills and training, to combine access to external funding (loans), to stress the
critical role of human capital in upgrading technology successfully and to stimulate co-
operation and mutual learning among SMEs. Typically, programmes that focus on smaller
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firms tend to be more effective than support of larger firms since barriers to adoption increase
as firm size decreases.
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9 SUMMARY AND CONCLUSIONS
This report made an attempt to assess the technological competitiveness of Europe in six
fields of key enabling technologies (KETs): nanotechnology, micro- and nanoelectronics,
industrial biotechnology, photonics, advanced materials and advanced manufacturing
technologies. The main purpose of the study was to apply a uniform methodology that allows
for quantitative and qualitative analyses of technological performance as well as the strengths
and weaknesses of each KET in Europe. For quantitative analysis, patent data were employed.
Qualitative analysis of success factors, barriers and market and system failures rest on
detailed analysis of ten selected clusters (five from Europe, five from overseas). This chapter
summarises main findings of the report in a comparative way.
9.1 Technological performance
Dynamics in Patenting
The number of patent applications (EPO/PCT patents) by European applicants considerably
increased in all six KETs over the past ten years (Figure 9-1). While the number of patents
cannot be directly compared across KETs because of different definition criteria of patent
classes that are used to delineate a certain KET as well as because of different patenting
strategies, technology content and inventive HÖHE, one still can see that KETs differ
significantly in the amount of new technology that is generated within each KET. Advanced
manufacturing technologies and advanced materials tend to be rather large fields with several
thousands new patents applied by European applicants every year, while photonics and
microelectronics are smaller in size. In nanotechnology and industrial biotechnology,
European applicants generate only about 500 patents per year.
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Figure 9-1: Number of patents by European applicants 1981-2005 (EPO/PCT patents), by
KET
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Nanotechnology Micro-/nanoelectronics
Industrial biotechnology Photonics
Advanced materials Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
Nanotechnology shows the largest increase in patenting over the past 15 years (Figure 9-2).
All other KETs except industrial biotechnology also show a continuous upwards trend in the
number of yearly patent applications, though at a more moderate pace. Advanced
manufacturing technologies reports a quite significant increase recent years while patenting in
microelectronics grew strongly until 2000 but less rapidly afterwards. Photonics shows a
strong growth until 2001, followed by only modest growth rates. The annual number of
patents in advanced materials rose steadily, though at a modest rate. Patenting in industrial
biotechnology grew until 2000. After that year, the annual number of patent applications by
European applicants remained stable.
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Figure 9-2: Dynamics of patent applications in KETs by European applicants 1991-2005
(EPO/PCT patents; 2000=100)
20
40
60
80
100
120
140
160
180
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Nanotechnology Micro-/nanoelectronics
Industrial biotechnology Photonics
Advanced materials Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
When looking at the entire period 1991-2005, compound annual growth rates of the number
of EPO/PCT patent applications by European applicants were highest in nanotechnology (13
percent), followed by microelectronics (10 percent) and photonics (8 percent) (Figure 9-3).
Patenting in advanced manufacturing technologies grew by 7 percent, while growth rates
were lower in advanced materials and industrial biotechnology (4 percent). Growth rates in
Europe were above the world average only in microelectronics. The number of patents
increased at the global growth rate in nanotechnology and advanced manufacturing
technologies. The other three KETs (advanced materials, photonics, industrial biotechnology)
show below average growth rates for Europe.
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Figure 9-3: Compound annual growth rate of the number of patents 1991-2005 (EPO/PCT
patents; percent), by KET
0
3
6
9
12
15
Advanced
manufacturing
technologies
Industrial
biotechnology
Advanced
materials
Micro-/
nanoelectronics
Photonics Nanotechnology
European applicants All applicants
Source: EPO: Patstat. ZEW calculations.
Europe’s share in the global production of new technological knowledge in KETs varies
considerably by field of technology (Figure 9-4). Market shares are high in advanced
manufacturing technologies (48 percent in 2005) and industrial biotechnology (36 percent). In
both KETs, Europe produces more patents than North America or East Asia. While Europe
could sustain its high market share in advanced manufacturing technologies over the past 15
years, Europe’s share in the total output of industrial biotechnology patents felt significantly
(from 48 percent down to 36 percent).
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Figure 9-4: Market share of Europe in KETs 1991-2005 (EPO/PCT patents; percent)
0
10
20
30
40
50
60
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
Nanotechnology Industrial biotechnology
Micro-/nanoelectronics Photonics
Advanced materials Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
Lower market shares are reported for advanced materials (32 percent) and photonics (29
percent). Both KETs show slightly decreasing shares for Europe over time. Europe’s market
share in nanotechnology is rather low (27 percent) though slowly increasing since 1996. In
microelectronics, Europe could raise its share in global patenting from 1991 to 1998 but
experienced a decreasing market share since then, falling to 22 percent in 2005.
Overlap between KETs
The six KETs are technologically linked to each other to some extent. One may determine the
degree of overlap by identifying the share of patents from one KET which are at the same
time classified as patents of another KET. Such overlap results from the fact that one patent
may be assigned to many different IPC classes, some define one KET, others another. Figure
9-5 shows that nanotechnology strongly overlaps with other KETs. 64 percent of all patents
assigned to nanotechnology have also been assigned to another KET: For photonics and
microelectronics, this share is 24 and 23 percent, respectively. Less overlap occurs with
advanced materials (11 percent) and almost none with advanced manufacturing technologies
(6 percent) and industrial biotechnology (4 percent).
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Figure 9-5: Share of patents by KET that have been assigned to other KETs (EPO/PCT
patents 1981-2007; percent)
0 10 20 30 40 50 60 70
Nanotechnology
Microelectronics
Industrial Biotechnology
Photonics
Advanced materials
Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
The high degree of overlap in nanotechnology is due to three subfields within
nanotechnology. Nanomaterials are also part of advanced materials. Many nanoelectronics
patents are linked to microelectronics, and most nanooptics patents are also classified as
photonics patents (Figure 9-6). Microelectronics and photonics show a considerable overlap
with each other. The rather low degree of overlap in advanced materials relates to
nanotechnology, microelectronics and photonics. Of the few advanced manufacturing
technologies patents with co-assignement to other KETs, microelectronics, photonics and
advanced materials are the three most important KETs. The very few industrial biotechnology
patents with a link to other KETs primarily relate to advanced materials.
Figure 9-6: Links to other KETs of overlapping patents by KET (EPO/PCT patents 1981-
2007; percent)
0 10 20 30 40 50 60 70 80 90 100
Nanotechnology
Micro-/nanoelectronics
Industrial Biotechnology
Photonics
Advanced materials
Advanced manufacturing technologies
Nanotechnology Micro-/nanoelectronics
Industrial Biotechnology Photonics
Advanced materials Advanced manufacturing technologies
Source: EPO: Patstat. ZEW calculations.
Sector links
The six KETs show quite different links to economic sectors. Based on an analysis of the
sector affiliation of the most important patent applicants (covering between 60 and 100
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percent of all patents, depending on the KET), we find a focus of advanced materials and
industrial biotechnology on the chemical industry (including pharmaceuticals and processing
of petroleum). Microelectronics and photonics are rather closely linked to the electronics
industry as well as to the manufacturer of instruments. Most patents in advanced
manufacturing technologies are produced by companies from the electronics, mechanical
engineering and automotive/defence industries. Nanotechnology patents primarily come from
the electronics and chemical industry industries, though public research and dedicated
nanotechnology and biotechnology companies are also very important sources for
technological advance in this KET. Together they account for more than 35 percent of all
patents. This also holds true for industrial biotechnology. In the other four KETs, public
research and dedicated technology companies are of minor importance as producer of patents.
Figure 9-7: Sector affiliation of patent applicants by KET (EPO/PCT patents 1981-2007;
percent)
0 10 20 30 40 50 60 70 80 90 100
Nanotechnology
Micro-/nanoelectronics
Industrial biotechnology
Photonics
Advanced materials
Advanced manufacturing technologies
Chemicals (incl. pharmac., oil) Other Materials Electronics
Instruments Machinery/equipment Automotive/defence
Dedicated biotech/nanotech firms Public Research (incl. gvt. agenc.)
Source: EPO: Patstat. ZEW calculations.
There are some singificant differences in the sector composition of the actors that produce
new technologies in each KET among the three main regions (Europe, North America, East
Asia). Europe and North America show higher shares for public research, and North America
reports the highest shares for dedicated technology companies in nanotechnology and
industrial biotechnology. Europe reports very high shares for the chemical industry in
nanotechnology, industrial biotechnology and advanced materials, but below-average shares
in microelectronics and photonics. The electronics industry is of higher importance in East
Asia in all six KETs, reflecting the specialisation of this region on manufacture of electronic
products. In Europe, the automotive industry (including to a small extent also manufacture of
aircraft and defence technologies) is of greater significance as patent producer compared to
the other two regions. The manufacturers of instruments are more important in North America
and East Asia than in Europe for most KETs.
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Figure 9-8: Composition of overlapping patents by KETs (EPO/PCT patents, 1981-2007
applications; percent)
0 10 20 30 40 50 60 70 80 90 100
Nanotechnology
Micro-/nanoelectronics
Industrial biotechnology
Photonics
Advanced materials
Advanced manufacturing
Chemicals (incl. pharmac., oil) Other Materials Electronics
Instruments Machinery/equipment Automotive/defence
Dedicated biotech/nanotech firms Public Research (incl. gvt. agenc.)
Europe
0 10 20 30 40 50 60 70 80 90 100
Nanotechnology
Micro-/nanoelectronics
Industrial biotechnology
Photonics
Advanced materials
Advanced manufacturing
North America
0 10 20 30 40 50 60 70 80 90 100
Nanotechnology
Micro-/nanoelectronics
Industrial biotechnology
Photonics
Advanced materials
Advanced manufacturing
East Asia
Source: EPO: Patstat. ZEW calculations.
Summary overview
Table 9-1 makes an attempt to summarise main results of the quantitative analysis conducted
in this study. Over the past 15 years, nanotechnology is the KET with highest growth in patent
output, followed by microelectronics and photonics. Industrial biotechnology and advance
materials show rather slow increases in the generating of new technological knowledge. The
strong growth in nanotechnology patenting helped Europe to maintain its market share in
global patent output. In microelectronics Europe was even able to gain in market shares,
though startging from a very low level. Europe’s position is strongest in advanced
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manufacturign technologies with a market share of almost 50 percent which coulde be
sustained over the past 15 years. Europe is also leading in patent output in industrial
biotechnology though loosing significantly in global shares. When looking at subfields within
KETs, it turns out there is at least one subfield in each KET where Europe performs
particularly well, but there are also several subfields with weak performance. As a
consequence, attention to KETs should be aware of the wide variety of individual
technologies within each area and that competitiveness differs by subfields.
Table 9-1: Summary overview on technological competitiveness of Europe in KETs
Nano-
technology
Micro-/
nano-
electronics
Industrial
Biotech-
nology
Photonics Advanced
Materials
Advanced
Manu-
facturing
Techno-
logies
Patent Output in Europe
No. of EPO/PCT patents in
2005 (European applicants)
~500 ~1,900 ~600 ~1,900 ~3,000 ~4,600
Compound annual growth
rate 1991-2005 (percent)
12.8 10.4 3.9 7.5 4.3 6.5
Share in global no. of
EPO/PCT patents (percent)
27 22 36 29 31 48
Change in global market
share 1991-2005
(percentage points)
-1 +4 -11 -7 -4 -2
World region with highest
market share in 2005
North
America
East Asia Europe East Asia East Asia Europe
Subfields with particularly
high market share of Europe
nanobio-
technology
devices fermen-
tation,
enzymes
solar macro-sca-
led mate-
rials, ener-
gy-effi-
cient ma-
terials
robots,
measuring,
control-
ling, regu-
lating,
tools
Subfields with significant
improvement of Europe’s
market share
nano-
electronics
measure-
ment, X-
ray
- - - robots,
CIM
Patent producers (Europe)
Share of start-ups/dedicated
technology firms in total no.
of patents (percent)
10 <1 7 <5 <1 <1
Share of public research in
total no. of patents (percent)
29 10 23 9 5 5
Share of 15 largest
applicants in total no. of
patents (percent)
21 50 26 40 35 21
Sector links (Europe)
Sector with highest share in
total no. of patents
chemicals electronics chemicals electronics chemicals machinery
Sector with strongest
increase in its share in total
no. of patents between
1990s and 2000s
public
research
semicon-
ductors
public
research
lighting plastics vehicles
Market potential (global)
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Current market size (billion
US-$, ca. 2008)
12 - 150 200 - 300 80 - 100 ~230 ~100 ~150
Expected market volume in
2015 (billion US-$)
30 - 3,100 300 - 350 125 - 150 450 - 500 ~150 ~200
Expected compound annual
growth rate (percent)
16 - 46 5 - 13 6 - 9 ~8 ~6 ~5
Success factors and
barriers (global)
Key barrier for rapid and
broad commercialisation
lack of
venture
capital;
health,
environ-
ment and
safety
concerns
achieving
substantial
decrease in
unit costs
environ-
ment and
ethic
concerns,
price-cost
advantages
over
traditional
chemicals
mastering
complex
technology
long
product
cycles
adoption
barriers at
the side of
potential
users
Role of public funding for
R&D
very high low medium high low low
Role of public policy for
stimulating demand
low no high low no low
Significance of health,
environment, safety
concerns
high low medium low low low
Source: ZEW compilation.
Patenting in KETs is driven by different groups of actors. Public research is a main source for
new technological knowledge in Europe in nanotechnology and industrial biotechnology and
is also significant in microelectronics and photonics. Dedicated start-ups show a higher share
in nanotechnology and industrial biotechnology but are quite rare in photonics and almost
negligible in microelectronics, advanced materials and advanced manufacturing technologies.
In these three KETs, a few large enterprises dominate patenting. KETs are very much related
to the chemical and electronics industry.
Current market size of KETs ranges from about $100 billion for advanced materials and
industrial biotechnology to about 250 billion for microelectronics. For nanotechnology,
estimates of current market size vary a lot, ranging from $12 to $150 billion. This range
indicates the difficulties in determining the borderlines of this emerging industry. Though one
cannot simply add market size of individual KETs to get a total volume of demand for KETs
as several KETs overlap to some extent, it is still fair to estimate the global market volume of
the six KETs to be about $700-800 billion at present. This is certainly a considerable size
when compared to the market volume of established industries such as the electronics,
automotive, chemicals, pharmaceuticals or machinery industry. Each of these industries
generates global sales between $1,500 and 2,500 billion each year. More importantly, demand
for KETs is expected to increase at rates above the average expansion rate of world markets
for most KETs. Expected annual growth rates are particularly high for nanotechnology
(ranging from 16 percent compound annual growth to an extreme of 46 percent), high for
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microelectronics, photonics and industrial biotechnology (about 8 to 10 percent per year) and
rather moderate for advanced materials and advanced manufacturing technologies (5 to 6
percent, which is about the expected medium-term growth of global demand for goods and
services). The differences in expected future growth of KET demand reflect differences in the
underlying factors that drive market potentials of KETs.
Future technological and commercial success of KETs depends on a large variety of factors
which are difficult to weight or prioritise. Based on literature, one can nevertheless identify
some factors for each KET which seem to be particularly important for future prospects. In
nanotechnology, funding (particularly availabiltiy of venture capital) is an important driver, as
well as health, environment and safety concerns. In microelectronics, being a more mature
industry, main challenges refer to combining higher performance of ne microelectronic
technologies with a substantial decrease in unit costs. Industrial biotechnology is confronted
with environmental and ethic concerns about likely impacts of new biological chemicals on
the one hand and a lack of price-cost advantages over traditional chemicals which decelerates
diffusion of innovations.
Photonics is a field of technology that is particularly subject to complex technologies, and
intergrating various technologies into complex products is a therefore a main challenge which
demands high investment in R&D and cooperation of actors with different industrial and
disciplinary background. Advanced materials is a rather traditional KET driven by large
companies with longstanding R&D and market experience. A main barrier for the rapid
diffusion of advanced materials is long product cycles and often high investment needed to
adopt new materials. In advanced manufacturing technologies, the situation is quite similar,
though barriers to adoption are different. As many users of more advanced process technology
are small manufacturing firms, specific barriers to technology adoption by SMEs (lack of
external capital, lack of specific skills, uncertainty of price-cost advantages over the life cycle
of new technologies) matter.
Governments’ role in advancing KETs differs with respect to the role of public funding for
conducting R&D, the role of public policy for stimulating demand (e.g. through public
procurement, taxes or regulation), and the role of environment, health and safety issues.
Governments tend to be important players in nanotechnology and industrial biotechnology
since public funding and regulation are important for commercialising new research results.
In photonics, public policy is first of all important for funding R&D. In the other three KETs,
governments tend to be less directly involved in advancing technology. Their role tends to be
more focused on providing a favourable environment for industry, including to maintain a
strong industrial base as a key starting point for developing and commercialising new
technologies.
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9.2 Conclusions from Cluster Analyses
Whereas the patent analysis has given the insights into the general development within the
KETs worldwide, and enabled to give general policy recommendations, our cluster
benchmark has given us some more specific insight about how KETs develop and flourish in
certain regions. We find it essential to note that whereas key enabling technologies are
absolutely global in their applications and hence their markets (most clusters export around 75
percent of their products), their origins are often strongly embedded in local clusters. The size
and concentration of the clusters may vary, but with the name of a flourishing technology
(like biotech) almost always comes the name of an area (biotech Cambridge). In our analysis
we describe how and why the regional aspect of technology development in important and
which policy recommendation can be derived from that.
Clusters: knowledge base and path dependency
First of all, technologies do not just appear. They develop out of existing knowledge and
(re)combination of existing, or existing and new knowledge. Knowledge and capabilities are
not static facts though that can be bought off the shelf. Innovation and technology
development is not the result of a simple transfer of tangible information: it is the creative
process of invention and creation between people who carry with them specialist knowledge
and know how. It is therefore that new KETs and the KET clusters grow on the foundations of
already existing knowledge ‘hot spots’, clusters or industries.
Characteristic of all clusters is that they grow either around a very strong knowledge
infrastructure (thick network of world-class universities and research labs for instance) or on
the foundations of well established and successful industries. In all the clusters we studied we
saw this as a major prerequisite for cluster development. In some cases the clusters were more
originated by science and universities, e.g. the Cambridge biotechnology cluster and the
Grenoble microelectronics and nanotechnology cluster, and others were more strongly
stimulated by the presence of dominant firms and strong industries, e.g. Ontario micro-and
nanotech and Berlin-Brandenburg photonics. Overall though, we see in all clusters an
important role for both knowledge base and industrial base as foundations for world class
knowledge (science) and application (industry).
The policy implications of this observation are that whereas technologies can be stimulated in
general, and clusters can be too, clusters cannot be made or planned. Successful cluster
development will always have to have a basis in science and industry. Hence, successful
policies should focus on looking for emerging clusters of technology development, and
strengthening these emerging clusters. Once a start has been made, which will often be a more
or less spontaneous and unpredictable process, momentum can be gained by tailoring policy
measures to stimulate the technology (through general policy measures), the region (for
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instance with regional development funds) and the entrepreneurial climate (for instance by
providing tax breaks, incentives for locating in the area) and of course the cluster by
(co)financing a cluster platform. By combining general technology policy measures, with
more tailored regional and cluster measures, an interesting self perpetuating cycle of activities
can evolve which will strengthen the developing cluster. Path dependency – the process by
which actions and sediments of those actions in the past, form a basis for even more and
better actions and results in the future, will be the natural accompaniment of these policy
actions.
Cluster development: time scale and realistic expectations
Another cluster fact is that mature and successful clusters are old. From research we have
learned that technology developments generally take up to 30 years to get from invention to
broad scale implementation. Clusters are no different. The clusters that we examined were
often between 20 to 100 years old. If they appeared to be young, because their cluster status
had recently been formalised in supportive policies, or because their cluster platform had
recently been established, they always went back on old foundation on closer examination.
This can be no surprise: if technologies take long to develop, companies and their
complementary cluster partners will also grow and evolve along with the speed and success of
the (application of the) technology.
For policy this means that realistic expectations should be set at the start. Neither KETs nor
clusters will be successful within the usual policy cycles of a limited number of years (for
example 4 years). Policy measures can accommodate this fact by adjusting its policies to the
phase of development technologies and clusters are in. For instance, emerging technologies
and clusters will much more depend on funding of basic research and knowledge exchange,
whereas mature clusters tend to depend on the successful organisation of critical and creative
mass in the cluster and internationalisation. Once a cluster is past its heydays, regeneration of
the cluster should be put on the agenda. This process is illustrated in Table 9-2 below.
Table 9-2: Policy recommendations for different phases in the life cycle of a cluster
Emergence Development (Fast) growth Maturity Post maturity /
regeneration
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W
ha
t h
ap
pe
n
s?
Existing basis of
excellence is
important
(research,
industry)
Basic research
funding
Relationships
need to be built
Knitting of PP
partnership
Increasing
number and
variety of actors
Technologies and
products become
better
Cluster builds
reputation
Starts attracting
firms and
excellent labor
Attractiveness of
cluster stimulates
start-ups
Fast growth in
number of firms
and their turn-
over
Cluster reaches
critical mass
Internationali-
sation
Cluster attract
firms, specialist
service providers
and qualified
people
internationally
Cluster has
excellent
reputation
Cluster declines
Technologies are
overtaken by new
developments
Cluster
characterised by
mergers and
acquisitions
(concentration)
Actors start looking
for ‘new wave’ to
ride
W
ha
t s
ho
u
ld
be
do
n
e
in
su
pp
o
rt
? Public policy
recognizing
potential growth
areas based on
scientific or
industrial
excellence
Finding
protagonists to
champion cluster
development
Support
collaboration
Tax measures and
public funding to
create favourable
business
environment and
attract new
entrants
Funding of
research and
collaboration
Establishment of
cluster platform
Public policy
setting clear goals
Attracting or
creating sources
of private funding
Working on
commercialisation
Creating
international
reputation
Tax measures and
public funding to
attract lead firms
Shift focus
funding from
basic to applied
Stimulate export
development
Ample attention
to start-ups and
spin-offs to keep
momentum
Keep the cluster
open – track new
development to
prevent myopia
Provide or
stimulate funding
structure for
commercialisation
/ internationali-
sation
Stimulation of new
developments /
technologies that
build on old
capabilities and
knowledge.
Stimulating new
contacts with actors
outside the cluster /
technology field
Establish links
between smaller
actors of the ‘new
wave’ with
potential anchor
firms
Source: TNO compilation
Funding structure for all stages of technology development
A known problem in technology development and commercialisation is the so called ‘valley
of death’: whereas funding for basic research is often available, seed- and venture capital
often helps early start-up, and the market will pick up the technologies that have (partly)
proven themselves in the market, large investments are often still needed for the phase in
between the applied research and commercial application. This stage, sometimes referred to
as scaling up, requires large investments in proto-typing, testing, and the scaling up of
production facilities. These activities are usually not covered by policy interventions as the
market is to pick up technologies at that stage. In the clusters we have studied we have also
observed this problem. In the European clusters this problem is often solved when large firms
are present in the cluster: they will be well informed about promising new development and
have the funds, distribution channels, and international connections to get past this stage. An
example of this is Cambridge biotech.
In the non-European clusters there is much more attention to the commercialisation stage, and
also more elaborate funding structures are available to support firms at all stages of
development and growth. For example in Canada, very favourable tax measures make for a
good knowledge development and commercialisation climate. In the non-European clusters
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we also see that governments pay explicit attention to the commercialisation phase. They
implement ideas of public procurement in their policies (like in the microelectronics Ontario
cluster) or give clear indications of desired directions of applications (like in the case of the
Kyoto nanotechnology cluster). We observe that those clusters are very strong in
commercialisation, whereas some of the European clusters, for example the Berlin-
Brandenburg photonics cluster, run the risk of staying ‘stuck’ in knowledge development and
inter-firm collaboration between local smaller firms, without making ‘the jump’ to large scale
application and commercialisation.
China and Japan also form a special case as the governments here very explicitly govern the
markets in the sense that they actively stimulate and if necessary help create, the funding
structures for these developments. They for example set up venture capital schemes or make
sure private actors provide seed capital. They do not shy away from interfering into the
market and thereby actually create an indirect route for making sure companies can find
funding for technology development and commercialisation. However, we are not sure if such
lessons could be transferred to European economies as we do not have a tradition of more
central planning, and such government interference would perhaps also clash with our
dominant business culture and ethic.
The policy implications of the observations on cluster and technology development, and the
interconnectedness of the two, are that we are dealing with staged processes that need
different forms of policy support in different stages of development. Whereas in the early
stages emphasis will be on knowledge development and careful building of a strong core in
the cluster, later stages will involve more knowledge exploration activities and the cluster will
expand and create more external ties to be able to reach a world market. We have illustrated
this process, and given policy advice, in Table 9-2 above.
Next to that, we emphasis that policy measures should not only be fit for the type of
technology and cluster it should also be adopted to the culture of the respective area or
country. Whereas the Asian countries seem to be successful in implementing more centrally
governed strategies, the Anglo-Saxon follow more of a ‘market’ model of development in
which general tax measures and stimulation of entrepreneurship play a crucial role, and
Europe seems to focus more on the stimulation of basic research and R&D collaboration.
These models all seem to work, but we strongly believe they also do because they are suited
to the countries they are designed for. Still though, European countries do seem to be able to
learn from the non-European countries in the sense that the funding of the whole trajectory of
technology development and application is much better organised. Also, European countries
could learn from the scale of non-European clusters and focus less on small evolving clusters,
and more on potentially strong clusters that have lead actors in them, or other anchor firms,
that can enable the cluster to develop into maturity.
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Regional embedding and collaboration: strong and weak ties
Although the development and application of KETs is a global affair, the evolution of
knowledge and technology is a regional – though not isolated - matter. This is so because
excellent knowledge and knowhow is developed by people. Innovation no longer takes place
in isolated research labs. Through the high level of specialisation necessary to belong to the
top of a specific technology field, companies and research organisations alike, need to
collaborate with complementary partners. Although modern day technology can enable such
collaboration across large distances, the social processes and trust underlying fruitful
collaborative relationships cannot be displaced by technology.
From research in this field we know that for successful collaborative innovation, both strong
ties and weak ties play a role. Within the clusters strong ties can develop with other actors that
are close by: with this we mean both geographically proximity and not too big cognitive
distance (complementary knowledge and skills, but also often similar or compatible culture,
norms and values). In almost all the clusters that we studied we found that close interaction
between the clusters actors, and a general cluster culture supportive of such collaborations,
was considered crucial for cluster growth. The dense clusters provide rich labor markets,
where people can find and change jobs, but also start for themselves. Such dynamism also
promotes spillovers and positive externalities, and gives the cluster an identity people and
companies want to be related to as it improves their legitimacy and credibility. Next to this we
see the close and repetitive collaborations between cluster actors. Through longer term
collaboration, trust can grow, and the relationships will be increasingly open and creative,
increasing the innovative potential of the actors. The Cambridge and Grenoble cluster form
good examples of this type of regional cluster ‘buzz’.
Whereas this relates to the close relationships within the cluster, weak ties within and outside
the cluster are also of crucial importance. Through these weak ties, new knowledge and skills
can be fed into the cluster that prevent myopia and provides new knowledge and inspiration
for KETs to develop. In nearly all the clusters we studied we saw how especially in the more
mature stages of cluster development, weak links - often through universities and large actors
- form an essential link to ‘the outside world’. Functions that these links fulfill go both ways:
new ideas and knowledge will feed into the cluster, but these links will also provide a bridge
to foreign markets – to sell products and promote the cluster building its international
reputation.
The policy implications of this are that next to technology stimulations, measures should be in
place that encourage – or at least don not hinder – collaboration. Cluster platforms form an
excellent instrument for this, and we have seen very successful examples of these platforms in
this study. The cluster platforms should focus on both establishing of weak and strong ties.
Within the cluster they should stimulate collaboration by organizing network events, using
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firm databases to increase transparency of the actors present in the cluster, provide
intermediary services etc. Next to that, the external links should be encouraged to prevent
becoming an ‘in-crowd’ club that misses out of important external developments. Cluster
platforms can facilitate this by organizing marketing and knowledge visits to other countries
or other countries, visiting trade fairs, and other actions to get into contact with new actors
that can provide access to new knowledge and markets.
This is a function that is well understood in nearly all the clusters we studied. It is remarkable
though that the European technology policies seem to put more emphasis on collaboration,
whereas non-European policies more rely on tax-breaks and tax-incentives to attract actors
and stimulate KETs. This is a more indirect route for getting the density of actors in a certain
area. We see no clear difference in the effect of both policy routes: in European as well a non-
European clusters collaborations plays a determining role in making the cluster successful,
hence, we conclude that both direct and indirect policies are possible.
Lead markets, public procurement and the role of anchor firms
In the design of this study we anticipated that there could be a role for public procurement and
lead markets to explain the successful development of KETs. In the study however, we found
very little proof of this. We explain this by the fact that first the KETs are technologies that
are still in a very early stage of development, second that the technologies are intermediary
products that do not have a direct demand, and third, that KETs have so many applications
(one technology or material can be used in many applications) that it is difficult to identify
key application areas. We did find two clusters in which public procurement was mentioned
as a means to stimulate technology development. However, we found no proof other than that
there were good intentions.
In stead of an important role for lead markets, we found a key role for lead or anchor firms. In
nearly all clusters lead firms played an important role to create critical mass and funding
opportunities, international connections and distribution channels. Next to that, some clusters
have strongly developed thanks to the spin-offs of large companies that were present at an
early stage of the cluster’s development, the so called anchor firms. Examples of this we saw
with CEA in the Grenoble, and Nortel in the Ontario microelectronics cluster. In these cases,
the anchor firms played an essential role in ‘kick-starting’ the cluster. From the large
organisations there have been many spin-off that have greatly increased the level of dynamics
and viability of the cluster by having a good mix of young entrepreneurial firms, but also the
large ones.
The policy implications of these observations are that policy makers should not only look at
technology and cluster development, but also at the composition of the cluster. The right mix
is mostly a mix of large, medium-sized and small players. To attract large firms into the area,
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tax measures can play an important role as it can reduce the operations costs of the firms.
Another strong factor attracting large players is a well developed labor market which can be
stimulated with good knowledge institutes and good labor laws.
The occurrence of spin-offs/outs, start-ups, and entrepreneurship in general can be stimulated
with incubator firms, business angels, seed- and venture capital. Some clusters also provide
business parks and incubator centres to support these activities. An entrepreneurial spirit in
the area is also important but will be difficult to encourage with government policy (e.g.
Anglo-Saxon countries will naturally harbor more entrepreneurs than more centrally planned
countries like China).
Overall conclusion: the role of policy and funding in the KET clusters
After this elaborate discussion on key factors for KETs and cluster development, and the
implications of this for government policy, we shortly summarise the main findings from the
European and non-European clusters and the lessons we derive from it:
All KET clusters receive considerable funding and support for technology development and
for business and cluster development. This support is very important and has in the cases
studied proven very effective.
In all KET clusters we find the presence of cluster platforms. These platforms are active in
bringing parties together, promoting the cluster, spreading information, promoting funding
for companies, marketing, internationalisation etc. The platforms are very useful and
successful and a relatively cheap and legitimate way to provide business support as it
doesn’t favor one firm over another.
We observed that technology and cluster development go hand in hand and take a long time.
Twenty to thirty years should be considered a normal time range for technologies to catch
on and clusters to reach maturity. This implies that there is also a need for long term
consistent policies that take into account the staged phases of development.
In all clusters the regional component plays an important role. Local firms collaborate, good
relationships exist with the knowledge infrastructures, and a dense labor market provides
the people that can make it happen. At the same though, the weaker links with actors more
distant from the cluster are essential for keeping up to date with new developments and
preventing the cluster from becoming to close (turning from a hot spot to a blind spot).
From the EU/non EU comparison we learned that non-European countries make more use of
tax incentives and – breaks which are very successful at attracting new entrants and large
(international) firms to the cluster. This is a lesson that European countries could take on
board to extent their policies with.
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From this comparison we also saw that non-European countries also manage, in various ways,
to close the gap between basis research and application funding (the valley of death) better
than the European countries do. They do so by not only making the technology or cluster
attractive to technology driven firms, they also encourage funding actors (like venture
capitalists) to come and invest in the area, sometimes by tax measures, sometimes by
strong governance (China).
Characteristic of the European approach seems to be the strong emphasis on collaboration.
Whereas this shouldn’t be a goal in itself, especially the Asian countries could learn from
that. The more hierarchical structures that characterise their economies can form an
obstacle for innovation as these lack the trust and openness for open knowledge exchange
and creative innovation.
9.3 Failures and Success Factors
Market failures hindering KET development
Market failures relate to failures in market structure or demand in providing the right
conditions for new technologies and businesses to evolve. Market structure relates, for
instance, to high entry barriers or lack of innovation incentives due to dominant incumbent
firms (Klein Woolthuis, 2010). Markets can also fail to invest sufficiently into the generation
and application of new technology, in which case government intervention in the way of co-
funding R&D may be required. Market demand can be distorted due to insufficient
transparency or inefficient pricing mechanism due, for instance, to the inability to include
negative externalities in prices.
Funding
A known problem in technology development and commercialisation is the so called ‘valley
of death’ (see USBA, 1994). Whereas funding for basic research is often available, (private)
funding for later stages is often lacking. Mainly the “scaling up” phase, which requires large
investments in proto-typing, testing, and the scaling up of production facilities is often
difficult to fund. Such expenditures are usually not eligible in most policy programmes, while
uncertainty is still too high for commercial firms to pick-up the technology.
In the European clusters analysed in this study, the problem is in some cases solved by large
firms in the cluster that become lead users or anchor firms. They typically have the funds,
distribution channels and international connections necessary to get across ‘the valley of
death’ (Nordicity Group, 1996). An example of this is the Cambridge biotechnology cluster.
Among the non-European clusters investigated there is much more attention for funding in all
stages of technological development, including the commercialisation stage. Tax measures
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(Canada), government strategy and interventions (Changsha advanced materials cluster,
Kyoto nanotechnology cluster) and public procurement (Ontario microelectronics cluster)
form policies to address this market failure. All in all, the lack of funding for later stages of
technology development in the investigated clusters is rather poorly developed in Europe
when compared to the non-EU clusters.
Market structure
For the development of healthy KETs, there is a need for large as well as small
entrepreneurial companies. Large companies can serve as lead or anchor firms, i.e. they can
provide the guidance, capabilities and capacity to develop technology from incubation to
maturity (Wolfe, 2008; Nordicity Group, 1996). Small companies can play an equally
important role in keeping the market flexible and innovative. Start-ups, university spin-offs
and company spin-offs are important to advance KETs since they are more capable than large
firms to adopt entirely new technologies and develop markets with a low sales volume at the
start and uncertain prospects. Such markets are often unattractive to large companies since
they do not allow for leveraging scale economies.
Small firms need open markets to develop. Dominant firms that are blocking the market for
new entrants or innovations should be forced into competition. Barriers to entry can be
lowered by providing joint facilities, lowering the costs of start-ups and stimulating
entrepreneurship (Den Hertog et.al., 2001). In the European clusters investigated, the market
structures often lacked large players that could have the power to develop a KET into
maturity, and take into their wake a larger group of firms. Many of the European clusters that
have been analysed consist of a many SMEs with similar capabilities (e.g. Berlin-
Brandenburg photonics). Such firm structure can be regarded as a weakness for Europe. Also,
Europe seems relatively weak in promoting entrepreneurship compared to for instance the
USA and Canada where culture, market openness and supportive infrastructure are better
developed (Pierson and Castles, 2006).
Demand
Whereas successful KET clusters are often characterised by a strong market focus, less
successful ones tend to have a primary orientation on research. For successful KET
development, there is a need for both. (David, 1997). The European clusters under study often
show a strong focus on basic research and scientific and technological excellence but they
seemed less focussing on (niche) markets. In Chinese and Japanese clusters studied, the
government tends to play a strong role in co-determining the focus of KETs by defining key
technology fields and choosing strategic markets. For instance, the Japanese government has
chosen nanotechnology as a top national priority and China focuses on batteries for the export
market. In this way, governments help to put forward a strong vision and concentrate funds to
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a limited number of activities. In Europe these processes tend to grow more organically and
decentralised, which implies that developments can take longer to mature. In the USA, there
seems to be a stronger focus on linking technologies and market. As funding more often
comes from private sources, the potential for commercialisation plays a key role during the
whole process of KET development.
Labour markets
An essential success factor for KETs is a highly skilled labour force and a thick labour market
(Wolfe, 2008). In all clusters that have been analysed, the quality of the labour force was
emphasised as being crucial to success, with the best clusters attracting talented people from
all over the world (e.g. Grenoble, Silicon Valley). Whereas the importance of skills is widely
acknowledged, e.g. for cluster dynamism and hence success and longevity (Malmberg and
Power, 2006), it is observed that investments in higher education in Europe have deteriorated
over the last decades, leading to a lower number of graduates and researchers in some fields
of natural sciences. A main challenge is to train students in cross-disciplinary fields which are
particularly important for research in KETs. A lack of skilled people is a severe problem as it
may jeopardise current and future KET developments. The problem becomes more acute
when compared to the efforts of emerging economies (such as China, India and may south-
east Asian countries) to catch up with Western economies in education levels.
System failures that hinder KET development
System failures relate to those factors in the system that hinder innovation (Klein Woolthuis,
2010). Examples for such failures are a lack of interaction between actors which hinders
knowledge exchange an innovation (interaction), or ill functioning rules and regulations
(formal institutions) that discourage innovation (e.g. lack of IP protection), or a culture that
discourages openness, creativity, innovation and risk taking (soft institutions). Capabilities in
the fields of technology, organisation and marketing are also necessary for innovation to be
successful (capabilities).
Entrepreneurial culture
Many studies have shown that the USA, the UK and Canada are more oriented toward
entrepreneurial cultures whereas continental Europe is so to a lesser extent (Pierson and
Castles, 2006). Although there are incentive schemes in place in all clusters investigated,
entrepreneurship clearly seems to thrive more in those countries where these policy measures
are paired with an entrepreneurial culture. In many European countries there is, however, less
acceptance of risk and failure, and cultural attitudes tend to be more egalitarian. In Anglo-
Saxon cultures, one is challenged to stand out, and risk and failure are considered part of that
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(Thomas and Mueller, 2000). The presence of funding for entrepreneurial ventures forms the
material appreciation of this.
Marketing capabilities
A focus on entrepreneurship is often linked to a focus on commercialising innovations. An
invention is not an innovation unless adopted and diffused. In the non-European clusters
analysed, the attention for, and capabilities in the fields of marketing tend to be more
developed. Marketing capabilities, entrepreneurial culture and funding are forming a crucial
triangle for KET success in clusters in the Anglo-Saxon countries examined in this study.
These capabilities seem weaker developed in continental Europe, where basic research and
industry-science collaboration dominate KET development (which are also the elements for
which funding is most readily available). A more balanced approach which takes into account
both R&D and commercialisation would be beneficial for KET development in Europe.
Public procurement, lead markets and public funding
Public procurement
In theory, public procurement can play an important role in stimulating KET development
(Klein Woolthuis 2010). In practice, public procurement does not play an important role in
the clusters that have been studied, for the same reasons that market potentials were difficult
to estimate (see chapter 6). KETs are no final products and generally ERROR - FlateFilter: stop reading corrupt stream due to a DataFormatException
in a very early phase of
their development.
However, public procurement can still play an important role in stimulating KETs by
specifying specific goals for public purchases, e.g. sustainability (Edler and Georghiou,
2007). KETs can play an important role in meeting sustainability goals and will benefit from
market developments of products that embed these technologies (e.g. solar, LED lights,
bioplastics).
Lead markets or lead / anchor firms
A lead market is commonly defined as a regional market that adopts early a specific
technological solution to a certain problem that will later be adopted by users in other regions
as well (see Beise, 2001). Lead markets tend to develop through an interaction of various
supportive demand-side factors, including anticipatory demand, international orientation of
users, intense competition, and a price advantage over alternative technological solutions.
Lead markets are often different from those regions where a certain new technology first has
been developed. Deliberately creating lead markets by policy intervention is difficult. Policy
can play an important role in creating lead markets for specific KETs in case regulation is
critical for the application and diffusion of technologies. In this case, anticipatory regulation
that refrains from a too strong predefinition of technological solutions but rather emphasises
Chapter 9 Summary and Conclusions
EN 345Error! Unknown document property name. EN
progress in technological features that are critical for users can help to establish markets
which early adopt KETs. This early success of KET applications can stimulate other countries
to adopt similar regulation, and by diffusion of regulations, the early adopting market can
become a lead market. Examples for such type of regulation-driven lead markets can be found
in environmental technologies (see Beise and Rennings, 2005).
In contrast to lead markets, lead or anchor firms do play an important role for a KET’s
development as mainly large players have the capacity (funds, capabilities, absorptive
capacity) to develop KETs (Wolfe, 2008; Nordicity Group, 1996). In nearly all clusters lead
firms played an important role to create critical mass and funding opportunities, international
connections and distribution channels. Next to that, KETs have strongly developed thanks to
the spin-offs of large companies (ex researchers starting a patent based business, ex
employees starting new (supplier) firms. Examples of this were observed with CEA in the
Grenoble, and Nortel in the Ontario microelectronics cluster.
Public funding
KETs, both in Europe and in non-European countries, receive considerable public funding
and government support for technology development. This underscores the importance given
to technology development as a basis for economic growth. European countries tend to
emphasise the funding of (basic) research and industry-science collaboration, though they also
provide supportive infrastructures such as incubators and joint research facilities. Almost all
EU countries have at least one cluster programme in place (Furre, 2008). Europe tends to be
relatively weak though in funding the later stages of technology development as good
developed private funding structures are underdeveloped (e.g. venture capital, business
angels).
Asian countries combine research and development funding with clear policy guidance in
choosing technologies and (niche) markets. Funding is focused on these key areas and
funding covers all stages of KET development (also scaling up and commercialisation). The
clusters studied in the Anglo-Saxon countries (USA, UK, Canada) have relatively much
availability of generic policy measures to stimulate KET development. Measures include tax
breaks and incentives, creating an attractive climate for investments in high growth areas
(clusters), R&D subsidies and stimuli for scaling up and commercialisation. Less use is made
of measures stimulating collaboration although such measures (such as cluster development)
slowly gain popularity (Sölvell, 2008). Next to technology stimulation, government funding
was observed to be used to stimulate entrepreneurship through good funding infrastructures
and availability of incubators and business parks.
European Competitiveness in KETs ZEW and TNO
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9.4 Generic Policy Conclusions
Europe’s Competitiveness in KETs
Europe is an important source for technological advance in all KETs considered in this report.
Europe is clearly world market leader in advanced manufacturing technologies and also holds
a top position in industrial biotechnology. It has a strong position in advanced materials which
could be maintained over the past 15 years despite a rapid increase in technology output in
East Asia. Europe’s position is less well in photonics, nanotechnology and microelectronics
where Europe contributes less to the global production of new technology than North
America and East Asia. In microelectronics, Europe could significantly increase its global
share over the past 15 years, though starting from a very low level.
All in all, Europe is neither loosing ground nor moving ahead in KETs. In all KETs, Europe is
confronted with an increasing competition from East Asia which caught up significantly in
the past decade whereas North America tends to show decreasing shares in global technology
output.
Europe’s position in KETs tends to be better in fields related to chemical technologies
compared to technologies linked to electronics. Another peculiarity of Europe is the
significant role of automotives as source of technological advance in some KETs
(microelectronics, photonics, advanced manufacturing technologies) which points to the high
degree of technological competence of this particular industry in Europe. Public research
plays a more prominent role in Europe, though in some KETs (industrial biotechnology,
nanotechnology) North America reports an even greater share of public research in total
patent output in KETs. Dedicated technology start-ups are less significant in Europe
compared to North America, but more relevant compared to East Asia.
Market and System Failures
Analysis of successful KET clusters has shown that success factors and barriers tend to be
similar across KETs, though each KET is showing some peculiarities. For each KET, basic
research and linkages between public research and industrial firms are key issues, as is the
role of regulation, funding of innovation through venture capital, and the urgent need of high
qualified personnel.
Advance in KETs is affected by a number of generic technology market failures, which are
typically addressed by a well-developed set of research and innovation policy instruments.
High knowledge spillovers and a substantial degree of technological uncertainty which could
prevent private R&D investment are tackled by public R&D funding schemes as well as
cluster and network initiatives. The need for large fixed investment in specific R&D
Chapter 9 Summary and Conclusions
EN 347Error! Unknown document property name. EN
laboratories constitute high entry costs, particularly for smaller firms while the need for
cooperation with partners from different institutional and disciplinary backgrounds results in
high coordination costs and require effective mechanisms to protect the intellectual property
of each party involved. Policy responds to these market failures by offering networking and
cooperation programmes and by providing joint R&D facilities.
In addition, KETs are subject to financial market failures arising from high technological
uncertainty, long time horizons between R&D investment and potential economic returns, and
high information asymmetries over the prospects and risks of KET-related R&D activities. As
a consequence, traditional ways of external funding are restricted while public funding and
venture capital are important sources to complement (limited) internal funds of actors
engaged in KET-related R&D. Particularly small firms and start-ups are dependent upon these
financial sources. Furthermore, networking and cluster activities can reduce information
asymmetries and help to link financial market actors and technology organisations.
Each KET is also subject to technology-specific barriers that may hamper technological
advance. Most prominently, R&D on KETs is often research at the technological frontier
which has to master complex technologies and solve upcoming technological challenges that
have been unknown yet. Most often, technological advance requires joint efforts from
different scientific disciplines and fields of technology. This is particularly true for
nanotechnology and photonics, but is also increasingly important in advanced materials and
microelectronics. Bringing together these different competencies can be complicated by
different disciplinary routines and approaches and involves substantial coordination costs.
Some KETs need to pay particular attention to health, environment and safety issues.
Nanotechnology, industrial biotechnology and advanced materials are to be named here.
Developing procedures and regulations to deal with these issues which at the same time
provide incentives for further technological advance and innovative dynamics is a main
challenge in this area.
The development of KETs heavily depends upon knowledge and creativity. Access to highly
qualified people is thus a key success factor. Many KETs require very specific skills,
particularly cross-disciplinary knowledge from disciplines such as chemistry, physics,
biology, computer sciences, mechanical engineering and material sciences. Acquiring such
knowledge is particularly time-consuming, and many higher education institutions are not
prepared to offer curricula that meet the specific demands of KETs. What is more, career
opportunities of cross-disciplinary studies are unclear to many students (e.g. because
commercial applications and thus job opportunities in KETs have yet to evolve), resulting in
low perceived attractiveness of such studies and a low number of students.
European Competitiveness in KETs ZEW and TNO
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Linked to the cross-disciplinary nature of KETs, technological advance often depends on the
co-occurrence of technical progress in different scientific disciplines and fields of
technologies, i.e. joint innovative activities by many actors at the same time. Different actors
from both public research and industry need to be co-ordinated, which rarely takes place
sufficiently by market mechanisms. Policy activities such as providing incentives for
networking and clustering among various actors can help to overcome this specific failure.
Another obstacle for KETs are barriers to adopting new technology at the side of users.
Information asymmetries over the expected returns compared to established technologies can
result in low adoption rates. High investment costs for applying KETs may exceed the
available internal funds of users, particularly for SMEs, while external financing can be
difficult if the technology is completely new and no experience over the likely returns are
available to financing institutions. In-house capabilities for dealing with new technologies
-skills of workers, coordination among departments, integration of suppliers and customers-
may be missing and cannot be built up in short term. Finally, applying KETs may need
adjustments to the product produced which may result in complex changes in a firm’s internal
and external organisation (involving marketing and users).
Public Policy in Favour of KETs
The critical role of KETs for manufacturing calls for policy attention, regardless of the current
technological competitiveness. A mix of generic measures and KET specific interventions is
most promising to accelerate the development, diffusion and use of KETs and their impacts
on the wider economy:
- KETs are strongly research driven. Maintaining a strong research base is thus essential.
Funding basic research with a long-term view is a key policy task. Basic research funding
in KETs need to be balance between setting thematic priorities (in order to obtaining a
critical mass of knowledge and to promoting cooperation among researchers working on
similar subjects) and providing free space for explorative research into entirely new areas.
- Since KETs are technologies that originate at the border between scientific research and
industrial applications, the exchange between both groups of knowledge producers is
essential, too. In particular, incentives need to be in place at public research for actively
engaging in technology transfer. This includes a proper IP management, promotion of
spin-offs, acknowledging the importance of technology transfer in evaluations and
funding and offering linkage programmes such as researcher mobility programmes.
- Industrial R&D on KETs is characterised by high knowledge spillovers and high
technological uncertainty. Public co-funding of business enterprises’ R&D efforts is
therefore clearly justified. R&D programmes should follow a long-term perspective, align
Chapter 9 Summary and Conclusions
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technology priorities with thematic priorities of basic research programmes and include
incentives for co-operative R&D.
- Although KETs are characterised by particularly high investment in R&D and high
technological and market risks, a generally favourable framework for innovation and
commercialisation of new technology can be helpful as well. Policy measures that
stimulate start-ups, including a culture of entrepreneurship and risk taking, can be
important activities, as well as a favourable financial environment, including tax
incentives for R&D and investment in new technologies.
- Linked to R&D project funding, policy should encourage actors in KETs to build up
networks for joint technology development, particularly in those areas of KETs that
require a high degree of cross-disciplinary and cross-technology fertilisation. Networking
could take place at different geographical levels. While for some areas, global networks of
the leading organisations from research and industry are best suited, regional networks
(clusters) can spur technology development in case close and frequent co-operation
among actors is needed. Clusters can be particularly helpful for linking R&D and
commercial applications.
- Maintaining a competitive manufacturing base within each KET is critical if one wants to
fully utilise productivity and innovation impacts of KETs. While pure technology
development could be spatially separated from production, direct interaction between
R&D, manufacture and application in user industries is needed for creating new fields of
application and developing efficient production facilities for new technologies.
- Promoting higher education and training in the fields of KETs is essential in order to serve
KETs with the skilled personnel they need. Strengthening cross-disciplinary education is a
main challenge here. A likely shortage of skilled labour should be tackled through both
education and immigration policies.
- A vital venture capital market is important for commercialising research results in KETs
through university spin-offs and other types of start-ups. Above all, venture capital needs
a supportive regulatory environment. When private venture capital markets in Europe are
not fully capable of providing sufficient funds for start-up and early stage financing,
public programmes may have to fill these gaps.
- Addressing barriers in adopting new technologies is another important policy task.
Innovation policy has also gained extensive experience in promoting the rapid and broad
diffusion of certain KETs such as advanced manufacturing technologies. These findings
stress the role of consulting, skills and training, access to external funding as well as co-
operation and mutual learning among SMEs.
- Policy should also acknowledge the role of lead firms and lead markets in
commercialisation KETs. An early incorporation of large, globally active companies can
European Competitiveness in KETs ZEW and TNO
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help to match research with global market prospects early and thus link technological
advance to market needs. Venture capitalists can also play a role in this process.
- Balancing health, environment, safety issues on the one hand and innovation incentives on
the other are a main challenge for regulation in the area of KETs. Involving all main
stakeholders and focusing on legislation that is flexible enough to adjust to technological
progress within each KET is a promising approach.
- In order to fully leverage the potential of KETs to increase productivity and wealth, an
integrated, co-ordinated policy approach is required that links policy actors from regional,
national and international levels as well as from different policy domains, including
research, innovation, education, competition, industry, taxation, health and environment.
References
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