Industry Science Links
Prof. Dr. Reinhilde Veugelers
KULeuven
Bruegel & CEPR
Industry Science Links:
growing emphasis
New technologies are science-based: Biotech, 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
% of firms reporting pathway as important for innovation
Source: Cosh et al (2006)
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…
Industry Science Links
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 EmployerEmployee 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
A diversity of science links being
used
Figure 1: Linkages to Science by Flemish Firms (CIS 3)
Cooperation with public institutions
60 (2 involved in scientific publication)
5
(1 involved
science)
40
Use of public sources of information
74
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)
Source: Cassiman et al (2006)
11
Industry Science Links
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)
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 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, …
Evidence on
FIRMS 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))

…
FIRMS 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
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.
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 licensingcommercializing 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
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
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 & PérezCastrillo (1991, AES), Begg (1992, IJIO),
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
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)

Industry Science Links
Some concluding comments
Some concluding comments
ISL 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