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CBR Summit:Innovation and Governance 29-30 March 2006

Universities, Innovation, and theCompetitiveness of Local and National

Economies

Richard K. LesterDirector, Industrial Performance Center

Professor of Nuclear Science and EngineeringMassachusetts Institute of Technology


“We believe the United States’ economic andpolitical standing are fundamentally bound up inour capacity as a society to innovate. We believecompanies that do not embrace innovation as acore business value will fall to global competition –and that innovation in universities and governmentis crucial to unleash America’s national innovativecapacity.”

-- “National Innovation Initiative”Council on Competitiveness

July 2004

!2006 Richard K. Lester

‘Standard model’ of universityengagement in the local economy

University-initiated technologicalentrepreneurship.

Laboratory research Discovery/invention Disclosure Patenting Licensing Spinoffs

But the model is incomplete. University role isn’t just about ‘tech

transfer’.


Myth #1: Economic significanceof university spin-offs

New business formation around universitytechnology, though increasing, is still a smallcontributor to the total number of business starts(2-3% or less in the U.S.)

*Startups licensing university IP; total number of university-relatedstartups: 8,000-10,000/yr

~ 150,000/yr~ 3700/yrPatents

550,000/yr400-500/yr*Startups

U.S. totalU.S. universities


Top U.S. patent award recipients -- 2004

. .

132MIT135Caltech

. .

. .1305Sony1310Toshiba1514Hitachi1601Intel1604Samsung Electronics1760Micron Technology1775Hewlett Packard1805Canon1934Matsushita Electric3248IBM


Myth #2: Payoff from universitytechnology transfer Total licensing revenue to universities

is -- and will remain -- a small fractionof research revenues (4-6% in U.S.)

Don’t expect licensing to transformthe finances of the university!


Myth #3: Role of patenting & licensingin university tech transfer

Licensing university patents is only one ofseveral mechanisms that firms use toaccess university-developed science andtechnology

Indirect mechanisms may be moreimportant (e.g., industry hiring ofuniversity graduates)


Adding tothe stock of

codifiedknowledge

Providingpublicspace

Problem-solving for

industry

Educatingpeople

UndergraduatesGraduatesMid-careerExecutive

Contract research

Cooperative researchwith industry

Technology licensing

Faculty consulting

Providing access tospecializedinstrumentation andequipment

Incubation services

PublicationsPatentsPrototypes

• Forming/accessing networksand stimulating discussion ofindustry developmentpathways.

• Influencing the direction ofsearch processes

– Meetings and conferences– Hosting standard-setting

forums– Entrepreneurship centers &

mentoring programs– Alumni networks– Personnel exchanges

(internships, facultyexchanges, etc.)

– Industrial liason programs– Visiting committees– Curriculum development

committees– Creating the built environment

to support this

Multiple university roles in thelocal economy


CBR/IPC Innovation BenchmarkingSurvey

• Barriers to innovation

• Role of public policies

• Sources of knowledge, technology

• Types of collaboration

• Human resources

• Innovation effectiveness and efficiency


Innovation Benchmarking Survey:Sample Characteristics

1001149100114910015401002129Total

11.513211.513213.92148.91891000+

20.123121.624824.437524.9531100-999

68.478666.976961.895166.2140910-99

%No.%No.%No.%No.Size(Employees)

USUKUSUK

Matched SamplesFull Samples


University contributions to businessinnovation

• Industry interactionswith universities arewidespread and multi-faceted

• Informal contacts,recruiting, publications,and conferences arethe most frequentlycited contributors inboth UK and US

• Licensing of universitypatents is among theleast frequently citedinteractions


At MIT, even patent holders downplay the role ofpatenting and licensing in university tech transfer.

Source: Agrawal and Henderson, “Putting patents in context”, Management Science, Jan. 2002. Basedon interviews with 68 MIT faculty in Mech E. and EECS with at least one patent and license.


Universities compared with other sourcesof knowledge used in business innovation

• Internal knowledge, customers,suppliers, and competitors arethe most frequently citedsources of knowledge relevantto innovation.

• Universities are less frequentlycited.

• UK companies cite use of allexternal knowledge sourcesmore frequently than their UScounterparts.


Uses of partnerships and collaborativearrangements by innovating firms

• Other firms, customers, andsuppliers are the most frequentpartners/collaborators in bothcountries.

• UK firms are somewhat morelikely to partner with universitiesthan their US counterparts.

• In both countries, firms aremore likely than twice as likelyto collaborate with other firmsas with universities.


Selected summary

• Interactions between firms and universities are wide-ranging and multi-faceted.

• University-industry interactions are more pervasive in theUK than in the US, but UK firms attach less importanceto these interactions than their US counterparts.

• Universities are seen by industry in both countries as arelatively small contributor to overall innovation-relatedknowledge flows.

• ‘Traditional’ university contributions -- education andtraining, conferences, publications, informal contacts --are seen by industry in both countries as significantlymore important than patenting and licensing.


The LIS Project: An international,interdisciplinary collaboration

SponsorsAlfred P. Sloan Foundation

National Science FoundationTEKES

Norwegian Research CouncilCambridge-MIT Institute (UK)

UTRI (Japan)

Research UnitsIndustrial Performance Center, MIT

SENTE, University of TampereHelsinki University of TechnologyCenter for Business Research,

University of CambridgeRogaland Research Institute

University of Tokyo

DisciplinesManagement science

Entrepreneurship studiesEconomics of innovation

Engineering systemsUrban and regional studies

Political science


‘Outside-in’ perspective onuniversity role

How can universities strengthen theabilities of local firms to take up andapply new technological and marketknowledge productively?


Country Location Industry/technology

USA Rochester, NY Opto-electronics

USA Akron, OH, Advanced polymers

USA Allentown, PA Opto-electronics/steel

USA Boston, MA Bioinformatics

USA New Haven, CT Biotechnology

USA Charlotte, NC Motor sports

USA I-85 Corridor, NC/SC Autos

USA Alfred-Corning Ceramics

USA Youngstown, OH Steel/autos

Finland Tampere Industrial machinery

Finland Turku Biotechnology

Finland Seinajoki Industrial automation

Finland Pori Industrial automation

Finland Helsinki Wireless

Finland Oulu Medical

UK Central Scotland Opto-electronics

UK Aberdeen Oil and gas

UK Cambridge Bioinformatics

Taiwan Taipei-Hsinchu Electronics

Taiwan Taipei-Hsinchu Software

Japan Hamamatsu Opto-electronics

Japan Kyoto Electronics

Norway Stavanger Oil and gas

LIS Case Portfolio


LIS Interviews

714TOTAL

31Norway

84Japan

103United Kingdom

238Finland

258United States

Number ofinterviews

An additional 117 interviews were carried out in Taiwan.


Finding I: Multiple university rolesin the local economy

Create

Attract

Unlock

Adapt

Combine


Finding II: Firms seek different inputsfrom different universities

Help with specific problems(‘analytical’)

Staying current; participating inongoing conversations about thedirection of technologies,markets, curricula (‘interpretive’)


Four pathways of regionalinnovation-led growth

I. Indigenous creation of new industrySilicon Valley: Personal computersBoston: Systems biology

II. Transplantation of new industry into regionI-85 corridor (NC/SC): Automotive

industryTaipei-Hsinchu corridor (Taiwan):

Electronics industry

III. Diversification of existing industry into newAkron, OH: Tires Advanced

polymersRochester, NY: Cameras, copiers

Opto-electronics

IV. Upgrading of existing industryTampere, Finland: Industrial

machineryCharlotte, NC: Motor sports

(NASCAR)

Type I:Indigenous

creation of newindustry

Type II:Transplantationof new industry

Type III:Diversification ofold industry into

related new

Type IV:Upgrading of

mature industry

• Success conditions (and failure modes) foreach of these pathways are different.

• Patterns of innovation in each case aredifferent

• Roles of educational institutions, financialinstitutions, government, and others for eachpathway are different


CREATING NEWINDUSTRIES

UPGRADING EXISTINGINDUSTRIES

Customer-driven; TQM;continuous improvement;‘best practice’

Science-driven;entrepreneurial

Internal financing, supplierfinancing, govt. financingfor demonstrations

Angel/venture capital(private and public);active assetmanagement

Lead firmsLead customers/users

Research universitiesGovernment labs

BS/MS-level engineers;faculty-student knowledgeof industry practices andbusiness problems.Internships, rotations.

Ph.D.-level scientistsand engineers;entrepreneurialbusiness education

Participate in regulatoryprocesses; global scanningfor best practice; ‘foresight’exercises

Long-term relationshipsbetween universities andestablished firms

Creating an identity(‘evangelism’);standard-setting

Proactive techtransfer fromuniversities & gov.labs; startup-oriented

TYPE IV

Technologytransfer

Leadershipin the publicspace

Educationand training

Localanchors

Innovationculture

Financing

TYPE I


Finding III: University role in local innovation systemdepends on industry development pathway

Creating NewIndustries

(I)

IndustryTransplantation

(II)

Diversification ofold industry intorelated new (III)

Upgrading ofmature industry

(IV)

Forefront science andengineering research

Aggressive technologylicensing policies

Promote/assistentrepreneurial businesses(incubation services, etc.)

Cultivate ties betweenacademic researchers andlocal entrepreneurs

Creating an industry identityParticipate in standard-setting

EvangelistsConvene conferences,workshops,entrepreneurs’ forums,etc.

Bridging between disconnected actors Filling ‘structural holes’ Creating an industry identity

Problem-solving for industrythrough contract research,faculty consulting, etc.

Education/manpowerdevelopment

Global best practicescanning

Convening foresightexercises

Convening user-supplierforums

Education/manpowerdevelopment

Responsive curricula Technical assistance for sub-

contractors, suppliers



Summary Universities should embrace their role as actors in the

local economy. This need not be inconsistent with thepursuit of excellence in the still primary missions ofeducation and research.

The conventional view of this role is too narrow.Universities have many different ways to contribute to localinnovation processes.

A ‘one-size-fits-all’ approach to economic developmentis common but not wise. Different industries, anddifferent development pathways, demand different kinds ofparticipation in local innovation processes.

Universities need to approach economic developmentstrategically. This means aligning university efforts withwhat is actually happening in the local economy.

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