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Industry Science Links

Industry Science Links. Prof. Dr. Reinhilde Veugelers KULeuven 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

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Industry Science Links

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  1. Industry Science Links Prof. Dr. Reinhilde Veugelers KULeuven Bruegel & CEPR

  2. 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

  3. 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… • …

  4. Multiple mechanismsforindustryscience links % of firms reporting pathway as important for innovation Source: Cosh et al (2006)

  5. 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 Motives

  6. 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” Barriers Divergent cultures, incompatible objective Appropriation, SR exclusive returns vs free dissemination, LR societal impact

  7. Some survey evidence on barriers

  8. Industry Science Links: a policy concern and a topic for research Despitegrowth in (attention for) ISL, nevertheless discours on inadequate scale (esp in the EU, cf European Paradox) Lack of demandfromIndustry Side Lack of supplyfromScience Side Inefficient/insufficientintermediaries .. In need of more research, but first…

  9. Industry Science Links How to measure them?

  10. Industry Science Link Indicators ISL data available at EU level 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 • 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 • ...

  11. Figure 1: Linkages to Science by Flemish Firms (CIS 3) 40 Cooperation with public institutions 60 (2 involved in scientific publication) Use of public sources of information 74 5 (1 involved science) 5 (4 involved in science) 2 Firms with scientific NPR 7 (2 involved in scientific publication) Firms without linkage to science 649 (1 involved in scientific publication) A diversity of science links being used Source: Cassiman et al (2006)

  12. Industry Science Links A firm’s perspective: Do they matter? What do we know from analysis from their effects?

  13. 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?

  14. 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)

  15. Do INDUSTRY SCIENCE LINKS matter for FIRM INNOVATION PERFORMANCE? • 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 EurostatCommunityInnovationSurveysmostfirms (68%) indicateuniversities as notimportantsources of information at all. • Butthosefirmswithbasicscience links have a betterappliedinnovation performance onaverage (butheterogeneity)

  16. 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 crossorganisationalboundaries • at organisationallevel: boundarycrossingfirms • at inventor level: boundarycrossinginventors • complementaritybetweenorganisational and inventor level Firmscapturingvaluefromsciencerequires: • Owninternal basic research capacityfor • Boundary spanning and search • Collaborativetieswithuniversities • Absorptivecapacity • How tobuildinternal basic research capacity? Recruitingscientists, ownscientificactivities, …

  17. Evidence onFIRMS CAPTURING VALUE FROM ISL REQUIRES ABSORPTIVE CAPACITY, ORGANISATIONAL PRACTICES • 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)) • …

  18. FIRMS CAPTURING VALUE FROM ISL REQUIRES ABSORPTIVE CAPACITY, ORGANISATIONAL PRACTICES • Firmswithscientificpublicationshave a higherappliedresearchproductivity(Setting: AllBelgianpatent-active firms, allsectors) (Cassiman, Veugelers & Zuniga (2008)) • FirmScientificOrientationmeasuredbythe stock of scientific (co-)publications of thefirm • 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)). • Firmboundary crossing institutional link is measuredthrough partnership in cooperative programs • Boundary crossing inventors: inventormobility on patents

  19. Industry Science Links The perspective of Science Despite the surge in Industry Science Links, there are significant barriers to commercialization of basic research Governance Structure and Incentive Schemes affect both the production of new technology and its transfer.

  20. 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)?

  21. Parties involved • Researchers • University • TTO • Firms • (Venture) Financers Each with different information and different objectives: moral hazard & adverse selection issues

  22. 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

  23. Researcher Selection: Taste For Science (TFS) and/or Commercialisation (TFC) • TFS and TFC are separate dimensions; researcherscan combine: hybridscientists; • Location in taste-spacemattersfor: • Whatscientists do: Jobs (academia-industry), activities (pure research, applied research, development, commercialisation, spin-offs.. • How effectivethey are in whatthey do: scientificand patent performance; scope forcomplementarityfromcombiningactivities; Sauermann & Rauch (WP Georgia Tech, US), 2011 Sauermann

  24. Taste for Science and/or Taste for Commercialisation • 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

  25. 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

  26. 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

  27. 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),

  28. The Role of TTOs Universities 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

  29. 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,

  30. 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.

  31. 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 organizationalfactors • 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)

  32. Industry Science Links Some concluding comments

  33. Some concluding comments ISL policy shouldbebettersupportedwith data and analysis Still far from understanding ISL for firm’s innovative performance • Betterand more measures of industryscience links • More theoreticalandempirical analysis of effectiveness (private andsocial) Avenues forfurther research

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