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WHEN it comes to translating basic research into industrial success, few nations can match Germany. Since the 1940s, the nation’s vast industrial base has been fed with a constant stream of new ideas and expertise from science. And though German prosperity has faltered over the past decade because of the huge cost of unifying east and west as well as the global economic downturn, it still has an enviable record for turning ideas into profit.

Much of the reason for that success is the Fraunhofer Society, a network of research institutes that exists solely to solve industrial problems and create sought-after technologies. The organisation has created everything from commercially important lasers for cutting out car parts to the popular music format MP3. But today the Fraunhofer institutes have competition. Universities are taking an ever larger role in technology transfer, and technology parks are springing up all over. These efforts are being complemented by the federal programmes for pumping money into start-up companies.

Such a strategy may sound like a recipe for economic success, but it is not without its critics. These people worry that favouring applied research will mean neglecting basic science, eventually starving industry of fresh ideas. If every scientist starts thinking like an entrepreneur, the argument goes, then the traditional principles of university research being curiosity-driven, free and widely available will suffer. Others claim that many of the programmes to promote technology transfer are a waste of money because half the small businesses that are promoted are bound to go belly-up within a few years.

While this debate continues, new ideas flow at a steady rate from Germany’s complex assortment of research networks, which bear famous names such as Helmholtz, Max Planck and Leibniz (see “Germany’s research jungle”). Yet it is the fourth network, the Fraunhofer Society, that plays the greatest role in technology transfer.

Founded in 1949, the Fraunhofer Society is now Europe’s largest organisation for applied technology, and has 59 institutes employing 12,000 people. And it continues to grow. In 2001, it swallowed up the GMD National Research Centre for Information Technology, which is made up of eight institutes in Bonn, Darmstadt and Berlin. Last year the Fraunhofer gobbled up the Heinrich Hertz Institute for Communication Technology in Berlin. Today, there are even Fraunhofers in the US and Asia.

The centres are proving grounds for the young researchers who feed academia and industry. “Germany is fantastic at giving students practical experience, especially in engineering,” says Axel Bauer of the Fraunhofer Institute for Laser Technology in Aachen. Many students use the Fraunhofers as springboards into industry, while many established researchers at Fraunhofers also hold positions at universities.

Only 20 per cent of the Fraunhofer Society’s €900 million annual budget comes direct from government. The institutes have to compete for contracts to supply the remainder. Commissions come from small companies that can’t afford to do their own research, big ones that appreciate the specialist knowledge and equipment of the Fraunhofers, and from the state and federal governments too.

Some Fraunhofers have seeded clusters of companies around them. In Stuttgart, five Fraunhofers service the thriving car and construction industries in the area. In Freiburg, just down the road from the sunniest spot in Germany, sits the Fraunhofer Institute for Solar Energy Systems, Europe’s biggest solar research institute. It pioneers work in photovoltaics, miniature fuel cells and environmentally friendly buildings. Meanwhile Aachen, while best known for equestrian competitions, has become the country’s centre for laser technology (see “Laser city”).

You can see the Fraunhofer’s success in the number of patents it gets – 449 last year. That put it 27th in the list of Europe’s top patent winners, and it’s the only “society” among giant companies such as Siemens and Volkswagen. But if the Fraunhofer Society is Germany’s best-known route for converting blue-sky ideas into practical products, it is not the only one. The Max Planck institutes, for example, which are famous for basic research, have their own conduit to industry, called Garching Innovation. Founded in 1970 and based in Munich, the organisation now manages about 100 patents a year. Researchers who worked in Max Planck institutes before moving to industry, such as Peter Pack, CEO of the Heidelberg-based biotech company Molecular Tools in Medicine (MTM), say Garching Innovation is “fantastic” at what it does.

The universities too are getting in on the act of technology transfer, though praise for their systems is not so forthcoming. It used to be that university staff who invented novel technologies had sole claim to any patents. That changed in February 2002.

Now inventors have to offer their ideas to the universities first, which have four months to decide whether to take the invention on. If they do, they get patent rights and 70 per cent of any income. Universities have begun opening up offices to deal with this new aspect of their job, but they have a long way to go. “Technology transfer at the universities is immature. You go to the tech transfer office with a patent idea and they don’t know what to do,” says Magnus von Knebel Doeberitz, joint founder of MTM and LION Bioscience, one of Europe’s biggest biotech success stories.

Fortunately they’ll have the help of one of Germany’s most experienced patent offices – the Fraunhofer Society’s Patent Centre for German Research (PST). This February the PST announced it will be taking a more active role in the “technology alliance”, which links a variety of organisations from patent lawyers to universities. The PST will help university offices to assess the novelty of their inventions and potential markets, and negotiate contracts with industry. The PST already has one such project for Bavarian universities. Now it is opening up nationwide programmes for university clinical and engineering patents.

For now it is unclear how university tech transfer programmes will develop. One problem is that they are funded for only a few years by federal government, after which they are supposed to make a profit, says Jörn Erselius, licensing manager for Garching Innovation. “That’s extremely unlikely, unless they’re very lucky,” he argues.

But while universities look at cashing in on their academics’ ideas, some researchers argue that universities shouldn’t get involved with technology transfer at all. “A lot of them believe that’s what the Fraunhofers are for, and that getting the universities involved is somehow immoral,” says Pack. “It’s still a big debate.”

Researchers such as Ulrich Platt, director of the environmental physics department at the University of Heidelberg, wouldn’t go so far as to say that business has no place in the university. But he does think that all these technology transfer offices are symptomatic of a bigger problem – that Germany has become too focused on applied science. “We’ve stopped producing new knowledge – we’re just mining it,” Platt says.

That has inevitably deprived basic research of some funding. While that’s a common complaint in most countries, many believe the situation is worse in Germany. “The input into research in Germany is not sufficient at this stage,” says Harald zur Hausen, vice president of the Helmholtz Association of National Research Centres. “Both the US and Japan increase funding into basic research in these hard economic times. Germany does the opposite.”

In recent years, funding per researcher for cancer research has gone up four times as much in the US as in Germany, zur Hausen says. The federal government says funding is going up, but that it is being eaten up by things like salary increases.

Frank Florian, a spokesperson for the federal ministry of education and research (the BMBF), which sets the national science agenda and distributes federal funds, seems to confirm this emphasis on applied science. “The most important projects we have promoted in the last four years are things that are of practical use to people,” he says – projects that emphasise health rather than space technology, for example.

The ministry is also keen to promote the formation of new companies that pursue practical, applied science. That happens through programmes such as BioChance, a €50 million project that has launched 52 companies in the past three years. The BMBF says this scheme and others will keep Germany ahead in the worlds of biotech and high-tech, and provide jobs for smart researchers to stop them heading off to the US and elsewhere. Eventually, it will also deliver a badly needed fillip to the German economy.

The government has supported links between science and industry in other ways too. In the mid-1990s the BMBF launched a DM150 million ($100 million) competition to designate three areas as biotechnology hot spots. Universities, companies and research institutes madly scrambled to forge links and prove their worth as a “bioregion” in an effort to win part of the pot. That project ended in 2002, but the winning bioregions – Munich, Rhineland, and the Rhine-Neckar area that includes Heidelberg – are still going strong.

Local governments have got involved too. In Heidelberg, a giant technology park that is majority owned by the city nuzzles next to the university. With 50,000 square metres of space, it houses subsidiaries of giant companies including Merck and Abbott and 90 smaller companies. In a brand-new building, 10,000 square metres still wait to be filled. With 1500 biotech workers in the Rhine-Neckar region, it may be a far cry from the 22,500-strong workforce in San Francisco’s Bay area, but it isn’t a bad start.

With government encouragement, the private sector is playing a key part in the creation of new companies. Many of the companies born in the Rhine-Neckar area were given a helping hand by Heidelberg Innovation, one of the leading German venture capital companies. Back in 1997, it had €12 million to seed 12 companies, of which LION Bioscience was one. Only one of this dozen has folded so far, a remarkable success rate given the economic climate.

But will the others survive? “The capital in biosciences has dropped by 90 per cent since 2000. I’ve never seen anything like it,” says Klaus Pate, managing director of Heidelberg’s technology park. Still, he expects the park to be sheltered from the looming biotech bubble burst. “We were really picky in deciding who would come here. Some people criticised us for this and said we could have more people here already. But in Berlin up to half of the biotech companies might fail. That won’t happen here,” he says.

Others aren’t so sure. “There are too few companies with actual products on the market,” says von Knebel Doeberitz. “All the programmes for start-ups is just burnt money.” He says part of that problem stems from the explosion of investment companies that came along with the biotech growth – these often have too little experience to properly judge which ideas will fly and which will sink without trace. “The investors suffer from a lack of vision – they have no perception of the true market. There were millions of companies set up to build chips, and only one or two of these will survive,” he says.

But the rest of the world is facing these challenges as well. At least in Germany, if the biotech bubble makes a mess when it bursts, the country will have lasers, solar cells and a host of other technologies to help see it through. And, of course, the Fraunhofers will still be keeping the links between science and industry strong.