Industry Science Links

Industry Science Links

Prof. Dr. Reinhilde VeugelersKULeuven

Bruegel & CEPR

Industry Science Links: growing emphasis

New technologies are science-based: Bio-tech, ICT, New Materials

Firms increasingly combine internal R&D capacity with external sourcing: open innovation

Research Institutes/Universities are increasingly looking for alternative funding

Policy favoring ISL

Diversity of Industry Science Links

Collaborative research, i.e. defining and conducting R&D projects jointly by enterprises and science institutions;

Contract research and know-how based consulting ;

Development of Intellectual Property Rights (IPRs) by science (patent portfolios, the protection of design typologies, the establishment of frameworks for Material Transfer Agreements (MTAs), the protection of databases, the property rights on tissue banks, etc.);

Start-up of technology-oriented enterprises by researchers from the science-base generated at the research institute;

Systematic exchange of research staff between companies and research institutes, (post)graduate student and research mobility.

Informal contacts, personal contacts…

…

Multiple mechanisms for industry science links

Source: Cosh et al (2006)

% of firms reporting pathway as important for innovation

Motives Motives for Industry

Access to know-how & infrastructure

Recruitment of R&D personnel

Access to networks Reducing costs for

inhouse R&D

Motives for Science Source for funding Better labour market for

graduates New impulses for

research and education

Barriers Barriers for industry

Lack of absorptive capacity (qualified own R&D capacity)

Not-invented-here syndrome

Fear of loosing confidential knowledge

Unclear IPR

Barriers for Science Capacity constraints

from other activities (teaching, basic research, administration..)

Lack of incentives (research, teaching based evaluations)

Bureaucratic regulations and cival servants law

“Freedom of research”Divergent cultures, incompatible objective

Appropriation, SR exclusive returns vs free dissemination, LR societal impact

Some survey evidence on barriers

Industry Science Links: a policy concern and a

topic for research

Despite growth in (attention for) ISL, nevertheless discours on inadequate scale (esp in the EU, cf European Paradox)

Lack of demand from Industry Side Lack of supply from Science Side Inefficient/insufficient intermediaries ..

In need of more research, but first…


How to measure them?

Industry Science Link Indicators

ISL data available at EU level EUROSTAT CIS survey (sources

of information, collaboration OECD, R&D (private funding of

research at public research institutes

Patent and citation data (PatStat, NBER…)

Publication and citation data (WoS, Scopus)

Other (non-) recurrent surveys (Proton, ASTP, MORE…

LEED: Linked Employer-Employee data

...

Measures for ISL

R&D contracting/cooperation between Public Research & Industry

Public Research based spin-offs Public Research based patents Co-patenting between Public

Research & Industry Co-publishing between Public

Research & Industry Citations (prior art)

corporate patents to academic patents, corporate patents to academic literature, academic literature to patents..

Researcher mobility… Inventor mobility Author-Inventor mobility LEED

11

A diversity of science links being used

Figure 1: Linkages to Science by Flemish Firms (CIS 3)

Firms with scientific NPR7 (2 involved in scientific publication)

Use of public sources of information74

Cooperation with public institutions60 (2 involved in scientific publication)

40

Firms without linkage to science 649 (1 involved in scientific publication)

2

5 (4 involved in science)

5(1 involved science)

Source: Cassiman et al (2006)


A firm’s perspective:Do they matter?

What do we know from analysis from their effects?

Research Questions

Explaining: skew in ISL active firms,

heterogeneity in modes, heterogeneity in

performance effects from ISL

Which firms choose ISL ? Which modes?

What are the effect of ISL on (innovative)

performance of these firms?

What are the effects of ISL on social (innovative)

performance?

WHY WOULD SCIENCE MATTER FOR INNOVATION

at the firm level?– By providing a map for research and codified forms of problem

solving science helps firms• Increase the productivity of applied research (Nelson;

1959; Evenson and Kislev, 1976)• Avoid wasteful experimentation when working with highly

coupled (complex) technologies (Fleming and Sorenson (2004)

• Better identification, absorption and integration of external knowledge, e.g. what is cutting edge; identifing most promising technological opportunities (Cohen and Levinthal, 1989; Gambardella, 1995; Henderson and Cockburn, 1998).

• Internal Spillovers; cross-projects fertilization of basic knowledge (Cockburn and Henderson, 1994)

Mansfield (1998): 15% of new products, 11% of new processes representing about 5% of total sales in a sample of major firms in US could not have been developed in the absence of academic research.

But: a skewed phenomenon

E.g. In Eurostat Community Innovation Surveys most firms (68%) indicate universities as not important sources of information at all.

But those firms with basic science links have a better applied innovation performance on average (but heterogeneity)

Do INDUSTRY SCIENCE LINKS matter for FIRM INNOVATION PERFORMANCE?

As Science and technology use different selection logics and are developed in

different communities (Gittelman and Kogut, 2003): the need to cross

organisational boundaries

at organisational level: boundary crossing firms

at inventor level: boundary crossing inventors

complementarity between organisational and inventor level

Firms capturing value from science requires:

Own internal basic research capacity for

Boundary spanning and search

Collaborative ties with universities

Absorptive capacity

How to build internal basic research capacity? Recruiting scientists, own

scientific activities, …

Do INDUSTRY SCIENCE LINKS matter for FIRM INNOVATION PERFORMANCE?

Co-authorship with university employees increases R&D productivity by pharmaceutical

firms (Henderson and Cockburn,1998).

Recruitment of university scientists increases research productivity (Kim et al., 2005)

Firm patents with academic inventors on the team have higher value (cited) (Czarnitzki

et al (2010))

…

Evidence onFIRMS CAPTURING VALUE FROM ISL REQUIRES

ABSORPTIVE CAPACITY, ORGANISATIONAL PRACTICES

Firms with scientific publications have a higher applied research productivity (Setting: All Belgian patent-active firms, all sectors) (Cassiman, Veugelers & Zuniga (2008)) Firm Scientific Orientation measured by the stock of scientific (co-)publications of the firm

Firms that combine a boundary crossing institutional link with boundary crossing inventors have higher valued applied patents and can build cumulative knowledge advantage (Setting: micro-electronics; link to IMEC) (Cassiman, Veugelers, Arts (2012)). Firm boundary crossing institutional link is measured through partnership in cooperative

programs Boundary crossing inventors: inventor mobility on patents

FIRMS CAPTURING VALUE FROM ISL REQUIRES ABSORPTIVE CAPACITY,

ORGANISATIONAL PRACTICES


The perspective of Science

Despite the surge in Industry Science Links, there are significant barriers to commercialization of

basic researchGovernance Structure and Incentive Schemes

affect both the production of new technology and its transfer.

QUESTIONS

How universities can play a more active role in promoting technical advance?

What drives academic research and technology transfer activities (licensing, spin-offs..)?

What is the role of economic incentives in shaping university research and technology transfer?

Which is the role of organisational structure, i.c. a specialized, decentralized Technology Transfer Office (TTO)?

Parties involved Researchers University TTO Firms (Venture) Financers

Each with different information and different objectives:

moral hazard & adverse selection issues

Moral hazard and adverse selection in technology transfer

(Adverse) selection at the hiring stage Moral hazard at the research stage Moral hazard at the disclosure stage Moral hazard at the licensing -

commercializing stage (Adverse) selection at the licensing-

commercializing stage

Researcher Selection: Taste For Science (TFS) and/or Commercialisation (TFC) TFS and TFC are separate dimensions;

researchers can combine: hybrid scientists; Location in taste-space matters for:

What scientists do: Jobs (academia-industry), activities (pure research, applied research, development, commercialisation, spin-offs..

How effective they are in what they do: scientific and patent performance; scope for complementarity from combining activities;

Sauermann & Rauch (WP Georgia Tech, US), 2011

Sauermann

Intentions to patent: significantly higher for commercial types; even higher for hybrid types;

Intentions to start spin-offs: significantly higher for commerical types; even higher for hybrid types;

Sauermann & Rauch (WP Georgia Tech, US), 2011

Taste for Science and/or Taste for Commercialisation

Moral hazard: Incentives Basic principal – agent theory calls for the

use of payment schemes (to researchers and the labs) based on success in research: royalties and equity.

Macho-Stadler, Martínez-Giralt & Pérez-Castrillo (1996, RP): Transmission of non-verifiable technology is often done via royalties.

Know-how is non-contractible and royalties provide incentives to transfer it.

Jensen & Thursby (2001, AER): University transfers innovations in embryonic stage that need the inventor cooperation at the

development stage. Royalties and equity provide incentives to solve this MH problem.

Jensen, Thursby & Thursby (2003): Royalties provide incentives to disclose. Higher quality faculty disclose a higher fraction of inventions

at the proof of concept stage

Incentives : returns tied to success

Macho-Stadler, Martínez-Giralt & Pérez-Castrillo (1996, RP): Transmission of non-verifiable technology is often done via royalties. Know-how is non-contractible and royalties provide incentives to transfer it.

Jensen & Thursby (2001, AER): University transfers innovations in embryonic stage that need the inventor cooperation at the development stage. Royalties and equity provide incentives to solve this MH problem.

Jensen, Thursby & Thursby (2003): Royalties provide incentives to disclose. Higher quality faculty disclose a higher fraction of inventions at the proof of concept stage

Informational asymmetries between university and firms

• Quality of the innovation.• Profitability of the innovation.Royalties and equity are useful to:

Signal (by the university) good innovations. Separate bad applications of the technology

from good ones. Gallini & Wright (1990, Rand), Macho-Stadler & Pérez-Castrillo

(1991, AES), Begg (1992, IJIO),

The Role of TTOsUniversities with high record in ISLs have a decentralized

model of technology transfer (i.c. TTO) Bercovitz et al (2001)

Advantages of TTOs Specialization in supporting services, esp. Reducing transaction costs (screening of projects). Search for potential buyers/financers.

Disadvantages of TTOs Costs of setting up/running TTO Principal-agent problem between TTO and university Principal agent problems between TTO and researchers

Results from our research

Macho Stadler, I. D. Perez-Castrillo and R. Veugelers, 2007, Licensing of University Innovations: The Role of a Technology Transfer Office, International Journal of

Industrial Organisation,

A rationale for a TTO (IJIO 2007)

Using a framework where firms have incomplete information on the quality of inventions, we develop a

reputation argument for the TTO to reduce the asymmetric information problem.

The TTO being able to pool innovations across research labs, will have an incentive to “shelve” some of the projects, thus raising the buyer’s beliefs on expected quality, which results in less but more valuable innovations being sold at higher prices.

When the stream of innovations is too small, the TTO will not have enough incentives to maintain a reputation.

Individual research labs will only have a similar incentive to build reputation if they are sufficiently large.

Empirical evidence on performance of TTOs in US universities (both quantitative & qualitative evidence)

TTOs Present constant returns to scale wrt licensing activities, but

increasing returns to scale wrt licening revenue. Productivity depends on organizational practices.

Most critical organizational factors Faculty reward systems. TTOs staffing Compensation practices: monetary and non-monetary rewards for

researchers & TTOstaff Royalty distribution formula’s work through illicitating efforts plus

selection of skills Boundary spanning role to overcome cultural barriers between

Universities and Firms.Siegel, Waldman & Link (2003, RP)


Some concluding comments

Some concluding commentsISL policy should be better supported with data and analysis

Still far from understanding ISL for firm’s innovative performance

Better and more measures of industry science links

More theoretical and empirical analysis of effectiveness (private and social)

Avenues for further research

Documents

Industry Science Links