The key for getting this research out of the lab and into the marketplace is the close partnership between research at the universities and today's high-tech factory floors. Most German manufacturers have rich budgets for research, which they often buy from others. Unlike many American firms that might fund a professorship or make a general donation to a university department, German companies usually approach universities with very specific problems they want solved. At TUM, for example, the composites department is funded by SGL Carbon, a German maker of carbon fibers that wants to know what kinds of materials are best suited for the next generation of manufacturing processes. BMW has about a dozen of the department's Ph.D. students on its payroll; their dissertation projects are part of preproduction research for the i3. Equipment makers such as KUKA (robots) and Manz (composites presses) are deeply integrated into the university's research as well.

Multiply this intense networking by dozens of universities specializing in technology and engineering. At RWTH Aachen University, more than 20 university institutes focus on state-of-the-art production techniques, cooperating with machinery makers, robot companies and software developers to make manufacturing processes so efficient that a high-wage country such as Germany can compete with the likes of China. RWTH Aachen is now building a $2.5-billion industrial park for companies partnering in this research. The Karlsruhe Institute of Technology specializes in nanotechnology and materials science, working with Germany's leading chemicals companies, such as BASF, to design new substances that will allow batteries to store renewable energy more efficiently and cheaply. At the Technical University of Dresden, researchers partnering with chipmakers and infotech companies are developing integrated circuits that use one hundredth the energy of current-generation electronics.

The German government, too, plays a crucial role. Whereas the country funds excellent labs for basic science, such as the Max Planck network of 80 institutes covering disciplines as disparate as particle physics and evolutionary biology, Germany's most economically successful research institution is the Fraunhofer So-ciety. Its network of 60 technology centers is cofinanced by the government and businesses and thus is strictly market-driven. Fraunhofer's $2.5-billion annual budget is also flush with patent income, most notably from its invention of the MP3 data format in the 1980s.

A unique trust

Closely partnering with nearby universities, each Fraunhofer center acts as a transmission belt to an entire cluster of companies networked with the center—and with one another—through collaborative research designed to find its way into processes and products. There are centers for every conceivable industrial sector, including polymer research for chemical companies, precision optics for the makers of sensors and lasers, and nanoelectronics to produce next-generation IT components.

Several centers, such as the Fraunhofer Institute for Production Technology in Aachen, focus on developing cost-efficient manufacturing techniques to keep Germany competitive with China. And for composites research, there is a Fraunhofer project group in Augsburg near Munich that grew out of a cold war–era rocket propulsion lab. Partnering with TUM and more than 50 companies, including BMW, Audi and Airbus owner EADS, the Augsburg center is already working toward the next generation of composite fibers derived not from petroleum but from lignin, an inexhaustible by-product of the wood and paper industries.

What also speeds up the transmission of these technologies is the encouragement of job-hopping of researchers and engineers. The average Fraunhofer scientist, for example, switches to an industrial company after five to 10 years, and many of the best corporate engineers also do stints as professors or Fraunhofer directors. Klaus Drechsler, professor and head of the Institute for Carbon Composites at TUM, spent part of his career at EADS developing composites for the Airbus. Now he is in charge of setting up the new Fraunhofer center for composites in Augsburg. This kind of job-hopping, crucial in diffusing expertise and technology, is much rarer in the U.S., where a government researcher usually stays in one place for life.

3 Comments

1. 1. Kitsapian 06:52 PM 9/26/12

   I should like to see a comparison of the degrees held by the CEOs of German manufacturing companies with those of similar U.S. firms. I suspect that we have more business admin types and they have more science and engineering majors. It would also be interesting to see German and U.S. CEO salaries compared, expressed as multiples of that of the lowest-paid worker in their plants.

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2. 2. dbtinc 08:46 AM 9/27/12

   I am convinced that the downfall of American manufacturing began with the rise in the number of MBA's running our companies. Years ago top management actually understood the products they researched and made. Now, it's purely numbers. We've become a nation of virtual companies. Cheap products but soon none will be affordable at any price.

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3. 3. sjn 09:29 AM 9/27/12

   As a 30 year veteran of R&D within US manufacturing companies, I have often competed against German companies. The Fraunhofer network of research institutes is a strong component of German competitiveness.
   Basically they provide a 50% government subsidy of corporate R&D.
   The role of these institutes is to perform commercial scale up of the latest university technologies.These efforts are funded 50% by government subsidy to the institutes and 50% by the German corporations. This is a significant subsidy to the short term development budgets of German corporations.
   The US should definitely look at developing an equivalent network. The network provides many advantages:
   - Benefits to the local community by spreading innovation centers throughout the country, with each center focused on a different technology area.
   - AN interesting way to stop the corporatization of the university system and maintaining the universities as sources of independent investigation and pubic analysis by putting the for-profit research in it's own, publicly identified network
   - An effective mechanism for supporting small and mid sized hi tech manufacturing companies within Germany thus maintaining high wage manufacturing labor in Germany.
   
   I am glad to see someone in the US finally look at this network with the seriousness it deserves.
   

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