National Jewels: The Beginnings of Commercial Research Labs
National Jewels: The Beginnings of Commercial Research Labs
Commercial research labs have given us the inventions that have changed our lives, including transistors, microchips, nylon, floppy disks, and the laser. At the same time, they've provided fractals, evidence for the Big Bang theory, and detailed pictures of atoms and molecules. Funding for these labs emerged from competition for new markets and prestige. Ultimately, research labs became an integrated part of the modern system of industrial production. Their findings are the engines of a new technology-driven economy.
During the twentieth century, Bell Labs (formerly part of AT&T, now part of Lucent Technologies, Inc.) became the model for the modern commercial research lab. Incorporated in 1925 as Bell Telephone Laboratories Inc., Bell Labs has patents for lasers, light-emitting diodes, and solar cells to its credit. Its scientists have been awarded four Nobel prizes over a 60-year period for work that demonstrated the wave nature of matter, the invention of the transistor, the discovery of cosmic background radiation (proof for the Big Bang theory), and the fractional quantum Hall effect. Bell scientists created UNIX, the software operating system that runs much of the World Wide Web, and the C programming language.
The origins of Bell Labs are unusual. Its mandate was shaped by the status of AT&T as a monopoly, which was made explicit in the Graham-Willis Act of 1921. This assured the lab of a steady source of funding and made research for the public good part of its reason for being. This set it apart from other commercial labs, which generally had to justify all projects based on market potential. For Dow Corning, Westinghouse, and other contemporary labs, the model was set by Thomas Edison (1847-1931).
Edison's first patent, in 1868, was for a speedy vote-counting machine. It was a clever device, but he couldn't sell it, and, after that, he did not believe in inventing anything for which there was not a market. His lab in Menlo Park, New Jersey, was a commercial enterprise, dedicated to putting out a new invention every 10 days. Edison and his associates were responsible for an unprecedented, regular flow of patents (1,093) and inventions, including the phonograph, the incandescent light, and motion pictures. General Electric, which maintained a relationship with Edison through his patents and consulting, established its research laboratory in 1900 in Schenectady, New York. A genius named Irving Langmuir (1881-1957) came to work there in 1909. By 1913, he had invented the gas-filled incandescent lamp, which, to this day, lights our homes. The invention was so important that Langmuir was allowed to do basic research. He won the 1932 Nobel Prize in chemistry for his work in surface chemistry.
DuPont took a different direction from other businesses. In 1927, it established a laboratory for "pure science or fundamental research work." This attracted an energetic, young Harvard chemist named Wallace Carothers (1896-1937), and in 1931 his team introduced synthetic rubber. A more important challenge was in front of them, however—finding a substitute for silk. By 1934, Carothers was producing synthetic fibers and in the following year nylon was patented. Basic research had paid off.
During World War II, the pressure was on for laboratories to contribute to the war effort. Management techniques and process engineering recognized the role of research labs, and the labs began to become incorporated into the industrial system. Many scientists made a good living at commercial labs, but after the war, the labs faced competition from government labs and National Science Foundation-sponsored university research programs. During the war, the physics community had proven that militarily important discoveries could come from unexpected places. The U.S. was competing with the Soviets, and it was willing to put money into pure research.
Bell, with its dual mandate, could attract the best and the brightest who often were more interested in extending the frontiers of knowledge than in helping create new, improved products. The results were the right chemistry. In the second half of the twentieth century, Bell regularly burnished their image with noncommercial discoveries. They attracted keen minds, and led innovations both in pure and applied science. Other labs watched and learned as Bell Labs's discoveries were publicized and its scientists collected honors.
Today, we live in a world that has largely been invented in commercial laboratories. The artificial fibers for clothing and furnishings—including nylon, rayon, and polyester—have their origin in the labs of DuPont. Plastics and other polymers are now commonplace, found in toys, garbage bags, and artificial heart valves. In software, C and UNIX came from Bell Labs, while FORTRAN and relational databases came from IBM Research. Computers are unimaginable without the transistor, the multiprocessor, and magnetic storage, from researchers at Bell, Intel, and IBM, respectively. We depend on communications satellites (Bell), power plants (Westinghouse), and jet engines (GE) that were created in commercial laboratories.
Perhaps the most significant laboratory-related invention didn't come from the labs. It was the integration of research and development into the industrial process by managers and operations research analysts. The modern industrial system begins with an idea, proceeding onto pilot to prototype to manufacturing start-up to production and marketing. This is true whether the industry is telecommunications, paper, food, chemicals, aerospace electronics, or automobiles. And it works, regularly producing new and better products and services while increasing industrial productivity. One of the most intensively research-driven industries is pharmaceuticals. Most of the wonder drugs of the second half of the twentieth century emerged from a systematic approach of investigation, development, and testing. The pharmaceutical industry invests heavily in its research laboratories. In 1999, the top 10 drug companies worldwide accounted for over 2,000 new patents.
Innovation has been recognized by the financial community, and the market valuation of companies is increasingly related to the intellectual capital that is coming out of their labs. In fact, the cycle of innovation has sped up, and one of the management challenges is to place the right bets on technologies earlier in their development. Often the best bet is on the talent, and, just as DuPont attracted Carothers and other innovators to its labs by explicitly offering the opportunity to do basic research, many of the top commercial laboratories lure top scientists to their companies with a measure of freedom.
IBM Research has operated in the tradition of Bell Labs, with he explicit goal of doing things to make itself "famous and vital." Thus, while practical inventions like RISC computing, FORTRAN, floppy disks, and memory chips got their start in IBM's labs, there also were accomplishments that did not directly affect the bottomline, such as Benoit Mandelbrot's (1924- ) discovery of fractals and Nobel-honored work by others in high temperature superconductivity and scanning tunneling microscopy. Those scientists who are particularly accomplished may be designated IBM Fellows and given time and resources to pursue research of their own choosing.
Despite its contributions, business accountants usually classify research as a cost. Because of this, support for commercial research, especially in basic science, waxes and wanes. Many commercial laboratories downsized during the late 1980s and early 1990s. AT&T took it a step further. In 1996, AT&T divested themselves of Bell Labs when they spun off their systems and technology divisions to create Lucent Technologies. Since then, one current and two former Bell Labs scientists were awarded the 1998 Nobel Prize in physics, making a total of 11 members of the lab so honored.
Perhaps the most important effect of the development of commercial research labs has been the creation of a worldwide, technical economy. Though it isn't always acknowledged, today's business strategies are driven by technology. The Internet, which leverages many key inventions of commercial labs, has disrupted many industries, especially in the distribution of books, software, and music. Laboratories are expected not just to rapidly improve on today's leading edge technologies like wireless communications and intelligent agents, but to push into new areas like nanomachines, gene therapy, and business analytics. Venture capitalists and large corporations invest in new technologies that come out of laboratories with the confidence that these are where the next opportunities will come from. But the frontier for commercial laboratories isn't only in new technologies. It's also in new methods for adopting emerging technologies and getting them to market quickly. This includes understanding how technologies converge, how firms can acquire as well as invent new technologies, and how new inventions embed themselves within the social framework for the biggest economic advantage.
PETER J. ANDREWS
Rosenbloom, Richard S. and William J. Spencer. Engines of Innovation: U.S. Industrial Research at the End of an Era. Cambridge: Harvard Business School Publishing, 1996.