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Spurring University Tech Commercialization through Incentives

Since her inauguration in January, Arizona Governor Janet Napolitano has pushed legislation intended to increase university tech transfer and commercialization. But will it work? Do economic incentives really encourage university researchers to pursue commercialization goals? Or are academics "pure" scientists, truly beyond monetary motives as many would argue?

A new econometric model that looked at the tech transfer policies of 102 U.S. research universities and their licensing/royalty incomes during the 1990s finds that, yes, even academic researchers have their price. Economic incentives, such as royalty sharing arrangements, do affect the number of inventions produced and the licensing income generated by universities, according to Incentives and Invention in Universities. The recent National Bureau of Economic Research Working Paper by Saul Lach and Mark Schankerman posits that, controlling for other factors such as institution size, quality, research funding and technology licensing inputs, universities that provide higher royalty shares to researchers trigger more inventions and higher license incomes.

The 102 universities in Lach and Schankerman’s data set averaged 67 invention disclosures per year between 1991-1999, with a mean annual license income per disclosure of $43,000.

With the potential for greater income and economic growth resulting from university tech commercialization, it is vital to recognize what moves academic research and technology licensing activity forward, argue Lach and Schankerman. Their model suggests economic growth and productivity can be affected through the structure of intellectual property rights and other incentives at the university level.

The model also finds researchers in private universities are four times more responsive to incentives than their counterparts in public institutions, so much so that private schools enjoy greater licensing revenues as well (producing a "Laffer effect" in stats jargon).

Overall, "increasing the inventor’s royalty share by 10 percentage points results in a 14 percent increase in revenues," the authors write. Separating public and private schools, however, implies "a 10 percentage point increase in royalty share would increase the number of disclosures by about 13 percent and the license income by 57 percent in private institutions."

Explaining why private university researchers outperform public university faculty by this measure was beyond the scope of the paper, the authors point out. They offer that organizational structure and objectives vary greatly among universities. Lach and Schankerman also report the findings suggest technology licensing offices (TLOs) in private institutions "have more effective, commercially-oriented technology transfer activity so that their TLOs are better able to identify and capture innovation rents by licensing to industry."

[SSTI’s two cents: Ensuring public universities have the same tools available to encourage innovation and commercialization as private schools – tools not present in most states until the 1990s and still not available in many – helps level the opportunity for success. In Arizona’s case, constitutionally giving state universities the chance to benefit financially from the commercialization of academic research would be a step in the right direction.]

Incentives and Invention in Universities is available at: http://economics.huji.ac.il/facultye/saul/LachScahnkerman.pdf

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New Mexico Establishes Statewide Research Collaborative
With a combined annual research budget totaling $4.8 billion, New Mexico’s 12 largest research facilities signed a Memorandum of Agreement on May 30 to help turn intellectual property into jobs for New Mexicans. Members of the newly formed New Mexico Technology Research Corridor (TRC) include:

* Air Force Research Laboratory’s Directed Energy http://www.de.afrl.af.mil/ and Space Vehicles Directorates http://www.vs.afrl.af.mil/ ;

* Los Alamos National Laboratory, http://www.lanl.gov/worldview/ a government-operated facility that contributes to meeting the nation’s nuclear and security needs;

* National Center for Genome Resources, http://www.ncgr.org/ a Santa Fe-based nonprofit research organization involved in bioinformatics.

* New Mexico State University http://www.nmsu.edu/ ;

* New Mexico Tech, a state engineering university http://www.nmt.edu/ ;

* Sandia National Laboratories, http://www.sandia.gov/ a government-owned/contractor operated facility involved with national security research and development projects;

* Santa Fe Institute, http://www.santafe.edu/ a private, nonprofit, multidisciplinary research and education center;

* The MIND Institute, http://www.themindinstitute.org/cgi-bin/output.pl an Albuquerque-based partnership that explores functional brain imaging;

* University of New Mexico http://www.unm.edu/ and its Health Sciences Center; http://hsc.unm.edu/ and,

* White Sands Missile Range, http://www.wsmr.army.mil/ which provides test, evaluation, research and other technical services to the Army and Department of Defense acquisition programs.

Research commissioned by Technology Ventures Corporation (TVC) http://www.techventures.org/ identified four opportunity clusters that are a product of the blended core competencies of the 12 research institutions. In addition to securing patents and getting joint technology commercialized, TVC will also help the TRC institutions to collectively submit requests for new funding for cooperative research.

The nonprofit TVC, founded in 1993 by Lockheed Martin, helps entrepreneurs develop businesses around technologies and obtain funding from across the country for New Mexico business formations.

Arizona Legislation to Encourage Tech Transfer Awaits Voters’ Approval

House Bill 2403, a measure that ultimately would encourage technology transfer, has been signed by Arizona Governor Janet Napolitano and now awaits approval by voters. Passing the Arizona State Legislature in late May, the legislation provides that Arizona’s universities may partner with private companies in business ventures.

State agencies and organizations would be able to take equity investments in firms wanting to market products developed at the universities. Arizona voters will decide at the next general election whether to approve the change in the state’s Constitution. The complete text of HB 2403 is available at: http://www.azleg.state.az.us/

Copyright State Science & Technology Institute 2003. Information in this issue of SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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