Preparing for the hybrid economy: the new world of public-private partnerships

Business Horizons, Nov-Dec, 1993 by Ernest Sternberg

By the turn of the century, the United States will observe the coalescence of a trend that has been in the making for several decades: government and business--once the antithetical pillars of the economy--are combining to funnel their operations through hybrid "partnerships." Whether in technological research, worker training, agriculture, or international trade, decisions will be made through a variety of forums that are neither public nor private. There will be university-industry collaboration, military-industrial cooperation, industrial consortia in which public authority is implicitly transferred to nongovernmental groupings, and many other such nonclassifiable arrangements.

America's hybrid economy was conceived in the decades after World War II and nurtured by the politics of the Cold War and interest groups. It grew up in the 1980s amid fears of American industrial decline and fiscal crisis. It received intellectual sustenance from old laissez-faire liberals (usually called conservatives) and big-government liberals oriented toward public intervention. They found in this hybrid economy a confluence of interests and a new consensus.

As the public-private trend continues, the outcome will be post-liberal in both senses of the term "liberal." Networks of hybrid organizations will form the core of an economy/polity that is planned and governed through shadowy partnerships. As this new economy comes to account for ever greater proportions of the domestic product, it will challenge organizations that previously thought of themselves simply as business firms or governmental agencies. It should already be challenging university curricula that still make traditional distinctions between business and public policy.

THE HYBRID ECONOMY AND THE FACTORS OF PRODUCTION

Elements of the hybrid economy are well established, even if their importance is not yet widely recognized. In little more than a decade, industry-university research partnership, initiated in the 1980s by federal and state agencies hoping to increase U.S. technological competitiveness, have proliferated on campuses around the United States. Any major university now has several of them, researching anything from specialized manufacturing techniques to advanced computing, from robotics to agricultural biotechnology.

The National Science Foundation, other federal bodies, and a growing number of state industrial technology agencies provide funds to set up these research arrangements, but they require that private businesses become fee-paying participants. Once set up, the joint research centers operate in a collaborative spirit: committees composed of faculty members and representatives of sponsoring firms make allocation decisions for research. The joint centers pursue a complex combination of missions. They have to serve the fee-paying member companies, which have varied interests in specific lines of research. They must pay attention to traditional university values of academic publishing and academic prestige. In response to the concerns of the public agencies that helped set them up, they somehow have to make strategic decisions about research emphases that serve national competitiveness.

Outside the university, partnerships are becoming the conventional vehicle for many other initiatives in technological research and development. Federal laboratories such as Sandia, Lawrence Livermore, the jet Propulsion Lab, and the National Institute of Standards and Technology are making increasingly numerous arrangements for technological commercialization, each organized on principles of partnership with business firms. Department of Defense programs increasingly strive to serve military technological need and civilian competitiveness--in fields ranging from ball bearings to flat-panel video displays--through collaborative relationships with private industry. The Advanced Research Projects Agency, in particular, is organizing its defense technology conversion programs through a plethora of relationships among firms, business groupings, universities, and various levels of government.

Another version of the partnership phenomenon is represented by industrial research consortia, which began to spread rapidly in the 1980s. A few research consortia had existed previously, but they were restricted to industries in which firms did not compete directly, such as gas and electric utilities. Freed by law from antitrust restraints since 1984, even direct competitors now engage in research cooperation in semiconductors, fiber optics, oilwell drilling, manufacturing technologies, and many other fields. Though the consortia consist of private members, they do not relate to each other as competitors or even as short-term strategic partners. Public policies give them the prerogative (and frequently, the funds) to collaborate, based on the logic that they establish an American counterpart to Japanese industrial policy without direct government involvement.

Private firms continue to conduct their own short-term research on and engineering of products of specialized interest to them. In the most dynamic technological fields propelling us into the twenty-first century--photonics, recombinant DNA, advanced ceramics, advanced microelectronics--research and development occurs through institutions guided not by public accountability and administrative controls, or by market discipline, or by academic research traditions, but by new hybrid forms of management.