Intermediating knowledge exchange between universities and businesses

Research Policy 37 (2008) 1167–1174

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Intermediating knowledge exchange between universities and businesses Shahid Yusuf ∗ Development Research Group, World Bank, 1818 H Street, NW, Washington, DC 20433, USA

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Article history: Available online 5 June 2008 Keywords: University–industry linkages Intermediaries Tacit knowledge Technology Licensing Offices Knowledge integration community

a b s t r a c t The forging of links between universities and businesses is viewed increasingly as an important means of stimulating knowledge development that can lead to commercial innovation. Achieving effective knowledge exchange, however, requires the midwifery of different kinds of intermediaries often working in concert. Active and many faceted intermediation for the purposes of knowledge sharing and commercialization is essential when the knowledge is tacit or uncodified. The papers in this special section describe and discuss various intermediary mechanisms that assist universities in transferring knowledge and aiding the process of innovation. No single recipe is clearly superior but examining a variety of experiences helps to highlight the strengths of specific intermediary processes and to identify some of their shortcomings. © 2008 Elsevier B.V. All rights reserved.

1. Making a knowledge economy There can be no denying that the skill and knowledge intensity of a wide range of productive activities in manufacturing and in the services industries is on the rise. A closely related and parallel development is the quickening of technological change most notably but by no means exclusively in areas directly affected by the IT revolution.1 This began gathering momentum in the 1980s. Because IT, being a general purpose technology (GPT),2 permeates so many activities and its reach continues to expand, the trends it has unleashed – a tighter integration of global markets, a greater demand for skills, a stronger focus on R&D to achieve more technological mileage, and a faster pace of innovation to sustain firm level competitiveness – will not soon abate. The economic ripple effects of elec-

∗ Tel.: +1 202 458 2339; fax: +1 202 522 1150. E-mail address: [email protected]. 1 See, for instance the discussion of accelerating technological innovation and some of its implication in Rycroft (2006). 2 The characteristics of GPTs are examined in Helpman (1998). 0048-7333/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.respol.2008.04.011

tricity and the internal combustion engine were spread over four to five decades and there is every reason to believe that the consequences of IT will be as far reaching. Other technologies with their roots in basic research conducted mainly since the 1970s are beginning to reinforce the impetus provided by IT. These are advances in the fields of biotechnology, nanotechnology, the material sciences, and most recently, in alternative energy sources. To varying degrees, these intersect with one another and also with IT, opening up new inter-disciplinary subfields for research and promising fruitful synergies already apparent for example in bioinformatics and the crafting of exotic new materials using nanotechnology (see Silberglitt et al., 2006). The potential cornucopia of technologies appears limitless, and around the world governments and businesses are pinning their hopes with respect to economic growth, improving living standards, and environmental sustainability for example, on technological progress. Science is also expected to provide a part, perhaps the essential part, of the solution to the challenges posed by climate change, the demand for cost-effective and practical sources of renewable energy to supplement fossil fuels, and the health problems associated with ageing,

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sedentariness and recalcitrant infectious diseases old and new. If technology is and remains the key, and in particular, technology that derives from advances in a number of relatively new scientific fields, then we can expect three trends to intensify: • The ratio of jobs requiring higher order skills will increase and workers will need to periodically refresh and/or diversify their skills over the course of longer working lives. • Accelerating technological progress will entail increasing investment in basic and applied science, the development of innovative technologies, and effective channels for diffusing this knowledge to potential users. • The importance of entrepreneurship and intermediating entities responsible for identifying and marketing promising technologies, adapting and commercializing them and shouldering some of the financial, developmental and market related risks will become greater. These trends have a number of major implications from among which we will focus on the two that are at the heart of this special section. First is the role of universities and their associated local and increasingly global knowledge networks in generating the scientific know-how and in conducting some of the early-stage development that underpins commercial technologies. Second is the process by which more of the scientific knowledge and embryonic technologies being discovered can be transformed into viable technologies with a shorter lag than is currently the case so that the payoff from investment in skills and in R&D is quicker and larger. The purpose of the papers in this special section is not only to examine the evolving links between universities and businesses but also to delve into the less well-understood process of knowledge exchange between universities and different types of users which can take many different forms, and the function of intermediaries which encourage and facilitate the process. 2. Universities and firms: the ties that bind There is growing literature on the many faceted contribution of universities to development, a contribution which relies more and more on the accretion of knowledge in its many forms and the educating of the labor force. By socializing workers and equipping them with skills, universities and other training institutions play a vital role the world over. They are a crucial part of the foundation of any modern industrial economy and their salience is becoming greater in ones where economic growth and better living standards are entwined with continuous advances in useable knowledge. Starting in the 19th century, a small number of universities in industrialized and industrial countries have engaged in basic and some applied research.3 There is also

3 On the early beginnings of research universities and an account of their subsequent evolution (see Clark, 2006; Yusuf, 2007; Mazzoleni, 2005;

a lengthening tradition of collaboration with businesses, farming communities, and government agencies on practical aspects of technology development by, for example, the land grant universities in the U.S. and the technical universities in Germany.4 These universities have engaged in basic and applied research, have contracted with firms to perfect technologies, provided consulting and extension services, and licensed their research findings. In recent years, universities have leveraged their intellectual property (IP) to spin-off firms by encouraging students and faculty to be entrepreneurial, by establishing incubators and in some cases creating science parks and providing small amounts of seed funding for start-ups. While universities have a large hand in producing the human capital so vital for the functioning and growth of a knowledge-intensive economy, the evidence on their direct contribution to commercially viable technologies is much patchier. A few of the leading research universities, almost all in the United States, derive a handsome income from licensing fees and royalties, although a handful of patents contribute the bulk of this revenue and in no case does it account for more than a small fraction of the university’s annual budget (Lester, 2005). These very same universities are also linked to start-up companies and provide a hub for clusters of firms, most notably in the fields of biotechnology, pharmaceuticals, and IT. Many other universities in the United States, Europe and Asia are the source of consulting services and of spin-offs and generate a trickle of patents. But for these universities the links to business are sparse and not particularly lucrative, and few institutions offer incentives to faculty members to pursue such opportunities. That businesses also do not currently perceive of universities as the leading sources of technology of commercial significance emerges from surveys conducted in the United States and the U.K. Universities are ranked behind competitors, customers, exhibitions, own research, suppliers, trade associations and other sources (see Cosh et al., 2006). This is surprising, but there are grounds for believing that the role of universities in the knowledge economy will acquire greater importance, and linkages with firms will start to multiply in industrialized and industrializing countries.5 There are several reasons for anticipating such a trend. First and foremost is the emphasis firms are assigning to product and process innovation to sustain competitiveness, enhance returns and to diversify into promising market niches.6 A competitive strategy, which gives primacy to innovation, requires investment in R&D, whether in-house, through alliances and partnerships with other firms, or

Mowery, 2005). Atkinson and Blanpied (2008) describe how the research university emerged in the U.S., the contribution of a few universities to technology development during WWII, and the subsequent support provided by the government. 4 Questions remain as to whether technical universities, which have been favored by Germany, give rise to more knowledge spillovers as compared with general universities. Audretsch and Lehmann (2005) find little difference between the two. 5 See Geiger (2006). 6 The shortening lifecycle of products is inducing firms to emphasize innovation as is the shortening lag time in bringing products to market.

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through outsourcing to research-oriented universities and other entities. With the complexity and cost of new technologies on the rise, even the largest firms are having to focus and specialize their in-house research and to hive off basic research and early-stage development to other parties—universities and dedicated research entities, public or private being among those best equipped to conduct both as well as to embark on multidisciplinary research (Auerswald et al., 2005). This trend, which has surfaced in only the past decade, is likely to strengthen the tendency of firms to adopt ‘open’ innovation strategies7 and to forge research alliances with universities, albeit perhaps only the more prominent, large strategically located ones, with an established track record of research in specific fields. Second, with many products and services becoming commodified, dynamic firms of every size are turning to the new opportunities arising from scientific advances. Telecommunications, software, ICs, the Internet, biotechnology, and pharmaceuticals, are among the current favorites (Branstetter and Ogura, 2005). Looking ahead, other opportunities beckon in the fields of multimedia, robotics, nano-, energy and materials technology. As we noted earlier, commercial success is predicated on hard scientific effort to push outward the scientific frontiers, unlocking findings which serve as grist for the development of technologies with commercial potential. The recent experience with IT and more forcefully with biotechnology and pharmaceuticals, suggests that in areas where technological progress is closely correlated with scientific advances, university researchers are the principal channels through which new knowledge enters the commercial domain.8 In these emerging scientific subfields, university researchers frequently fulfill the entrepreneurial function while simultaneously working on the frontlines to perfect and develop a technology, often through additional research, which will meet the market test. Many of the new starts, which are commercializing cutting-edge technologies, spring up in the vicinity of universities where the science underlying these technologies is being explored.9

7 Early in the twentieth century, companies outsourced what little applied research they engaged in. The rise of the Big Labs owned by AT&T, IBM, DuPont and General Electric initiated a trend towards inhouse research and a closed system of innovation. The cost of conducting research, the need to tap different kinds of expertise in developing many products and the advantages of looking far afield for good ideas, has increased the popularity of “open innovation” (see Chesbrough, 2006; Christensen et al., 2005). 8 The entrepreneurial role and the contribution of tacit knowledge to entrepreneurship is examined by Zucker et al. (1998) and by Shane (2002). The higher productivity of such scientists, prior to starting up a firm and subsequently is shown by Lowe and Gonzalez-Brambila (2007). Moreover, those scientists with valuable patents associated with substantial knowledge are more likely to join private firms or launch start-ups rather than work with university spin-offs (Crespi et al., 2007). 9 Kenney and Patton (2005) note that the telecommunications firms and the electronics industry in the U.S. are clustered in areas where there is a concentration of research and of intermediaries that assist in knowledge transfer, financing and the start-up of firms. Biotechnology firms, although they too tend to cluster generally near research universities, can raise venture capital from distant providers. Whenever the tacit content of the knowledge being commercialized is high, the clustering of firms near universities is likely to be greater. Hussler and Ronde (2007) show that

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For both these reasons, the interaction between firms and researchers based in universities can be close and frequent. A third reason why universities with research capabilities may seek ties with the business sector, is the strong desire to diversify sources of funding. Tertiary education is gradually becoming a globalized industry subject to intensifying competition for students, faculty, research contracts, and IP. In fact, attracting more and better students is a function of the caliber of the faculty and the university’s reputation in its selected areas of research, because even the largest and best-endowed universities have to specialize to some degree. Fruitful research also generates royalties and licensing and consulting fees for the university that helps to improve facilities and to pay staff higher salaries. Undoubtedly, there are downsides to a strategy that assigns priority to the kind of research with a potential commercial payoff, because it can divert faculty from adequately fulfilling their role as teachers and reduce the time and effort devoted to basic research. However, more universities are being driven to enlarge the research function and to explore the revenue earning possibilities. In other words, universities are being motivated to pursue research and linkages with the business sector in order to grow, to maintain their academic standing and in some cases, to even survive. A fourth and related factor is the encouragement and incentives that governments are giving to the university sector in an effort to expand the research function. Industrialized countries, finding that their competitive advantage in many traditional manufactures and tradeable services is being blunted by the rising production capabilities and lower wages in newly industrializing countries, are eagerly pushing technology development so as to diversify comparative advantage and looking to the entrepreneurial research universities to serve as the axes of national innovation systems. Policymakers, sensing that the winds are now favoring more knowledge-intensive products and that competition is accelerating the tempo of innovation, are hoping that universities can both improve the quality of education and increase the supply of usable knowledge.10

UILs based upon proximity arise from what they call epistemic, knowledge creation oriented networks. Communities of practice which are using more codified knowledge to bring innovations to the marketplace are more likely to be geographically dispersed. The emerging field of nanotechnology illustrates the working of an existing knowledge-based network that straddles several sub disciplines and in relation to which, the emergence of UILs depends upon the co-location of firms and of a host of supporting intermediaries providing technical support and other services (see Robinson et al., 2007). 10 Bozeman (2000) survey of technology transfer assesses the experience of universities and government research labs mainly in the United States. Since the 1980s, the U.S. authorities have freed federal laboratories to enter into cooperative technology agreements with the private sector through Cooperative Research and Development Agreements (CRADAs). Across Europe, governments are intensifying their efforts to enhance university research capabilities, in some cases relocating public research centers in universities and as a part of the Lisbon Initiative, attempting to create centers of excellence which will spawn UILs. The efforts by the Singapore government to make the National University a research-based institution that promotes entrepreneurship are described by Wong (2007).

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Governments have another angle as well. The rising relative costs of education, much like health costs, in conjunction with fiscal and demographic pressures (which vary in severity from country to country), are using public policies in a broad spectrum of countries, to push for closer and multi-stranded university–industry linkages. The more financing universities can obtain through their association with firms, the smaller their claims on the public budgets. Whether the efforts to raise the quality of human capital, and to promote more basic research and earlystage development in universities is consistent with the desire to reduce the burden of education spending and to increase the capabilities of universities to generate more commercially feasible technologies, is anyone’s guess. For many universities this might be a tall order. Even in the United States, less than 100 universities engage in a serious amount of research and only a minor fraction of these produce technologies that can readily be harnessed by firms (Atkinson and Blanpied, 2008).11 However, as we noted earlier, change is in the air. The expanding subsectors and new ones showing considerable promise are heavily science-based. Moreover, because these new industries are drawing on technologies that are not yet codified, they are far more reliant on the tacit knowledge12 of researchers whose scientific discoveries are feeding these technologies. For this reason, proximity to universities, contacts and papers jointly authored with researchers and access to as well as assimilation of this tacit knowledge through several channels, is advantageous to pioneering firms (see Zucker et al., 2002). 3. Intermediaries and tacit knowledge Entrepreneurial initiatives of researchers, consulting arrangements between university faculty and firms, university spin-offs and the hiring of graduates by companies are the avenues through which knowledge and especially tacit knowledge, diffuses. However, the transition from the lab to the commercial realm is always a difficult one. Developing a product or a service based on a new technology can be a complicated and risky process. Many SMEs are often poorly informed about new technologies, and ill-prepared to assimilate technology requiring departures from established practices because of a lack of technical and

11 Although universities are making an effort to patent and license technologies for a variety of reasons listed by Shane (2002), currently the licensing of patents are much less important than publications, scientific communication and consulting as a means of knowledge transfer (Agrawal and Henderson, 2002; Colyvas et al., 2002). 12 Polanyi, who elucidated the notion of tacit knowing, observed (1967, p. 4) that “we can know more than we can tell.” In other words, all knowledge is not reducible to rules and algorithms. There is, in addition, know-how or skills which is difficult to articulate. Nonaka (2007, p. 165) also refers to a cognitive dimension of tacit knowledge “It consists of [ingrained] mental models beliefs and perspectives which profoundly shape how we perceive the world around us.” The importance of tacit knowledge has risen greatly in a world of intensifying global competition because “tacit knowledge constitutes the most important basis for innovation based value creation . . . when everyone has relatively easy access to explicit/codified knowledge, the creation of unique capabilities and products depends upon the production and use of tacit knowledge” (Gertler, 2003, p. 29).

marketing skills. Even when SMEs have such awareness, they can be discouraged from utilizing new technology by limited access to financing and by the risks and the lengthy payback period for some kinds of products, e.g. in the field of medical biotechnology. Larger and well-established firms with a track record are also wary of adopting an untried technology sometimes because it can undercut the sales of an existing major product. As a consequence, many ideas and findings (including patents) remain dormant in the university and far too many researchers lack the entrepreneurial talent, business know-how and contacts to be willing to relinquish secure university jobs and enter the business world. This situation creates a role for intermediaries of many different stripes whose ‘midwifery’ assists knowledge exchange between universities and the business community through the creation of bridging ties and interfaces, by diagnosing needs and articulating the demand for certain kinds of innovation, by instituting a dynamic framework for change and working to achieve the change through financing and other means (Howells, 2006; Boon et al., in press; Bessant and Rush, 1995). Knowledge intermediaries take several different forms. Some are better at dealing with codified knowledge, others with tacit knowledge, and some intermediate both kinds. The papers in this special section discuss the working of four types of intermediaries: • The general purpose intermediary of which the university is the leading example, producing and disseminating the different forms of knowledge. • The specialized intermediary, such as the university Technology Licensing office (TLO) which seeks out, helps codify via patenting, and also helps to transfer knowledge to commercial users.13 • The financial intermediary, such as, a venture capitalist or an angel investor supplies risk capital. Frequently such a provider brings additional tacit knowledge in the form of managerial know-how, contacts, troubleshooting skills or risk assessment skills which can assist start-ups (Hellman and Puri, 2002). • The institutional intermediary is often a public agency that offers incentives to encourage knowledge transfer, and a variety of services to facilitate interaction among researchers and firms. Many institutional intermediaries have access to special funds, which can grease the process of technology transfer, stimulate new entry by leveraging IP from universities, and promote the circulation of tacit knowledge by placing

13 Howells (2006) surveys the many functions of intermediaries from forecasting and articulating needs to financing, scanning for information brokering, testing and providing accreditation and setting standards. While intermediaries improve the connectedness of an innovation system, Howells maintains that their capacity to infuse dynamism and stimulate the search for new technologies is equally important. Debackere and Veugelers (2005) describe and evaluate the activities of TLOs in the EU, building UILs, and the development of a culture, organization and approach, to achieve the best results. Dissatisfaction with the ability of TLOs to catalyze innovation, is expressed by Litan et al. (2007).

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university graduates in SMEs. And these are not the only ones. It is probably fair to say that if the technological intensity of production continues to increase and universities come to shoulder more research and early development underlying technological change, then the significance of tacit knowledge will become greater, intermediaries will need to be more active, and risk capital will be in more demand. Furthermore, to the extent that tacit knowledge regarding new scientific findings diffuses slowly, spin offs and new starts are more likely to cluster near the large research focused universities, which attract the better students and researchers, and are a prolific source of new ideas. This is still mostly in the realm of speculation, although research findings are helping to fill out the picture. The leading universities continue to overshadow lesser ones with regard to scientific output, and it is the wellentrenched clusters that are thriving the most.14 Venture capital (VC) is on the rise but subject to big fluctuations and concentrated in relatively few locations. And although technological advance is supposedly opening many more profitable opportunities for investment in manufacturing and producer services, a surge in fixed investment in industrialized or industrializing countries, is not apparent. In fact, with the exception of China and India, the share of investment in productive assets has stagnated or declined across the world even though capital is abundant and the corporate sector worldwide is earning handsome profits. But past need not be prologue. As we noted above, several factors, reinforced by government policies, are pushing universities closer to the forefront of technological development and inducing them to forge linkages with businesses. Financial deepening is further aiding the process. 4. Special section in brief The five other papers in the special section contribute to the rich and growing literature on university industry linkages (UILs) by closely examining the nature and functions of multiple intermediaries in specific contexts and by showing how the effective circulation of knowledge depends both upon an intertwining of tacit with codified knowledge as well as the efficacy of the knowledge networks to which the intermediaries belong. By highlighting these two aspects, the papers deepen our understanding of what Bramwell and Wolfe denote as a “fluid, complex and iterative process involving many different actors”. The starting point to a discussion of UILs is the existence of centers capable of generating knowledge, which potentially at least, can be of use to many branches of industry and to society more broadly. In other words, the focus is on general purpose intermediaries or universities that conduct some research and not on tertiary level institutions in the large, all of which impart knowledge to students. The quality of the university and its excellence in selected areas of research is emphasized by several of the authors. Bramwell and Wolfe show how the university is admirably

14

See the review and discussion in Degroof and Roberts (2004).

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positioned to facilitate the interactions and social requirements of knowledge transfer. They trace the contribution of the University of Waterloo to its careful cultivation of strengths in major fields and its now established reputation which attracts local as well as multi-national companies. Over time, the university has become a knowledge hub15 which intersects with multiple networks. In this context the University of Waterloo through its faculty and students plays the role of an intermediary by helping to connect networks. According to Bramwell and Wolfe, students are a major vehicle for the transfer of research findings and valuable, tacit knowledge associated with it. They are also a channel for the transmission of knowledge from firms back to the university, a channel that informs future research and the design of the university curriculum. In this regard, the University’s Co-op program, which places students in affiliated firms, is a significant asset. Internships allow firms to tap into the latest thinking in university research labs and arrive at a sense of how science is evolving and the possible implications for production technologies. Students in turn, gain a first-hand understanding of practical research applications and also of the challenges firms are faced with. This tacit knowledge, circulated back to the university department, can both guide the research agenda and create openings for collaborative R&D with industry. Key university professors at the University of Waterloo serve as boundary spanning intermediaries by enabling firms to connect with the networks of which they are a part. By consulting with faculty, companies gain access to knowledge and contacts that individuals acquire from participation in events and professional dealings across the world. Moreover, the combination of in-house research, networking and capacity to organize conferences and meetings, enables the university to bring together entrepreneurs and professionals for face-to-face encounters that can forge UILs. Bramwell and Wolfe indicate how a university can yoke together and facilitate knowledge exchange between separate networks. How easily this is achieved and what types of firms are likely to participate in networking with the university, is a function of several factors. The reputation of the university and the quality of its research undoubtedly affects its convening power. But these are not the only factors. Youtie and Shapira also note the importance of the university serving as a stable and credible platform that provides access to a spectrum of knowledge and opportunities for interdisciplinary collaboration. In other words, breadth and demonstrated excellence are key determinants of networking potential.

15 The concept of a knowledge hub which is a point of intersection between various knowledge networks is similar to the notion of “structural holes” that Burt (2001) denotes as “weak connections between networks of closely connected individuals.” Entities or individuals which fill these holes, “can broker the flow of information between people and control the projects that bring together people from opposite sides of the hole.” Network closure leads to better and faster solutions and the sparking of ideas. In Burt’s view, “creativity is an import-export game. It is not a creation game.” Transferring an idea from one network to another where it can have greater value, is the key to creativity and the entity at the structural hole by filtering ideas, transferring them between networks, and redirecting them, can make a vital contribution.

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Youtie and Shapira discuss how boundary spanning intermediation has helped Georgia Tech develop and strengthen UILs. Here too the university has attempted to carve out a role for itself as a regional knowledge center by mobilizing a number of specialized financial and institutional mechanisms for intermediating the exchange of knowledge. These are both intermediaries internal to the university and others which are external. For example, Georgia Tech’s Advanced Technology Development Center (ATDC) has provided incubation facilities and induced spin-offs. It has also helped launch start-ups by providing a mix of seed capital and services. Perhaps more significant in this case, are the external mechanisms for intermediation that involve the joint effort of several universities and other agencies. For example, the state-supported Georgia Research Alliance mobilizes the resources of six universities in the state so as to promote technology transfer with the help of venture capital and allied mentoring and coaching services financed through the Eminent Scholars program. The Yamacraw Initiative, another state-led program to promote IT and electronics technologies, encourages and helps finance the collaboration of university researchers with companies. It gives companies better access to codified and tacit knowledge and enables university faculty to come to grips with the micro aspects of translating university R&D into reality in the workplace. The Georgia Tech example brings into focus an issue that is picked up by Wright et al., and in the other papers. This is the readiness of local firms, especially the small and medium size enterprises (SMEs), to seek and to absorb new research findings which are still at the tacit stage. When, as in the vicinity of Georgia Tech, most firms are competing on the basis of low cost and not innovation, then the demand for UILs on the part of business is weaker and intermediaries have their work cut out. Where firms do little R&D in-house, have limited absorptive capacity, and are not seeking to learn, research universities must look farther afield, in particular to MNCs and to international clients. Wright et al. in their paper on three second tier, regional universities in Europe, further develop this point, highlighting the constraints on technology transfer from universities in spite of the best efforts of specialized intermediaries such as TLOs, of Regional Development Associations (RDAs) and a variety of fellowships—such as the Medici Fellowship that sponsor the circulation of researchers so as to assist with the commercialization of ideas. Wright and his co-authors note the considerable success their sample of universities has achieved in spinning off firms using university IP. They also point to the many bottlenecks that impede UILs. The incentives for researchers to commercialize their findings are sparse and the life of a researcher turned entrepreneur is full of risk. TLOs have their work cut out to first find research which may have commercial worth, to patent it and then to find a buyer. Patenting and maintaining a patent over its lifetime is costly and matchmaking, especially with SMEs, a slow and sometimes unrewarding process. TLOs with small staffs and few takers for the IP they have on offer find it difficult to break even much less make a profit. Financial intermediaries such as VCs can expedite the traffic of knowledge between the university and the business sectors but much depends upon their own grasp of

the technologies they are supporting, their experience, contacts and personal involvement with the businesses they finance. Many lack some of these attributes and hence, are only partially effective in launching firms which leverage university-based research. As noted above, the passive attitude of most SMEs towards the acquisition of technology is not helpful and Wright et al. observe that universities with a long-term strategic vision, that deliberately build centers of excellence, frequently must look internationally for their clients. Although the slow diffusion of tacit knowledge favors the immediate hinterland of the university, many regional universities must be ready to forge links with clients in other countries. In this, they are being aided by IT as well as by the increasingly transregional and cross-border nature of UILs and of knowledge networks. This point is nicely captured and elaborated in the papers by Acworth and by Kodama. Kodama examines how the Technology Advanced Metropolitan Area (TAMA) association, an institutional intermediary, operating in the Western segment of the Tokyo Metropolitan Area, has supported UILs by reducing search and bargaining costs for universities and SMEs. By offering a variety of services to its members, such as assistance in forming and coordinating research consortia, bidding for R&D grants, organizing business fairs, and operating a virtual laboratory, which registers the research equipment of local universities and research institutes, the TAMA association has had a measurable impact on UIL. SMEs which design and develop their own products have benefited the most from TAMA association membership. This encourages more own R&D and the readiness to seek technology and greater interaction with universities and supplier firms. By actively pursuing intermediation using multiple instruments in a region approximately the size of Silicon Valley, TAMA has demonstrated how much an intermediary can achieve, by first understanding and then easing the of bottlenecks to UILs, by inducing cooperation among firms, universities and local authorities, and by wining the support of the central government. The knowledge integration community or KIC created by the Cambridge-MIT Institute (CMI) with the financial support from the UK government is an example of an international network and specialized intermediating arrangement with considerable potential. The CMI initiative discussed in Acworth’s paper draws on the research capabilities of two of the leading universities in the world and seeks to create a knowledge exchange system through active partnering with several other public and business entities. To establish UILs and motivate knowledge sharing, each KIC is focused on finding a research-based solution to a “grand challenge” selected in cooperation with industry. The Silent Aircraft Initiative, one of five ongoing KICs, brings together airlines, aeroengine manufacturers, aeronautical research groups and airport authorities, each of which contributes in kind to the activity. This approach to building UILs is innovative because the KIC is a novel kind of intermediary. It involves a pooling of knowledge from several sources rather than a one-way flow from universities to industry. It engages other stakeholders whose participation and input has a profound bearing on outcomes. And

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it involves a longer term and cooperative research effort to find a solution in a number of stages, starting with the enhanced continuous descent approach (ECDA) for aircraft. Acworth identifies the several keys to the success of schemes for promoting knowledge flows between universities and the business sector. Clearly the quality of the research capabilities mustered by the universities involved is a necessary starting point. MIT and Cambridge University have much to offer and they can credibly serve as major nodes of a geographically dispersed knowledge network tasked with addressing a specific problem. The paper also draws attention to the tacit dimension of technology transfer. Knowledge circulation is a “full contact sport” and people need to be able to meet face-to-face for a network to function and for any meaningful exchange of uncodified knowledge to occur. The initial financial priming of the networking process by the generous funding from the UK Treasury was a distinct plus and enabled the universities to marshal the resources and for the intermediary to enlist the active participation of the other stakeholders. But Acworth notes as well, that there remains the lingering issue of how to make the KIC self-sustaining once the initial budget is exhausted, something that all intermediaries must resolve. How to deal with the assignment of intellectual property arising from a joint effort that entails the pooling of knowledge is a second issue that KIC type arrangements and other collaborative efforts must eventually tackle. 5. Concluding observations The papers in this special section illuminate different facets of knowledge intermediation. The papers lend support to those findings which suggest that it is the leading universities (general purpose intermediaries) and universities with strong and widely recognized research specializations that can engage in substantial and mutually advantageous knowledge exchanges with industry. Even in these cases, specialized and institutional intermediaries can facilitate knowledge transfer and strengthen the effectiveness of the knowledge network. The availability of financing to the intermediaries is a non-trivial consideration to which public agencies can make a vital contribution. Venture capitalists with the relevant experience and mentoring skills also fulfill intermediary functions and it is important to note again that intermediaries come in different forms and they are by no means perfect substitutes. Our current understanding of the intermediation process is such that no precise formula can be defined. UILs can boost development by helping to form knowledge networks and to increase productivity by raising the knowledge quotient. However, for these networks to be advantageous to the key participants, a number of conditions will need to be fulfilled. First and foremost, universities that seek to enter into knowledge-sharing relationships with industry need to firmly establish their credentials as general purpose intermediaries by pursuing long-term strategies to develop and sustain a high level of excellence in their chosen fields of research while also fulfilling their primary function, which is to educate. This will call for an appropriate balance among incen-

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tives for faculty and a matching allocation of resources. Government policies and public institutions can reinforce these incentives and ensure that key research universities not only build human capital but also contribute to industrial innovation. How such a balance can be struck is far from clear, but research is bringing us closer to effective policies for universities and governments. Second, unless firms proactively pursue innovation as a part of their competition strategy and seek out usable knowledge from universities, fruitful linkages will be slower to materialize.16 MNCs are more likely to take the initiative than SMEs but neither fully exploits the potential of universities in generating early-stage technologies. While there is no substitute for firms preparing the ground by doing in-house R&D and actively searching for ideas and technologies, specialized and institutional intermediaries can help to narrow the information gaps and minimize the transaction costs for both universities and businesses. As the contributors to the special section show, a robust innovation system should encourage a mixed approach that experiments with and deploys a variety of intermediating mechanisms. There are plenty of examples to choose from and the efficacy of different instruments will vary depending upon context and on circumstances. Third and finally, knowledge comes in more or less codifiable forms. The closer one gets to the knowledge frontier, the larger the human factor in the transmission process. Networking and circulation of knowledge workers take on a much greater importance. Because universities can serve as hubs that are points of intersection for networks, and as venues for people to meet, they are ideally suited to propagate codified knowledge and also to nourish tacit knowledge and work with industry so as to put it to commercial use. Thus the location of universities in strategically situated urban centers can be critical, even though the diffusion of knowledge is somewhat less tied to face-to-face contact.17 Large cities such as Atlanta or Boston, with a substantial industrial dimension, provide a better venue for the consummation of UILs. Deep pools of skilled workers18 and financial institutions able to supply smaller firms and startups with the risk capital also support UILs. Although the contributors to this special section do not emphasize this point, the urban locale of UILs can facilitate the networking,

16 “Receiver active” behavior on the part of firms based on the cultivation of in-house research capability and the defining of an open search strategy for new knowledge, paves the way to advantageous UILs (see Kodama and Suzuki, 2007; Laursen and Salter, 2004). Bercovitz and Feldman (2007) also find from their study of Canadian firms that firms which conduct more in-house exploratory research in a centralized manner, are more likely to enter into alliances with universities to complement and extend their own efforts. 17 As Gertler (2003, p. 79) observed, tacit knowledge is “a key determinant of the geography of innovation” because it is “acquired experientially” and difficult to transmit over distance, it is context specific and spatially sticky, and because learning processes are becoming socially organized interactions among specific entities such as universities and firms. 18 Not only human capital but also its quality determines the innovativeness of an economy. As Youtie and Shapira observe, the innovativeness of firms in the Atlanta region and their readiness to seek and exploit knowledge from universities is hampered by the quality of the workforce. See also Varsakelis (2006).

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