By: Dr. Phyllis Speser, Foresight Founder
Technology transfer/knowledge sharing are skating along the edge of a cliff. Read the mission statement of the Office of Technology Transfer at the Upstate Medical University of the State University of New York: “The mission of OTT is to promote the transfer of Upstate technology for society’s use and benefit while generating unrestricted income to support research and education.” Take a careful look the second mission: generate unrestricted income to support research and education.
The Great Recession has made that second mission increasingly critical, especially for all but the wealthiest schools. According to Donal Farish, President of Roger Williams University in Rhode Island USA in January of 2015: “Well over half of the nonprofit private colleges failed to meet either their enrollment or revenue targets this fall. Despite this, I predict that the overwhelming majority of these schools will continue to increase both tuition and discount rates next year, and even more of them will fall short of their enrollment and revenue targets.” (http://www.universitybusiness.com/article/higher-ed-thought-leaders-forecast-2015-trends). We might be inclined to discount this statement as Roger Williams is not a first or second tier research university. However the European University Association found in their Trends 2015: “The duration of the economic crisis is worrying even for the countries that have not been affected directly while it is jeopardizing for the mid- and long-term future of some higher education systems. Some National Rectors’ Conferences indicate that universities are expected to supplement the shortfall in public funding with increased European funding from programs such as Horizon 2020. At the same time, however, budget cuts also weaken their capacity to attract this type of competitive funding (EUA 2014c: 21).” (http://eua.be/Libraries/publications-homepage-list/EUA_Trends_2015_web.pdf?sfvrsn=18)
As a source of revenue, tech transfer is, for most, a bust. The Brookings Institute found in a 2013 study that “only a small number of universities consistently produce lucrative breakthroughs and collect the vast majority of the money. …The vast majority of licensing deals yield little or no money, and for most universities the royalty returns are low. …In a typical licensing deal, the royalties are split three ways — by the researchers, their academic department and the university’s general fund — an arrangement that can seem very generous to the scientist but paltry to the school. In a typical year, Mr. Valdivia estimated, that last one-third covers the cost of operating technology-transfer offices at only 13 percent of research universities.” (http://www.nytimes.com/2013/11/21/education/patenting-their-discoveries-does-not-pay-off-for-most-universities-a-study-says.html?_r=0) In other words, the great irony of Bayh-Dole is it is bleeding money away from research and education to support out-licensing of technology industry either does not want, or will only want on the cheap or for free. From a strict cash flow perspective, most universities would make money by eliminating their technology transfer office and turning tech transfer into a clerical function using easy access licensing controlled by the faculty inventors and corporate counsel.
Simply emphasizing spin-outs more is not the solution. Research suggests the current model for spin-outs is not a very good recipe for long-term net income. The reason is no matter how good universities are at spinning out companies, they really are not very good at spinning out winners – meaning companies that endure, thrive, and grow and thus can return money to the university in royalties, equality sales, or donations. Elizabeth Garnsey, Paul P. Hwang & Erik Stam of Cambridge’s Centre of Technology Management found university spin-outs were generally disadvantaged when compared to corporate spin-outs because of their lack of industrial experience and networks, adding “Although university or corporate origin exerts path dependent influence on the early development of these firms, the problems they face in scaling up are relatively unrelated to their origins. Critical problems arose from the shift in target market from technophile and early adopters to more mainstream customers as they moved from customized to standardized products, characterized by very different purchasing decisions of customers.” (“The Growth and Exit of University and Corporate Spin-outs in the Medical Instrumentation Industry,” http://www.academia.edu/2788734/The_Growth_and_Exit_of_University_and_Corporate_Spinouts_in_the_Medical_Instrumentation_Industry.)
A related view is expressed by Paul Nightingale and Alex Coad in “The Myth of the Science Park Economy. They found I a different UK analysis, “There is a role for supporting small firms during their early stages, and good arguments for concentrating some activities, but it is not clear this needs to be subsidized or universities are the best organizations to do it. This is part of a more general point. The number of start-ups in the UK is very high and possibly excessive. The vast majority fail quickly and add little to the economy beyond generating unproductive economic churn. It might be better to focus on encouraging poor quality firms to leave the market faster so that their resources and markets can be recycled by higher productivity firms. Too much subsidy can distort the market and make it harder for high potential firms to grow.” (http://quarterly.demos.co.uk/article/issue-2/innovation-and-growth/).
Just to be clear, I am not saying there is no reason to do tech transfer and knowledge sharing. I am only saying, if a goal is to make money, it is not doing that for most. In a business, top management would have by not bitten the bullet and either changed the business model or killed the office. Universities are not businesses of course, but then in the spirit of the English poet John Donne, “therefore never send to know for whom the bell tolls; It tolls for thee…”
So where does that leave us. The first takeaway is we need to serious rethink what it means to “promote the transfer of [your institution’s] technology for society’s use and benefit.” It is odd from that perspective, to give the same weight in our success metrics to the licensing of a skin whitener as to a better way to desalinate water, make a drought and heat resistant food crop, or cure cancer. The second take away is the business model for tech transfer needs a ground up rethinking.