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The Twenty-First Century University Innovation & the Commercialization
of University ResearchKnowledge Economy Forum IV
Istanbul, TurkeyMarch 23, 2005
Charles W. Wessner, Ph.D.Director, Technology and Innovation
National Research Council
© Charles W. Wessner PhD
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Commercializing University Research is Important because
it…• Provides a Return to Public Investments in Research– Ensures that new & promising ideas are not
trapped in the University laboratory
• Justifies New Research Allocations– Creates tangible outputs from public investments
• Provides a source of New Firms– Needed for Economic renewal & competitiveness
• Provides Services to Firms within the Innovation Ecosystem– Fosters skill pools needed for innovation clusters
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US Universities & Regional Growth
Overcoming Common Policy MythsRealizing the Potential for Regional Growth
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• Reality: Innovation is a Complex Process– Major overlap between Basic and Applied
Research, as well as between Development and Commercialization
– Principal Investigators and/or Patents and Processes are Mobile, i.e., not firm-dependent
– Many Unexpected Outcomes– Technological breakthroughs may precede, as
well as stem from, basic research
The Myth of the Linear Model of Innovation
Basic ResearchApplied Research
Development Commercialization
•Global Myth: Innovation is a Linear Process
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Myth of the “Ivory Tower” University• Myth: Pure Research and
Education are the central University Roles
• Reality: – University Research
Related to Industry Helps Generate Training and Skills Necessary for Productive Lines
– Industry’s Needs and Questions can Drive University Research and be a Source of Relevant Publications
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Pasteur’s Quadrant: Research can be Applied, Practical, and Basic at the
Same Time• Use-inspired research – increases existing
understanding and creates improved technology.
– can take existing technology to new levels but it
• can also improve understanding of fundamental principles
Pure Basic Research (Bohr)
Use-Inspired Research (Pasteur)
Pure Applied Research (Edison)
No Yes
Que
st fo
r F
unda
men
tal
Und
erst
andi
ng ?
Yes
No
Quadrant Model of Scientific Research
Considerations of Use?
From Donald Stokes, Pasteur’s Quadrant,
1997
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Basic Research
AppliedResearch
Development
Commercial-ization
Quest for Basic Understanding•New Knowledge•Fundamental Ideas Potential Use
•Application of Knowledge to a Specific Subject•“Prototypicalization”
Development of Products•Goods and Services
Feedback: Market Signals/Technical Challenge• Desired Product Alterations or New Characteristics•Cost/design trade-off
Feedback:Applied Researchneeded to designnew product characteristics
Feedback:• Basic Research needed for discovery •Search for new ideas and solutions to solve longer-term issues
NewUnanticipatedApplications
Non-Linear Model of Innovation
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Changing the Policy Framework
What Works?What Does Not?
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Bottom-Up vs. Top-Down Policies• Policymakers in many countries have passed new
rules intended to facilitate the commercialization of scientific research output
• Two types of approaches create contrasting incentive structures– Bottom Up Structure: (The US Model)
• Creates economic incentives for universities to find commercial opportunities for their research output
• Allow universities to experiment to find the best means to do that— evolves from below
– Top Down Structure: (The Swedish Model)• Intellectual Property Rights awarded directly to the
Inventor• Government directly creates mechanisms intended
to facilitate commercialization— designed from above
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What Works? What Does Not?• Giving IP to the University positively changes the
Incentive Environment for the Inventor– University can reward commercialization activities
of its faculty, who otherwise have to “publish or perish”
– University has access to a portfolio of opportunities among various technologies, hedging risks of the individual research outcomes, and covering costs of marketing and patenting
• Giving IP rights to the Inventor does not appear to work– Puts her in a non-supportive, high risk environment– Yields few incentives for universities or academics
to pursue commercialization of ideas
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Is the Bottom-Up Approach is more Effective in
Facilitating Commercialization?
• Sweden is an academic powerhouse, but technology transfer performance is weak– Top-down approach fails to create incentives for
academic researchers to become involved in the commercialization of their ideas*
• What are the results of US incentives for university-industry collaboration?
*Goldfarb & Henrekson, Research Policy 32 (2003)
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Example from the US: Before the 1980s, Few Incentives for
Collaboration• Before 1980 the US System was like Europe– Industry, Universities, and Federal laboratories
researchers rarely collaborated– Patents from Federally funded research were
generally held by Government—and not used– Presumptions about Antitrust Laws Limited Joint
Research– Industry Research based on Corporate
Laboratories—e.g., Bell Labs– Companies attracted University Graduates but
did not fund much University Research
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Policy Innovations of the 1980s Create Positive Incentives for
Commercialization• Bayh-Dole Act of 1980:
– Allows universities to patent the results of research that the federal government has funded•Universities can earn royalties by licensing
research innovations to private companies – As a result, Research Universities have been
actively involved in commercializing their proprietary technology •Universities have opened and expanded
Technology Transfer Offices
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Policy Innovations of the 1980s Create Positive Incentives for
Commercialization• Effects of Bayh-Dole are Real
– Increase in Patents granted to Universities•375 in 19823450 in 2003 •Total new patents filed=7203
– Increase in University Royalties from Licensing•$130 millionin 1991$1.033 billion in 2003
– More Startup Companies formed with University Patents• 175 in 1994348 in 2003, and growing
• Reforms take time to have an Impact, but with the Right Incentives, Behavior and Outcomes will Change
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University Royalties from Licensing
Royalties to Universities/Hospitals in Millions of Dollars
Source: Bremer, 2001 speech (http://www.autm.net) - data from AUTM Licensing Survey
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University startups initiated by technology
transfer processes
. Source: Nature Biotechnology 22, 21 - 24 (2004)
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Benefits for University of Growth in University Research
Commercialization• Enhances local/regional economic
development– More rapid technological diffusion to the public
• Potential Source of University Revenue• Positive Effect on the Curriculum
– Curriculum tuned to real world developments– Students see value in coursework
• Marketing Tool to Attract Students, Faculty, Industrial Research Support
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New Institutions May be Required to Foster
Knowledge-Based Growth• Policies that change Incentives will Modify
Behavior, shifting focus to Innovation– E.g.: Motivation for gain from Intellectual Property
(stimulated by Bayh Dole) led to more commercialization of University Research
– Mere exhortations to change have limited impact
• Creating new Dynamic Organizations can help overcome Resistance to Change– E.g. Troyes Technological University produces 14
times more patents than the average French University
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The 21st Century University• For the Knowledge Economy, the University
needs to– Teach the next generation
• With up to date laboratories on real market questions• About the sciences needed to address current and
future questions (e.g., nuclear waste, stem cell research, genetically modified food)
– Conduct Research• “Curiosity-driven Research,” certainly but • the University also needs to bring Science to bear on
Social Problems and Industry Needs– Commercialize
• New Science-led solutions to societal problems• New Products, Processes, and Market-ready students
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Concerns about the 21st Century University
• New Concerns that University-Industry Partnerships can
• Negatively impact a culture of “Open Science”• Reduce the quantity and quality of basic research• Lead academics to spend less time on teaching and
service*• Still,
To suggest that, somehow, universities are not and should not be engines of economic growth is missing the central point of how our economy grows and how we create jobs.
Robert Birgeneau, Chancellor, UC BerkeleyQuoted on NPR Morning Edition, Date: 08-09-04
*See Richard Florida, Issues in S&T, Summer 1999
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University-Industry Cooperation is Key• Cooperative Research
– University research draws ideas from commercial trends more than ever before
– Feedback loops from industry to universities are important
– Major contribution to training for real jobs• Regional Growth
– Regional economies need their research universities more than ever before
• Firm Formation– University innovation + early government funding
have been key to the growth of many successful technology companies
• Supportive University Culture & Incentives are crucial
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The Small Business Innovation Research
Program (SBIR)A Program to Change IncentivesNow being Adopted in Europe
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The SBIR Program• Created in 1982, Renewed in 1992 & 2001• Participation by all federal agencies with an
annual extramural R&D budget of greater than $100 million is mandatory– Agencies must set aside 2.5% of their
extramural R&D budgets for small business awards
• Currently a $2 billion per year program– Largest U.S. Partnership Program
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SBIR Incentives
• SBIR provides Competitive Awards that – Change incentives for Academic
Researchers– Change incentives for Small Firms – Encourage Commercialization of
University Research Results
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SBIR’s Attraction to New Entrepreneurs • Attractive to University Professors and
Graduate Students seeking to Commercialize their Research– Having a company not required to apply for a
grant—lowers risk of trying– Companies and Researchers can apply to
different agencies at the same time– Agency outreach programs provide guidance
and encouragement– Entrepreneur can explore technical and
commercial feasibility under Phase I before taking the full plunge
– Provides Useful Training & Motivates Students
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SBIR Grants are Entrepreneur-Friendly
• Why do Entrepreneurs like it?– No dilution of ownership– No repayment required for grant– Grant recipients retain rights to
Intellectual Property developed using SBIR funds
– No royalties owed to government– Certification effect of award attracts
private capital
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SBIR Primes the Pump of University Technology Transfer
RESEARCH $$ INVESTMENT $$
SALES $$
UNIVERSITYCOMMERCIAL
COMPANYNEW PRODUCTS
& PROCESSESINNOVATION
LicenseAgreement or Equity
• Licensing to existing companies – brings royalty $
• New company formation – brings royalties and/or equity
• Other, less direct, contributions to regional economic activity – 5,000 Good New Jobs in Pittsburgh Area
ROYALTIES
or EQUITY PAYOUT
SBIR
Drawn from C. Gabriel, Carnegie Mellon University
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The Benefits of University-Industry Cooperation: SBIR
Role• SBIR Innovation Awards Directly Cause Researchers to create New Firms– Jobs and Regional Growth– Cooperation creates High-Tech Jobs
• Universities help diversify and grow the job base– Increasingly universities are the largest regional
employer for all types of employment• Cooperation validates Research Funding
– Returns to Society in Health, Wealth, & Taxes– SBIR is a proven mechanism in an uncertain game
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Concluding Points
The 21st Century UniversityEducation § Research § Commercialization
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Encouraging Universities to serve as a Nexus of Growth…
• …Requires Real Changes in– Culture and Values: This requires new
leadership and new incentives– Status of Professors: permissive environment
to encourage innovations, collaboration with industry, and pursuit of innovation awards and wealth
– Institutional Practices: Parallel research institutes with self-select mechanism
• Strong local Leadership & Local Autonomy are required
• National Programs like SBIR help shift the culture
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Understanding Innovation Ecosystems• National Innovation Systems are Different in
Scale and Flexibility– Flexibility is a differentiator– It is less how much is spent but how well
• All Systems Have Common Challenges– Need to justify R&D expenditures by creating new jobs
& new wealth– Need to reform institutions (or invent new ones)– Need to recognize that project failure does not equal
program failure
• Linkages strengthen Innovation Ecosystems– E.g., SBIR draws together small businesses,
universities, and government agencies
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Thank You
Charles W. Wessner, Ph.D.Board on Science, Technology, & Economic Policy
National Research Council500 Fifth Street NW
Washington, D.C. 20001cwessner@nas.eduTel: 202 334 3801
http://www.nationalacademies.org/step
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SBIR Model
CompanyProposal
forPHASE I
FeasibilityResearch
PHASE IIIProduct
Developmentfor Gov’t orCommercial
Market
Private Sector Investment
Tax Revenue
Federal Investment
CompanyProposal
forPHASE IIResearchtowards
Prototype
Solicitationsfor
Government Needs
$750K$100K
R&
D
Investm
en
t
Recoupement through Tax System
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