Can companies benefit from Big Science?

Several studies have indicated that there are significant returns on financial investment via “Big Science” centres. Financial multipliers ranging from 2.7 (ESA) to 3.7 (CERN) have been found, meaning that each Euro invested in industry by Big Science generates a two- to fourfold return for the supplier. Moreover, laboratories such as CERN are proud of their record in technology transfer, where research developments lead to applications in other fields – for example, with particle accelerators and detectors. Less well documented, however, is the effect of the experience that technological firms gain through working in the arena of Big Science. Indeed, up to now there has been no explicit empirical study of such benefits.

We have therefore analysed the technological learning and innovation benefits derived from CERN’s procurement activity during 1997-2001. Our study was based on responses from technology-intensive companies of some financial significance. The main aim was to open up the “black box” of CERN as an environment for innovation and learning. Our findings reveal a variety of outcomes, which include technological learning, the development of new products and markets, and impact on the firm’s organization. The study also demonstrates the importance of technologically challenging projects for staff at CERN. Together, these findings imply ways in which CERN – and by implication other Big Science centres – can further boost technology transfer into spill-over benefits for industrial knowledge and enhance their contribution to industrial R&D and innovation.

The method and sample

The empirical section of the study had several parts. First, a series of case studies was carried out, to develop a theoretical framework describing influences on organizational learning in relationships between Big Science and suppliers. The theoretical framework for the study is indicated in figure 1. A wide survey of CERN’s supplier companies was carried out from autumn 2002 to March 2003. Finally, a parallel survey was carried out among CERN staff responsible for coordinating purchase projects in order to explore learning effects and collaboration outcomes at CERN.

The focus of the survey was CERN-related learning, organizational and other benefits that accrue to supplier companies by virtue of their relationships with CERN. The questionnaire was designed according to best practice with multi-item scales used to measure both predictor and outcome variables. All scales were pre-tested in test interviews, and the feedback was used to iron out any inconsistencies and potential misunderstandings.

The base population of the study consisted of 629 companies – representing about 1197 million SwFr (€768 million) in procurement – which were selected as being technology-intensive suppliers with order sizes greater than 25,000 SwFr (€16,000). This base population was selected from a total of 6806 supplier companies, which generated supplies worth 2132 million SwFr (€1368 million) during this period (see “The selection process” table). The selection procedure therefore indicates that around 10% of CERN’s suppliers are firms that are both genuinely technology-intensive and also of some financial significance; when combined, they represent more than 50% of CERN’s total procurement budget during the period under study. We received 178 valid answers to our questionnaire from 154 of these companies, most of which were still supplying high-technology products or services to CERN beyond 2001. These answers formed the basis for our statistical study.

The findings

The learning outcomes documented in the study range from technology development and product development to organizational changes. The main findings show that while benefits vary extensively among suppliers, learning and innovation benefits tend to occur together: one type of learning is positively associated with other types of learning. Technological learning stands out as the main driver. Indeed, 44% of respondents indicated that they had acquired significant technological learning through their contract with CERN.

The study revealed important signs of development of new businesses, products and services, and increased internationalization of sales and marketing operations. As many as 38% of all respondents said they had developed new products as a direct result of their contractual relationship with CERN, while some 60% of the firms had acquired new customers. Extrapolating to the base population of 629 suppliers suggests that some 500 new products have been developed, attracting around 1900 new customers, essentially from outside high-energy physics. In addition, 41% of respondents said they would have had a poorer technological performance without the benefit of the contract with CERN, and 52% of these believed they would have had poorer sales.

Virtually all CERN’s suppliers appear to derive great value from CERN as a marketing reference (figure 2). In other words, CERN provides a prestigious customer reference that firms can use for marketing purposes. As a result of their interaction with CERN, 42% of the respondents have increased their international exposure, and 17% have opened a new market.

Suppliers also find benefits in terms of organizational effects from their involvement in CERN projects, such as improvements to their manufacturing capability, quality-control systems and R&D processes. In particular, 13% of the respondents indicated that they had formed new-product R&D teams and 14% reported the creation of new business units. A final aspect of the impact on organizational capabilities concerned project management, with 60% indicating strengthened capabilities in this area.

In examining what determines the outcomes of the relationships between suppliers and CERN, we found that learning and innovation benefits appear to be regulated by the quality of the relationship. The greater the social capital – for example, the trust, personal relationships and access to CERN contact networks – built into the relationship, the greater the learning and innovation benefits. This emphasizes the benefits of a partnership-type approach for technological learning and innovation.

In particular we found the frequency of interaction with CERN during the project to be relevant, together with how widely used the technology was at the start of the project, and the number of the supplier’s technical people who frequently interacted with CERN during the project.

During the study we also interviewed physicists and engineers at CERN, to cross check the information provided by the companies. These interviews highlighted the benefits that these interactions with industry have for CERN personnel. We observed that the mutual beneficial effect is independent of the level of in-house experience and participation in high-tech projects, confirming the importance of maintaining an active “industry-Big Science” interaction. Furthermore the results confirmed the importance of technologically challenging projects for the high levels of knowledge acquisition and motivation of highly qualified staff at CERN.

The implications

The study has shown that to a larger scale than foreseen, many suppliers have benefited from technological and other types of learning during the execution of contracts with CERN. The benefits suggest that for companies that are participating in highly demanding and cutting-edge technological projects, conventional procurements and stringent requirements are not the most appropriate modes of interaction, especially if learning and innovation are to be nurtured in the long term. For a Big Science organization such as CERN, some measures to facilitate true partnership and some thoughts on how to maintain the efficiency of the derived benefits for projects with long life-span development, either within the present financial and commercial rules or through other possible routes, will have to be carefully investigated. In particular procurement policy should involve industry early on in the R&D phase of high-tech projects that will lead to significant contracts.

Lastly, note that the methodology developed is not specific to CERN. It would be interesting to determine if and how these findings from CERN compare with those of other Big Science centres.