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Research Commercialization
Research Commercialization S Slaughter, University of Georgia, Athens, GA, USA ã 2010 Elsevier Ltd. All rights reserved.
As more and more students attend post-secondary education and state support per student declines, faculty, administrators, trustees, regents and state officials are searching for ways to expand university revenues. One strategy is commercialization of research. To maintain or expand resources, faculty are increasingly encouraged to compete for external dollars tied to market-related research. Market-related research is referred to variously as applied, commercial, strategic, and targeted research. The external monies at which commercial research is aimed come in the form of partnerships with industry and government, technology transfer, royalties and licenses, equity holdings in faculty start-up companies, and income related to incubators and research parks. Another strategy for securing external dollars is through the marketing and sales of educational products and services, ranging from learning enhancement tools to digital education. Generally, institutional and professorial market or market-like efforts to secure external monies can be conceptualized as academic capitalism. This article focuses on a single aspect of academic capitalism: commercialization of research. The following topics are covered: broad policy changes that made research commercialization possible; patents; start-up or spin-off companies; research parks and incubators; copyright; and the infrastructure required by universities to manage research commercialization. Although the article is comparative, the focus is on the United States because it has led research commercialization.
Policy Changes Academic capitalism depends on the rise of the neoliberal state, which now characterizes English-speaking industrialized countries such as Australia, Canada, the United States, and the United Kingdom. The European Union (EU) does not embrace neoliberalism as closely as the English-speaking countries, but is in the process of adopting many of its practices with regard to higher education generally and research commercialization, specifically. In the United States, research universities came to maturity after World War II, during the great expansion of postsecondary education in the 1950s and 1960s, in the era of embedded liberalism. Embedded liberalism was a reaction to classic liberalism and sought to constrain capitalism to avoid depression, poverty, and social unrest. To achieve these ends, social and political oversight, regulatory and
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planning functions were embedded in the state. The common goals of embedded liberal states were full employment, economic growth, and the welfare of the citizenry. If necessary, the state intervened in market processes to reach these goals. Keynesian monetary policies were characteristic of the embedded liberal state. In contrast, neoliberalism is: . . .a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices (Harvey, 2005).
Although neoliberal theory minimizes the role of the state, in practice state subsidies and oversight are not minimized; rather they shift to new areas. In particular, and important with regard to higher education, subsidies shift from broad general appropriations for the public good – for example, low tuition – to user taxes and fees – for example, high tuition – which emphasize individual rather than social gains accrued as a result of higher education. In general, higher education shifts from a public good knowledge/learning regime to an academic capitalist knowledge/learning regime. The academic capitalist knowledge/learning regime would not be possible without the neoliberal state. However, the relationship is bidirectional and higher education is in many respects the exemplar neoliberal state agency in that it is flexible, entrepreneurial, and essential to the maintenance and expansion of a knowledge economy. The history of public policy in the United States illustrates the rise of the neoliberal state in research commercialization. Prior to the Bayh-Dole Act (1980), federal policy in the United States placed discoveries made with federal grant funds in the public domain. Although universities were permitted to secure patents from the federal agency that funded their research, a relatively small number of universities patented by engaging in this process. The 1980 Bayh-Dole Act signaled a more general encouragement of university research commercialization. It gave universities title to inventions discovered with federal research and development funds. Bayh-Dole made university technology transfer to the private sector an important outcome of federally financed research, and allowed exclusive licensing of publicly funded research to achieve that policy goal.
Research Commercialization
The Bayh-Dole Act gave new and concrete meaning to the phrase ‘‘commodification of knowledge.’’ As potential patent holders, university trustees and administrators require faculty to disclose all research that can be protected intellectual property. Faculty begin to conceptualize their discoveries as products or processes, private, valuable, and licensable, not necessarily as knowledge to share publicly with a community of scholars. The Bayh-Dole Act, for which representatives of research universities and business lobbied intensively, was only one piece of a broader bi-partisan competitiveness strategy developed by the US Congress. Beginning in the 1980s, an array of legislation – ranging from research tax credits to technology transfer – was passed that laid the ground work for the competitiveness coalition. For example, the Federal Courts Improvements Act (1982) created a new Court of Appeals for the Federal Circuit (CAFC) which handled patent appeals from district courts, thereby ending forum shopping in intellectual property cases, creating a more uniform approach to patents. The new court led the way for a greatly strengthened approach to intellectual property, which eventually allowed patents on genetically engineered bacteria, genetically altered mice, particular gene sequences, surgical methods, computer software, financial products, and methods for conducting auctions on the World Wide Web. Similar changes occurred in the United Kingdom, beginning under Margaret Thatcher’s government, and in Australia, under the Hawke government. Canada lagged behind, but in the 1990s neoliberal policy at both the provincial- and federal-level policy heavily promoted research commercialization. In the 2000s, the EU began a research commercialization program, drawing heavily on the models provided by the English-speaking countries.
Patents Prior to 1981, fewer than 250 patents were issued to US universities per year. The number of new patent applications more than quintupled between Fiscal Year 1991 and Fiscal Year 2003, indicating the growing effort and increasing success of universities in obtaining patent protection for their technology. The number of institutions awarded patents increased by more than 60% (to 198) between the late 1980s and 2003. Both public and private institutions participated in this rise. Success in obtaining patents seems to depend more on other resources, which are discussed below under infrastructure. Despite the increase in institutions receiving patents, the distribution of patenting activity has remained highly concentrated among a few major research universities. Among the top 100 research and development (R&D) institutions, the top 25 recipients between 1994 and
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2003 accounted for 55% of all academic patents in 2003, a share that has remained constant for two decades. Including the next 75 largest recipients increases the share to more than 80% of patents granted to all institutions since 1987. The growth in academic patents occurred primarily in the life sciences and biotechnology. Of the top 100 US research universities, ten institutions generated 66% of profits received from technology licensing. Less research-intensive institutions with small technology licensing programs or institutions that are new to technology licensing generally experience annual losses. The EU demonstrates a similar pattern. Although the growth of university owned and invented patents has increased, university licensing is not profitable for most universities. The success of a small number of intuitions may have exacerbated the differences among universities within the EU with regard to resources for research and development. US universities responded to the changing policy opportunities by developing intellectual property policies that simultaneously offered powerful incentives for faculty to patent and expanded institutional control over intellectual property. Royalties The various US university patent and/or intellectual property policies offer a wide range of royalty splits among faculty, department and/or college, and university. The most generous policies split royalties with faculty 50–50. At the bottom of range of royalty splits, faculty receive one-third of the royalty income. Private universities tend to be less generous than public ones, with many offering faculty one-third of the income from their licenses. When policies change over time, they usually give faculty a lower percentage of royalties. Whether it is one-third or one-half, the incentives for faculty are powerful. Personnel Coverage In 1970s and 1980s, a number of patent policies covered only inventors. By the mid-1990s, they included faculty, staff, graduate students, post-doctoral fellows, nonemployees who participate in university research projects, visiting faculty and, occasionally, undergraduates. If these personnel engage in research that might lead to an invention with market potential, they are required to disclose it, so an institutional decision about ownership and patenting can be made. Exceptions US universities had long claimed ownership of discoveries made by faculty; the decisive court cases were heard in
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the 1950s. However, initially, there were exceptions to universities’ ownership claims to intellectual property patented by faculty. If faculty made the discoveries on their own time, using their own resources, and not availing themselves of university facilities, they could claim a patent for themselves – for example, if they invented something in the summer, in their garage work room. As the academic capitalist knowledge/learning regime developed, definitions of time, resources, and facilities use were specified to the point where it became very difficult for faculty to assert any claims to ownership of invention. For example, policies frequently have guidelines that indicate that if researchers or other personnel use anything but routinely available office equipment and commercially available software or library materials generally available in nonuniversity locations, they are making substantial use of university resources and therefore the university owns the intellectual property. Initially, state system and institutional policies addressed only patents. Over the years, the forms of intellectual property covered multiplied. Among those included were: licensing income, milestone payments, equity interest, mask work, which charts the topography of a semiconductor chip product, material transfer agreements, tangible property (cell lines, software, and composite matter), trade secrets, and copyright. The multiple forms of market activity pursued by universities together with faculty’s close involvement in them created many opportunities for conflict of interest. Factors that increase the possibilities of conflict of interest for faculty are: increased magnitude of personal compensation; growing numbers of financial relationships between a creator and a company; greater commitment of a faculty’s time to a company; faculty or administrators holding equity in a company; involvement of trainees or students in a company; and involvement of patients or human subjects in company research trials. In other words, the risk of conflict of interest increases the more closely faculty members or creators of intellectual property are involved with market activity. Conflict-of-interest policies have proliferated and become more detailed. However, few call for close monitoring of faculty or institutional administrators, suggesting the primary purpose of such policies is to protect institutions from liability in legal cases.
Start-Up Companies, Research Parks, and Incubators As universities became involved in research commercialization, they began to be regarded by state and federal policymakers and institutional leaders as engines of economic development. Universities became the center of a cluster of economic activities directed toward economic
growth in the state or region in which they were located. Licensing of inventions to local and regional companies was at the core of economic development activities, but start-up companies, research parks, and incubators also grew rapidly. These latter activities were seen as a way to spur regional economic development, particularly growth of high-paying jobs.
Start-Up Companies Start-up companies began to increase rapidly among research universities in the 1980s. Start-ups are new companies dependent on licensing institutions’ technology for their formation. Sometimes universities take an equity position in these companies. The investment can be limited to free use of the license, or can involve cash, or arrangement of venture capital partners to fund the company. The number of equity deals spread rapidly among research universities. In 1994, the first year the Association for University Technology Managers reported such data, there were 175 start-up companies in US universities; in 2001, 402 new start-ups were reported. Equity provides several advantages over licensing: it gives universities options or financial claims on companies’ future income; equity deals align interests of university and firm with regard to rapid commercialization of technology; and it signals to interested investors the universities’ certainty about the worth of the technology. If the start-up company is successful, it moves from being privately held to being opened to public investment through an initial public offering (IPO), which greatly increases the worth of the stock of the company, and the monetary returns to the university. On the downside, taking equity involves risk of failure and loss of funds, while start-ups also often take up large amounts of faculty time.
Research Parks University research parks generally house technologybased organizations or companies that seek to benefit from the host university’s knowledge base and researchers. By housing the research park, the university encourages technology transfer. In addition to financial gain from technology transfer in which they are participants – for example, the research park may house university start-up companies – research parks often provide opportunities for students and faculty to participate in entrepreneurial science. The community and region gain if technology transfer results in economic development. Research parks grew rapidly in the mid-1980s and a large number are currently in the planning states. Currently, there are 81 research parks associated with universities, and an additional 27 are being planned.
Research Commercialization
Information technology and biosciences are often the focus of research parks. The contribution of research parks to economic development is unclear. The only studies of research parks to date account only for growth of employment within the park itself – about 8.4% over the life of a park. Approximately 50% of the parks were initially funded with public moneys, of which the public sector supported about 70% of initial park cost. Many research parks house activities unrelated to university research and development, in effect serving as a real estate operation on the part of the university, receiving income from rents. Incubators About 50% of research parks include incubators. In general, incubators foster start-up companies. As in the case of research parks, there are not a large number of studies of incubators. One study indicated that approximately half of start-up companies failed unequivocally in 3 years, while approximately 30% left the incubator and went out of their own. Start-ups with technology licenses from the sponsoring university and linkages to university faculty were less likely to fail, but less likely to leave the incubator at the end of 3 years.
Other Forms of Commercialization Technology is arguably more reliably transferred to the market by means other than patents and other forms of university-owned intellectual property. Managers of industrial R&D repeatedly stress that the most import contribution of universities to innovation is training of scientists and engineers. They stress the importance of public research, highlighting transfer channels such as public papers and reports, conferences, informal exchange, consulting, and other forms of university–industry partnerships that do not depend on intellectual property. Patents are most important for the biological sciences, which account for the largest amount. They are less important in fields such as engineering, materials sciences, and computer science.
Copyright The Telecommunications Act of 1996 dramatically altered the industry regulatory framework. Prior to 1996, the 1934 Communications Act, as implemented through the Federal Communications Commission, authorized separate monopolies: broadcast, cable, wire, wireless, and satellite. The 1996 Telecommunications Act deregulated these various industries, creating a competitive climate that favored
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growth of the Internet, World Wide Web, and electronic (e)-business, all of which utilized previously separated communications media in new patterns. Deregulation of telecommunications created numerous possibilities for an academic capitalism knowledge/learning regime, ranging from software to distance education. The Digital Millennium Copyright Act (DMCA) of 1998 protects digital property by prohibiting unauthorized access to a copyrighted work as well as unauthorized copying of a copyrighted work. The DMCA is far-reaching and covers an array of technologies, from web casting to hyperlinks, online directories, search engines, and the content of the materials made available by these technologies. Not only are citizens (and students) penalized for unauthorized access, but devices and services that circumvent copyright are also prohibited. The law very deliberately seeks to develop electronic commerce and associated technologies by strengthening protections of all forms of digital property. There are some exceptions, the broadest being for law enforcement and intelligence. The other exceptions are quite narrow. US universities and colleges copyright some forms of software as well as educational products, tests and measurements, and other marketable products able to generate external revenues for colleges and universities. Examples are the Minnesota Multiphasic Personality Inventory, developed by the University of Minnesota and a video demonstrating minimal incision aortic surgery, developed at the University of Wisconsin. Most US universities now have copyright policies that claim institutional ownership of products created with university resources, all products developed by administrative personnel, and products stemming from work-for-hire contracts. Over time, university protection of intellectual products by copyright has become more inclusive.
Infrastructure Commercialization of research entails considerable infrastructure development on the part of universities. Most universities now fund technology transfer offices, many also fund research parks and incubators and economic development offices. The managerial capacity in US colleges and universities has greatly expanded. The new functions are many: surveilling institutional employees’ intellectual property activity to ensure capture by the system or institution through faculty disclosures; reviewing and evaluating faculty disclosures; technology licensing; supervision of royalty flows, including distribution of funds within institutions; reinvestment of funds in new market activities; litigation to defend intellectual property; evaluation of intellectual property for institutional equity investments; monitoring and occasionally administering corporations in which the institution holds equity;
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overseeing IPOs; developing and monitoring market activity for conflict-of-interest issues. As colleges and universities become more involved in academic capitalism, they hire more managerial professional staff. Expanded managerial capacity institutionalizes business activity in colleges and universities by allowing segments to directly engage the market. Studies of university income from intellectual property suggests that the following contributes to success: past interactions with industry; hiring and retaining star faculty; greater numbers of experienced technology licensing officers; close ties to venture capital prior to initiation of a start-up company; and a culture supportive of entrepreneurial endeavor. Some related costs which are rarely included in costbenefit analyses of commercialization of research are: establishment or expansion of arms-length organizations, usually foundations, that distance market ventures from public institutions, institutional research boards (IRBs), which approve research with human subjects, essential to clinical trials of pharmaceutical and medical devices products; administrative policy development, ranging from conflict-of-interest policies to ownership policies; and faculty time. Faculty time is consumed in several ways. For example, faculty participate on committees such as IRB advisory committees, intellectual property committees, and conflict-of-interest committees. When faculty are involved in start-up companies, or in incubator activities, they very often work closely with the new firm, taking time away from other forms of research, including grants writing, as well as teaching and committee work. As the infrastructure for commercialization at universities develops in the United States, it articulates with dense networks in the broader society that support research. These networks range from the National Institutes of Health, and the other federal mission agencies that provide research funding, to hospitals, venture capitalists, state economic development agencies, and to small firms. Over time, these networks become more closely interwoven, promoting rapid commercialization through regional and national links. The union of graduate education and research in US research universities promotes interdisciplinarity that fosters innovation. In general, the US system is more heterogeneous than others. Europe, for example, has a less diverse group of public research institutions that works in narrower scientific areas, and lacks upstream public funding agencies such as the National Institutes of Health.
Conclusion In general, academic capitalism promotes research commercialization that shifts the emphasis of universities toward graduate-level science and technology. This
occurs because of the infrastructure costs discussed above. Rather than becoming a source of funding for undergraduate liberal arts and professional programs, in which the large majority of students are enrolled, research commercialization usually calls for greater expenditure on infrastructure and perceived high-opportunity product investments. Although funds from research commercialization are returned to universities to support education and research, many universities have moved away from defraying general support programs and instead invest these funds in further commercialization efforts. Through shifts in incentive systems, emphasis is placed on entrepreneurial research. One indicator is the dramatic rise in patenting by universities. Another is the flattening of scientific journal publishing rates. The number of science and engineering (S&E) articles by authors based in the United States has remained flat since 1992, even though real R&D expenditures and the number of researchers continued to rise. A similar shift was also seen in Canada, the United Kingdom, and the Netherlands. At the same time, a rapid growth of article citations in patents occurred. The growth of citations of scientific research in patents points to the close ties between research and products that are research driven, primarily in the life sciences. Taken together, the rise in patenting, the flattening of article production, and the growth of citations of science in patents suggest a realignment of the research system to promote commercialization. Most of the literature on research commercialization appears in economics journals or in specialty journals, such as Research Policy and Management Science. This literature is focused primarily on S&E fields, especially activity in the life sciences, and on increasing innovation and economic development, and on expanding the revenue from university intellectual property. Generally, it takes the position that for economic development to continue, innovation to occur, and revenue to increase more institutional funds should be invested into the infrastructure described above. This literature does not address the university as an organization engaged in undergraduate education across an array of fields other than science and technology, nor does it directly address the critique of research commercialization, which has appeared in a variety of disciplines and also reaches across disciplines. The critique of research commercialization points out that most research universities do not make money on technology transfer even though they expend substantial sums. Even among the top-rated US universities, only a small number generate a substantial revenue stream, and many of the infrastructure costs discussed above are not figured in the net costs. Even when research universities do generate substantial revenues, these are only a fraction of the grant and contract support from public and industrial sources. Patent and licensing income was $850 million for
Research Commercialization
academic institutions in 2004, as compared to $42 billion in support for grant and contract support for academic research and development. Another strand of critique points to the erosion of the scientific commons through the expansion of private rights in intellectual property. This critique notes that rapidly published open science contributes to scientific advance. As the number of patents and copyrights increases, access to the scientific commons decreases, and at some point in the not-too-distant future, scientific advances may be slowed and innovation stifled. A related critique notes that as greater numbers of university scientists become involved in commercial research, the university loses its claim to represent disinterested knowledge. If the majority of molecular biologists serves on the boards of biotechnology corporations, how can these scientists and the universities that have invested in their intellectual property impartially judge the merit of the science? This critique makes the case that commercialization undercuts a central public function of universities: disinterested assessment of knowledge. The broadest level of critique suggests that commercialization of research contributes to undermining public trust in universities. This critique suggests that commercialization of research may be funded by undergraduate tuition rises. As tuition has dramatically increased, so has the amount of funds research universities spend on research: institutional expenditures for research rose from 11% in 1972 to approximately 20% in 2004. High tuition for undergraduates without concomitant attention to them may cause the public to lose trust in higher education, which undercuts support. Patents dramatically illustrate the growth of the academic capitalist knowledge/learning regime. Patents, licensing and running royalties, start-up companies, and universities’ equity positions in corporations built on faculty patents are market behaviors that involve nonprofit institutions in profit taking. Yet, colleges and universities are not market entities because they do not disburse profits to shareholders. Instead, funds from external market revenues are plowed back into the institutions. In some ways, colleges and universities that patent are able to cross the traditional borders between public and private, engaging in practices that best meet their needs for generating external revenues. If patenting, which is expensive, fails to lead to licenses and royalties, the state bears the cost in the case of public institutions. Similarly, the start-up corporations initiated by universities are in many ways a form of state-subsidized capitalism. Start-ups are risky undertaking: only one in ten is likely to succeed. However, faculty and universities are spared the discipline of the market in that there are relatively few direct penalties for failure. Income from royalties and licenses are tax free, so long as the profits are returned to the university. Although patenting and technology transfer are generally portrayed
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as a win–win endeavor, a relatively small number of large research universities are the only ones to generate substantial external revenues. For many smaller colleges and universities, the cost of maintaining a technology transfer office exceeds any revenues. See also: Funding of University Research; Research Quality Assessment; The Management of University Research.
Bibliography Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press.
Further Reading Benneworth, P. and Charles, D. (2005). University spin-off policies and economic development in less successful regions: Learning from two decades of policy practice. European Planning Studies 13(4), 537–557. Bollier, D. (2002). Silent Theft: The Private Plunder of our Common Wealth. New York: Routledge. Chan, A. and Fisher, D. (2006). Academic culture in Canadian universities: The contexts of change. In Gingras, Y. and Roy, L. (eds.) Les Transformations des Universite´s du X111 au XX1 Sie`cle, pp 175–203. Que´bec: Presses de l’Universite´ du Que´bec. Cohen, W. M., Nelson, R. R., and Walsh, J. P. (2002). Links and impacts: The influence of public research on industrial R&D. Management Science 48(1), 1–23. Feldman, M., Feller, I., Bercovitz, J., and Burton, R. (2002). Equity and the technology transfer strategies of American research universities. Management Science 48(1), 105–121. Geuna, A. and Nesta, L. J. J. (2006). University patenting and its effects on academic research: The emerging European evidence. Research Policy 35, 790–807. Kirp, D. (2003). Shakespeare, Einstein, and the Bottom Line: The Marketing of Higher Education. Cambridge, MA: Harvard University Press. Krimsky, S. (2003). Science in the Private Interest: Has the Lure of Profits Corrupted Biomedical Research? Lanham, MD: Rowman and Littlefield. Link, A. N. and Scott, J. T. (2006). U.S. university research parks. Journal of Productivity Analysis 25, 43–55. Marginson, S. and Considine, M. (2000). The Enterprise University: Power, Governance, and Reinvention in Australia. Cambridge: Cambridge University Press. Mark, B. (2002). Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. Cambridge: Cambridge University Press. Mowery, D. C., Nelson, R. R., Sampat, B. N., and Ziedonis, A. A. (2004). Ivory Tower and Industrial Innovation: University–Industry Technology Transfer before and after the Bayh–Dole Act. Stanford, CA: Stanford Business Books. National Science Board (2006). Science and Engineering Indicators 2006, two volumes. Arlington, VA: National Science Foundation (volume 1, NSB 06-01; volume 2, NSB 06-01A). O’Shea, R. P., Allen, T. J., Chevalier, A., and Roche, F. (2005). Entrepreneurial orientation, technology transfer and spin-off performance of U.S. Universities. Research Policy 34, 994–1009. Owen-Smith, J., Riccaboni, M., Pommolli, F., and Powell, W. W. (2002). A comparison of U.S. and European university–industry relations in the life sciences. Management Science 48(1), 24–43.
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Powers, J. B. (2003). Commercializing academic research: Resource effects on performance of university technology transfer. Journal of Higher Education 74(1), 26–50. Powers, J. B. The profitability of technology licensing. Ms prepared for submissioin to Science. Richard, P. (2003). Unholy Trinity: The IMF, World Bank and WTO. London: Zed Books. Rothaermel, F. T. and Thursby, M. (2005). Incubator firm failure or graduation? The role of university linkages. Research Policy 43, 1076–1090.
Slaughter, S. and Rhoades, G. (2004). Academic Capitalism and the New Economy. Baltimore, MD: Johns Hopkins University Press. Slaughter, S. and Leslie, L. L. (1997). Academic Capitalism: Politics, Policy and the Entrepreneurial University. Baltimore, MD: Johns Hopkins University Press. Soley, L. (1995). Leasing the Ivory Tower: The Corporate Takeover of Academia. Boston, MA: South End Press. Washburn, J. (2005). University Inc.: The Corporate Corruption of Higher Education. New York: Basic Books.
As more and more students attend post-secondary education and state support per student declines, faculty, administrators, trustees, regents and state officials are searching for ways to expand university revenues. One strategy is commercialization of research. To maintain or expand resources, faculty are increasingly encouraged to compete for external dollars tied to market-related research. Market-related research is referred to variously as applied, commercial, strategic, and targeted research. The external monies at which commercial research is aimed come in the form of partnerships with industry and government, technology transfer, royalties and licenses, equity holdings in faculty start-up companies, and income related to incubators and research parks. Another strategy for securing external dollars is through the marketing and sales of educational products and services, ranging from learning enhancement tools to digital education. Generally, institutional and professorial market or market-like efforts to secure external monies can be conceptualized as academic capitalism. This article focuses on a single aspect of academic capitalism: commercialization of research. The following topics are covered: broad policy changes that made research commercialization possible; patents; start-up or spin-off companies; research parks and incubators; copyright; and the infrastructure required by universities to manage research commercialization. Although the article is comparative, the focus is on the United States because it has led research commercialization.
Policy Changes Academic capitalism depends on the rise of the neoliberal state, which now characterizes English-speaking industrialized countries such as Australia, Canada, the United States, and the United Kingdom. The European Union (EU) does not embrace neoliberalism as closely as the English-speaking countries, but is in the process of adopting many of its practices with regard to higher education generally and research commercialization, specifically. In the United States, research universities came to maturity after World War II, during the great expansion of postsecondary education in the 1950s and 1960s, in the era of embedded liberalism. Embedded liberalism was a reaction to classic liberalism and sought to constrain capitalism to avoid depression, poverty, and social unrest. To achieve these ends, social and political oversight, regulatory and
300
planning functions were embedded in the state. The common goals of embedded liberal states were full employment, economic growth, and the welfare of the citizenry. If necessary, the state intervened in market processes to reach these goals. Keynesian monetary policies were characteristic of the embedded liberal state. In contrast, neoliberalism is: . . .a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices (Harvey, 2005).
Although neoliberal theory minimizes the role of the state, in practice state subsidies and oversight are not minimized; rather they shift to new areas. In particular, and important with regard to higher education, subsidies shift from broad general appropriations for the public good – for example, low tuition – to user taxes and fees – for example, high tuition – which emphasize individual rather than social gains accrued as a result of higher education. In general, higher education shifts from a public good knowledge/learning regime to an academic capitalist knowledge/learning regime. The academic capitalist knowledge/learning regime would not be possible without the neoliberal state. However, the relationship is bidirectional and higher education is in many respects the exemplar neoliberal state agency in that it is flexible, entrepreneurial, and essential to the maintenance and expansion of a knowledge economy. The history of public policy in the United States illustrates the rise of the neoliberal state in research commercialization. Prior to the Bayh-Dole Act (1980), federal policy in the United States placed discoveries made with federal grant funds in the public domain. Although universities were permitted to secure patents from the federal agency that funded their research, a relatively small number of universities patented by engaging in this process. The 1980 Bayh-Dole Act signaled a more general encouragement of university research commercialization. It gave universities title to inventions discovered with federal research and development funds. Bayh-Dole made university technology transfer to the private sector an important outcome of federally financed research, and allowed exclusive licensing of publicly funded research to achieve that policy goal.
Research Commercialization
The Bayh-Dole Act gave new and concrete meaning to the phrase ‘‘commodification of knowledge.’’ As potential patent holders, university trustees and administrators require faculty to disclose all research that can be protected intellectual property. Faculty begin to conceptualize their discoveries as products or processes, private, valuable, and licensable, not necessarily as knowledge to share publicly with a community of scholars. The Bayh-Dole Act, for which representatives of research universities and business lobbied intensively, was only one piece of a broader bi-partisan competitiveness strategy developed by the US Congress. Beginning in the 1980s, an array of legislation – ranging from research tax credits to technology transfer – was passed that laid the ground work for the competitiveness coalition. For example, the Federal Courts Improvements Act (1982) created a new Court of Appeals for the Federal Circuit (CAFC) which handled patent appeals from district courts, thereby ending forum shopping in intellectual property cases, creating a more uniform approach to patents. The new court led the way for a greatly strengthened approach to intellectual property, which eventually allowed patents on genetically engineered bacteria, genetically altered mice, particular gene sequences, surgical methods, computer software, financial products, and methods for conducting auctions on the World Wide Web. Similar changes occurred in the United Kingdom, beginning under Margaret Thatcher’s government, and in Australia, under the Hawke government. Canada lagged behind, but in the 1990s neoliberal policy at both the provincial- and federal-level policy heavily promoted research commercialization. In the 2000s, the EU began a research commercialization program, drawing heavily on the models provided by the English-speaking countries.
Patents Prior to 1981, fewer than 250 patents were issued to US universities per year. The number of new patent applications more than quintupled between Fiscal Year 1991 and Fiscal Year 2003, indicating the growing effort and increasing success of universities in obtaining patent protection for their technology. The number of institutions awarded patents increased by more than 60% (to 198) between the late 1980s and 2003. Both public and private institutions participated in this rise. Success in obtaining patents seems to depend more on other resources, which are discussed below under infrastructure. Despite the increase in institutions receiving patents, the distribution of patenting activity has remained highly concentrated among a few major research universities. Among the top 100 research and development (R&D) institutions, the top 25 recipients between 1994 and
301
2003 accounted for 55% of all academic patents in 2003, a share that has remained constant for two decades. Including the next 75 largest recipients increases the share to more than 80% of patents granted to all institutions since 1987. The growth in academic patents occurred primarily in the life sciences and biotechnology. Of the top 100 US research universities, ten institutions generated 66% of profits received from technology licensing. Less research-intensive institutions with small technology licensing programs or institutions that are new to technology licensing generally experience annual losses. The EU demonstrates a similar pattern. Although the growth of university owned and invented patents has increased, university licensing is not profitable for most universities. The success of a small number of intuitions may have exacerbated the differences among universities within the EU with regard to resources for research and development. US universities responded to the changing policy opportunities by developing intellectual property policies that simultaneously offered powerful incentives for faculty to patent and expanded institutional control over intellectual property. Royalties The various US university patent and/or intellectual property policies offer a wide range of royalty splits among faculty, department and/or college, and university. The most generous policies split royalties with faculty 50–50. At the bottom of range of royalty splits, faculty receive one-third of the royalty income. Private universities tend to be less generous than public ones, with many offering faculty one-third of the income from their licenses. When policies change over time, they usually give faculty a lower percentage of royalties. Whether it is one-third or one-half, the incentives for faculty are powerful. Personnel Coverage In 1970s and 1980s, a number of patent policies covered only inventors. By the mid-1990s, they included faculty, staff, graduate students, post-doctoral fellows, nonemployees who participate in university research projects, visiting faculty and, occasionally, undergraduates. If these personnel engage in research that might lead to an invention with market potential, they are required to disclose it, so an institutional decision about ownership and patenting can be made. Exceptions US universities had long claimed ownership of discoveries made by faculty; the decisive court cases were heard in
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the 1950s. However, initially, there were exceptions to universities’ ownership claims to intellectual property patented by faculty. If faculty made the discoveries on their own time, using their own resources, and not availing themselves of university facilities, they could claim a patent for themselves – for example, if they invented something in the summer, in their garage work room. As the academic capitalist knowledge/learning regime developed, definitions of time, resources, and facilities use were specified to the point where it became very difficult for faculty to assert any claims to ownership of invention. For example, policies frequently have guidelines that indicate that if researchers or other personnel use anything but routinely available office equipment and commercially available software or library materials generally available in nonuniversity locations, they are making substantial use of university resources and therefore the university owns the intellectual property. Initially, state system and institutional policies addressed only patents. Over the years, the forms of intellectual property covered multiplied. Among those included were: licensing income, milestone payments, equity interest, mask work, which charts the topography of a semiconductor chip product, material transfer agreements, tangible property (cell lines, software, and composite matter), trade secrets, and copyright. The multiple forms of market activity pursued by universities together with faculty’s close involvement in them created many opportunities for conflict of interest. Factors that increase the possibilities of conflict of interest for faculty are: increased magnitude of personal compensation; growing numbers of financial relationships between a creator and a company; greater commitment of a faculty’s time to a company; faculty or administrators holding equity in a company; involvement of trainees or students in a company; and involvement of patients or human subjects in company research trials. In other words, the risk of conflict of interest increases the more closely faculty members or creators of intellectual property are involved with market activity. Conflict-of-interest policies have proliferated and become more detailed. However, few call for close monitoring of faculty or institutional administrators, suggesting the primary purpose of such policies is to protect institutions from liability in legal cases.
Start-Up Companies, Research Parks, and Incubators As universities became involved in research commercialization, they began to be regarded by state and federal policymakers and institutional leaders as engines of economic development. Universities became the center of a cluster of economic activities directed toward economic
growth in the state or region in which they were located. Licensing of inventions to local and regional companies was at the core of economic development activities, but start-up companies, research parks, and incubators also grew rapidly. These latter activities were seen as a way to spur regional economic development, particularly growth of high-paying jobs.
Start-Up Companies Start-up companies began to increase rapidly among research universities in the 1980s. Start-ups are new companies dependent on licensing institutions’ technology for their formation. Sometimes universities take an equity position in these companies. The investment can be limited to free use of the license, or can involve cash, or arrangement of venture capital partners to fund the company. The number of equity deals spread rapidly among research universities. In 1994, the first year the Association for University Technology Managers reported such data, there were 175 start-up companies in US universities; in 2001, 402 new start-ups were reported. Equity provides several advantages over licensing: it gives universities options or financial claims on companies’ future income; equity deals align interests of university and firm with regard to rapid commercialization of technology; and it signals to interested investors the universities’ certainty about the worth of the technology. If the start-up company is successful, it moves from being privately held to being opened to public investment through an initial public offering (IPO), which greatly increases the worth of the stock of the company, and the monetary returns to the university. On the downside, taking equity involves risk of failure and loss of funds, while start-ups also often take up large amounts of faculty time.
Research Parks University research parks generally house technologybased organizations or companies that seek to benefit from the host university’s knowledge base and researchers. By housing the research park, the university encourages technology transfer. In addition to financial gain from technology transfer in which they are participants – for example, the research park may house university start-up companies – research parks often provide opportunities for students and faculty to participate in entrepreneurial science. The community and region gain if technology transfer results in economic development. Research parks grew rapidly in the mid-1980s and a large number are currently in the planning states. Currently, there are 81 research parks associated with universities, and an additional 27 are being planned.
Research Commercialization
Information technology and biosciences are often the focus of research parks. The contribution of research parks to economic development is unclear. The only studies of research parks to date account only for growth of employment within the park itself – about 8.4% over the life of a park. Approximately 50% of the parks were initially funded with public moneys, of which the public sector supported about 70% of initial park cost. Many research parks house activities unrelated to university research and development, in effect serving as a real estate operation on the part of the university, receiving income from rents. Incubators About 50% of research parks include incubators. In general, incubators foster start-up companies. As in the case of research parks, there are not a large number of studies of incubators. One study indicated that approximately half of start-up companies failed unequivocally in 3 years, while approximately 30% left the incubator and went out of their own. Start-ups with technology licenses from the sponsoring university and linkages to university faculty were less likely to fail, but less likely to leave the incubator at the end of 3 years.
Other Forms of Commercialization Technology is arguably more reliably transferred to the market by means other than patents and other forms of university-owned intellectual property. Managers of industrial R&D repeatedly stress that the most import contribution of universities to innovation is training of scientists and engineers. They stress the importance of public research, highlighting transfer channels such as public papers and reports, conferences, informal exchange, consulting, and other forms of university–industry partnerships that do not depend on intellectual property. Patents are most important for the biological sciences, which account for the largest amount. They are less important in fields such as engineering, materials sciences, and computer science.
Copyright The Telecommunications Act of 1996 dramatically altered the industry regulatory framework. Prior to 1996, the 1934 Communications Act, as implemented through the Federal Communications Commission, authorized separate monopolies: broadcast, cable, wire, wireless, and satellite. The 1996 Telecommunications Act deregulated these various industries, creating a competitive climate that favored
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growth of the Internet, World Wide Web, and electronic (e)-business, all of which utilized previously separated communications media in new patterns. Deregulation of telecommunications created numerous possibilities for an academic capitalism knowledge/learning regime, ranging from software to distance education. The Digital Millennium Copyright Act (DMCA) of 1998 protects digital property by prohibiting unauthorized access to a copyrighted work as well as unauthorized copying of a copyrighted work. The DMCA is far-reaching and covers an array of technologies, from web casting to hyperlinks, online directories, search engines, and the content of the materials made available by these technologies. Not only are citizens (and students) penalized for unauthorized access, but devices and services that circumvent copyright are also prohibited. The law very deliberately seeks to develop electronic commerce and associated technologies by strengthening protections of all forms of digital property. There are some exceptions, the broadest being for law enforcement and intelligence. The other exceptions are quite narrow. US universities and colleges copyright some forms of software as well as educational products, tests and measurements, and other marketable products able to generate external revenues for colleges and universities. Examples are the Minnesota Multiphasic Personality Inventory, developed by the University of Minnesota and a video demonstrating minimal incision aortic surgery, developed at the University of Wisconsin. Most US universities now have copyright policies that claim institutional ownership of products created with university resources, all products developed by administrative personnel, and products stemming from work-for-hire contracts. Over time, university protection of intellectual products by copyright has become more inclusive.
Infrastructure Commercialization of research entails considerable infrastructure development on the part of universities. Most universities now fund technology transfer offices, many also fund research parks and incubators and economic development offices. The managerial capacity in US colleges and universities has greatly expanded. The new functions are many: surveilling institutional employees’ intellectual property activity to ensure capture by the system or institution through faculty disclosures; reviewing and evaluating faculty disclosures; technology licensing; supervision of royalty flows, including distribution of funds within institutions; reinvestment of funds in new market activities; litigation to defend intellectual property; evaluation of intellectual property for institutional equity investments; monitoring and occasionally administering corporations in which the institution holds equity;
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overseeing IPOs; developing and monitoring market activity for conflict-of-interest issues. As colleges and universities become more involved in academic capitalism, they hire more managerial professional staff. Expanded managerial capacity institutionalizes business activity in colleges and universities by allowing segments to directly engage the market. Studies of university income from intellectual property suggests that the following contributes to success: past interactions with industry; hiring and retaining star faculty; greater numbers of experienced technology licensing officers; close ties to venture capital prior to initiation of a start-up company; and a culture supportive of entrepreneurial endeavor. Some related costs which are rarely included in costbenefit analyses of commercialization of research are: establishment or expansion of arms-length organizations, usually foundations, that distance market ventures from public institutions, institutional research boards (IRBs), which approve research with human subjects, essential to clinical trials of pharmaceutical and medical devices products; administrative policy development, ranging from conflict-of-interest policies to ownership policies; and faculty time. Faculty time is consumed in several ways. For example, faculty participate on committees such as IRB advisory committees, intellectual property committees, and conflict-of-interest committees. When faculty are involved in start-up companies, or in incubator activities, they very often work closely with the new firm, taking time away from other forms of research, including grants writing, as well as teaching and committee work. As the infrastructure for commercialization at universities develops in the United States, it articulates with dense networks in the broader society that support research. These networks range from the National Institutes of Health, and the other federal mission agencies that provide research funding, to hospitals, venture capitalists, state economic development agencies, and to small firms. Over time, these networks become more closely interwoven, promoting rapid commercialization through regional and national links. The union of graduate education and research in US research universities promotes interdisciplinarity that fosters innovation. In general, the US system is more heterogeneous than others. Europe, for example, has a less diverse group of public research institutions that works in narrower scientific areas, and lacks upstream public funding agencies such as the National Institutes of Health.
Conclusion In general, academic capitalism promotes research commercialization that shifts the emphasis of universities toward graduate-level science and technology. This
occurs because of the infrastructure costs discussed above. Rather than becoming a source of funding for undergraduate liberal arts and professional programs, in which the large majority of students are enrolled, research commercialization usually calls for greater expenditure on infrastructure and perceived high-opportunity product investments. Although funds from research commercialization are returned to universities to support education and research, many universities have moved away from defraying general support programs and instead invest these funds in further commercialization efforts. Through shifts in incentive systems, emphasis is placed on entrepreneurial research. One indicator is the dramatic rise in patenting by universities. Another is the flattening of scientific journal publishing rates. The number of science and engineering (S&E) articles by authors based in the United States has remained flat since 1992, even though real R&D expenditures and the number of researchers continued to rise. A similar shift was also seen in Canada, the United Kingdom, and the Netherlands. At the same time, a rapid growth of article citations in patents occurred. The growth of citations of scientific research in patents points to the close ties between research and products that are research driven, primarily in the life sciences. Taken together, the rise in patenting, the flattening of article production, and the growth of citations of science in patents suggest a realignment of the research system to promote commercialization. Most of the literature on research commercialization appears in economics journals or in specialty journals, such as Research Policy and Management Science. This literature is focused primarily on S&E fields, especially activity in the life sciences, and on increasing innovation and economic development, and on expanding the revenue from university intellectual property. Generally, it takes the position that for economic development to continue, innovation to occur, and revenue to increase more institutional funds should be invested into the infrastructure described above. This literature does not address the university as an organization engaged in undergraduate education across an array of fields other than science and technology, nor does it directly address the critique of research commercialization, which has appeared in a variety of disciplines and also reaches across disciplines. The critique of research commercialization points out that most research universities do not make money on technology transfer even though they expend substantial sums. Even among the top-rated US universities, only a small number generate a substantial revenue stream, and many of the infrastructure costs discussed above are not figured in the net costs. Even when research universities do generate substantial revenues, these are only a fraction of the grant and contract support from public and industrial sources. Patent and licensing income was $850 million for
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academic institutions in 2004, as compared to $42 billion in support for grant and contract support for academic research and development. Another strand of critique points to the erosion of the scientific commons through the expansion of private rights in intellectual property. This critique notes that rapidly published open science contributes to scientific advance. As the number of patents and copyrights increases, access to the scientific commons decreases, and at some point in the not-too-distant future, scientific advances may be slowed and innovation stifled. A related critique notes that as greater numbers of university scientists become involved in commercial research, the university loses its claim to represent disinterested knowledge. If the majority of molecular biologists serves on the boards of biotechnology corporations, how can these scientists and the universities that have invested in their intellectual property impartially judge the merit of the science? This critique makes the case that commercialization undercuts a central public function of universities: disinterested assessment of knowledge. The broadest level of critique suggests that commercialization of research contributes to undermining public trust in universities. This critique suggests that commercialization of research may be funded by undergraduate tuition rises. As tuition has dramatically increased, so has the amount of funds research universities spend on research: institutional expenditures for research rose from 11% in 1972 to approximately 20% in 2004. High tuition for undergraduates without concomitant attention to them may cause the public to lose trust in higher education, which undercuts support. Patents dramatically illustrate the growth of the academic capitalist knowledge/learning regime. Patents, licensing and running royalties, start-up companies, and universities’ equity positions in corporations built on faculty patents are market behaviors that involve nonprofit institutions in profit taking. Yet, colleges and universities are not market entities because they do not disburse profits to shareholders. Instead, funds from external market revenues are plowed back into the institutions. In some ways, colleges and universities that patent are able to cross the traditional borders between public and private, engaging in practices that best meet their needs for generating external revenues. If patenting, which is expensive, fails to lead to licenses and royalties, the state bears the cost in the case of public institutions. Similarly, the start-up corporations initiated by universities are in many ways a form of state-subsidized capitalism. Start-ups are risky undertaking: only one in ten is likely to succeed. However, faculty and universities are spared the discipline of the market in that there are relatively few direct penalties for failure. Income from royalties and licenses are tax free, so long as the profits are returned to the university. Although patenting and technology transfer are generally portrayed
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as a win–win endeavor, a relatively small number of large research universities are the only ones to generate substantial external revenues. For many smaller colleges and universities, the cost of maintaining a technology transfer office exceeds any revenues. See also: Funding of University Research; Research Quality Assessment; The Management of University Research.
Bibliography Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press.
Further Reading Benneworth, P. and Charles, D. (2005). University spin-off policies and economic development in less successful regions: Learning from two decades of policy practice. European Planning Studies 13(4), 537–557. Bollier, D. (2002). Silent Theft: The Private Plunder of our Common Wealth. New York: Routledge. Chan, A. and Fisher, D. (2006). Academic culture in Canadian universities: The contexts of change. In Gingras, Y. and Roy, L. (eds.) Les Transformations des Universite´s du X111 au XX1 Sie`cle, pp 175–203. Que´bec: Presses de l’Universite´ du Que´bec. Cohen, W. M., Nelson, R. R., and Walsh, J. P. (2002). Links and impacts: The influence of public research on industrial R&D. Management Science 48(1), 1–23. Feldman, M., Feller, I., Bercovitz, J., and Burton, R. (2002). Equity and the technology transfer strategies of American research universities. Management Science 48(1), 105–121. Geuna, A. and Nesta, L. J. J. (2006). University patenting and its effects on academic research: The emerging European evidence. Research Policy 35, 790–807. Kirp, D. (2003). Shakespeare, Einstein, and the Bottom Line: The Marketing of Higher Education. Cambridge, MA: Harvard University Press. Krimsky, S. (2003). Science in the Private Interest: Has the Lure of Profits Corrupted Biomedical Research? Lanham, MD: Rowman and Littlefield. Link, A. N. and Scott, J. T. (2006). U.S. university research parks. Journal of Productivity Analysis 25, 43–55. Marginson, S. and Considine, M. (2000). The Enterprise University: Power, Governance, and Reinvention in Australia. Cambridge: Cambridge University Press. Mark, B. (2002). Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. Cambridge: Cambridge University Press. Mowery, D. C., Nelson, R. R., Sampat, B. N., and Ziedonis, A. A. (2004). Ivory Tower and Industrial Innovation: University–Industry Technology Transfer before and after the Bayh–Dole Act. Stanford, CA: Stanford Business Books. National Science Board (2006). Science and Engineering Indicators 2006, two volumes. Arlington, VA: National Science Foundation (volume 1, NSB 06-01; volume 2, NSB 06-01A). O’Shea, R. P., Allen, T. J., Chevalier, A., and Roche, F. (2005). Entrepreneurial orientation, technology transfer and spin-off performance of U.S. Universities. Research Policy 34, 994–1009. Owen-Smith, J., Riccaboni, M., Pommolli, F., and Powell, W. W. (2002). A comparison of U.S. and European university–industry relations in the life sciences. Management Science 48(1), 24–43.
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Powers, J. B. (2003). Commercializing academic research: Resource effects on performance of university technology transfer. Journal of Higher Education 74(1), 26–50. Powers, J. B. The profitability of technology licensing. Ms prepared for submissioin to Science. Richard, P. (2003). Unholy Trinity: The IMF, World Bank and WTO. London: Zed Books. Rothaermel, F. T. and Thursby, M. (2005). Incubator firm failure or graduation? The role of university linkages. Research Policy 43, 1076–1090.
Slaughter, S. and Rhoades, G. (2004). Academic Capitalism and the New Economy. Baltimore, MD: Johns Hopkins University Press. Slaughter, S. and Leslie, L. L. (1997). Academic Capitalism: Politics, Policy and the Entrepreneurial University. Baltimore, MD: Johns Hopkins University Press. Soley, L. (1995). Leasing the Ivory Tower: The Corporate Takeover of Academia. Boston, MA: South End Press. Washburn, J. (2005). University Inc.: The Corporate Corruption of Higher Education. New York: Basic Books.