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Knowledge and innovation generated at universities can lead to the creation of high-impact spin-off businesses. Whether it is through the licensing of intellectual property, partnerships or other informal arrangements, the tech transfer process can play a critical role in shaping new industries and regional economic development.
Research by Eesley and Miller and Eesley and Roberts has demonstrated the role Stanford University has played in shaping the development of Silicon Valley and MIT’s contribution to building a world-class innovation hub in the Kendall Square district of Cambridge, Massachusetts.
While those are examples of successful academic-industry-government ecosystems, the technology transfer system at many universities in the US and Europe is in need of a major overhaul. Its focus is historically rooted in revenue generation rather than in helping innovation. Technology transfer offices in many universities can act as bottlenecks rather than partners in knowledge transfer for economic and societal good.
This is particularly noticeable in European universities where academic institutions seek large equity stakes, unreasonable financial terms on licensing agreements, anti-dilution provisions and placement on boards of directors of spin-off companies, without providing any seed investment.
While technology transfer offices in the US may not be as extreme, they are still frequently viewed as roadblocks to commercialisation. They tend to have a home-run mentality where only projects likely to have the biggest, fastest payback are given priority at the expense of other available intellectual property. They also often have aggressive intellectual property (IP) management and unrealistic valuations, alienating both faculty and industry partners.
Despite their focus on revenue, most technology transfer offices do not even generate enough money to pay for their staff. In a 2013 Brookings Institution report, only 13 per cent of universities in the US over the last 20 years were found to generate enough revenue from licensing to cover the operating cost of their transfer office.
The current tech transfer system is clearly underperforming. However our research has identified four successful models currently operating in several universities around the world. The approaches are based on open innovation principles and they are effectively working to transfer technology out of universities so that it can have an economic and societal impact.
The first is the “Gateway approach” by Trinity College in Ireland, which aims to minimise all barriers to commercialisation. This has been done by merging its offices of research, contract, technology transfer and industry engagement, as well as entrepreneurship supports, into one unit with the aim of streamlining enterprise engagement. In this model, the technology transfer office encourages deal flow rather than short-term revenue maximisation objectives. The real money will be generated down the road when successful entrepreneurs seek further research and development partnerships or make donations to the university.
Another tech transfer model is the “Investor centric approach”. In this model, universities develop long-term partnerships with IP commercialisation specialists to bring ideas successfully to market. In Europe, an organisation known as the IP Group now partners with 12 leading universities, including Oxford and King’s College London. It has launched more than 100 spinout companies of which 15 have succeeded to IPO levels. This model has not yet reached the US, but given its success rate, it is only a matter of time.
The third approach is the “Academic entrepreneurship model,” which is currently in use at MIT. The technology transfer office takes an active role in connecting academic entrepreneurs with venture capitalists and then lets them proceed. While a small equity stake of up to 5 per cent is requested by the university, the technology transfer office does not attempt to interfere in the management of the venture. The focus is on getting knowledge and technology into society and creating an economic impact in the community.
Fourth is the “Easy access IP model,” which was given its first trial by Easy Access Innovation, a collaborative project between the University of Glasgow, King’s College London and the University of Bristol. Based on volume, this model essentially gives away the IP for free. While it does not generate revenue for the university, it achieves the goal of getting hundreds of inventions into society that otherwise may never see the light of day. By focusing on impact, the university hopes to generate research funding as these companies grow and develop. So far, more than 30 universities around the world have adopted this model.
Which model works best will depend on the university. However, the current technology transfer system in most universities is not achieving its goal of helping to disseminate innovation. Academic institutions need to focus on how they can best make a societal impact rather than on financial returns.
Thomas Allen is a professor of management emeritus at MIT Sloan School of Management. Rory O’Shea is a visiting professor in innovation and entrepreneurship at MIT Sloan and a faculty member at UCD Smurfit Graduate Business School, Ireland.