Archived — Occasional Paper Number 11: The Univeristy-Industry Relationship in Science and Technology
by Jérôme Doutriaux and Margaret Barker, University of Ottawa and Meg Barker Consulting under contract to Industry Canada as part of the Science and Technology Review, August 1995
This paper updates and improves our understanding of university-industry (U-I) relations in Canada. It begins with the volume of literature produced on this topic in the late 1980s and strengthens some of the initial, and perhaps, intuitive conclusions of this literature with findings from recent studies and some surveys. Benefiting from recent scholarship, the paper places significant emphasis on regional approaches to technology transfer. It insists that a variety of organizations — not just universities and industry — have important roles to play in technology transfer and local economic development, and suggests that both different sources of funding and approaches are important and should be complementary.
Standard indicators show that the quality of research effort at Canadian universities is high and has a respectable international profile. Given that Canadian universities perform a major share of Canada's research and development (R&D) — with the per capita expenditures being among the highest of the Organization for Economic Co-operation and Development (OECD) countries, academic research takes on a special significance, and its efficient transfer to industry is important. This is a challenge for Canada: the overall propensity of Canadian business to locate, adapt and assimilate new ideas and technology is low. This leads to a lower probability for innovation and growth. To assess whether strengthening university-industry links in Canada will improve the tendency of firms to innovate, more information is needed on the socio-economic impact of the academic sector on the economy.
The socio-economic impact of the higher-education sector on the economy includes three areas.
- Fundamental and applied research activities of universities contribute to the stock of knowledge in the economy.
- Universities provide highly trained human resources.
- The sector supplies ideas and inventions through technology transfer.
To analyze socio-economic impact, economists are obliged to dissociate variables, and the most commonly known work is that which focuses on the impact of academic knowledge creation on samples of firms. Research of this nature in the United States indicates that both university and university-industry R&D links have strong rates of return in terms of social impact. Estimates reach as high as 40 percent, although different industry sectors rely on university research in various degrees, with the more R&D-intensive sectors developing closer links. Analyses point to increased probability for innovation, profitability and growth among firms which form linkages with universities, but, to locate and assimilate knowledge, expertise and technology, such firms must already have in-house technical capabilities.
Our compilation of the statistics on industry sponsorship of university-based R&D in Canada indicates a rising trend, similar to findings in the United States, although Canadian data on this topic must be used with extreme caution as they are not sufficiently standardized nor subject to rigorous quality control. Industry sponsorship of university R&D in Canada was estimated at four percent in 1980, rising to 7.5 percent in 1992. It jumped to an estimated 11 percent in 1993 following an influx of funding for pharmaceutical R&D in the wake of the Patent Act (Bill C-91) which eliminated compulsory licensing and extended patent protection for Canadian-based pharmaceutical firms. In the United States, industrial sponsorship of academic research represented less than four percent of total funding in 1980, and this figure had risen to just over seven percent in 1993. These results point to a growing tendency of firms to use universities for their research needs. On the basis of surveys carried out by Canadian organizations, we conclude that this is mainly the result of the activities of large, R&D-intensive companies in Canada. For the most part, Canadian small and medium-sized enterprises (SMEs) do not avail themselves of the technology and ideas coming from the universities. It is, therefore, important to discover how to improve this situation. To do this, we examine the literature on the place of U-I collaboration in regional economic growth.
Studies of fast-growing high-technology regions have shown that even if universities are not a direct causal factor, they are certainly one of the catalysts for effective regional economic development. Successful innovation-based regional growth depends on a number of conditions which facilitate university-industry and firm-to-firm communications and collaboration, including:
- a regional knowledge-base, founded on a mix of universities, colleges and research laboratories;
- clusters of large and small high-technology firms;
- proactive support groups and organizations, such as networks, intermediary organizations and business service units working jointly with the regional government;
- adequate local communication and transportation infrastructure which permits access to international, national and local sites;
- a physical closeness between the relevant institutions; and
- complementary federal, provincial and local policies supportive ofuniversity-industry links based on research and development and training.
Unfortunately, there appear to be very few recent analytical studies on the impact of Canadian regional organizations on U-I interaction and local economic development. Studies discussed in this paper concern the Ottawa-Carleton area and the Waterloo-Kitchener-Guelph-Cambridge region.
Governments of OECD countries have been introducing different forms of U-I programs since the 1960s, but these have received more emphasis in the last decade. In Canada, federal and provincial governments have developed a number of programs to promote U-I relationships in science and technology. Relevant Canadian agencies have been developing some innovative programming in this area to meet changing circumstances and demands. Matching-fund programs developed in the 1970s and 1980s tended to meet the needs of large corporations which look to the universities for basic and pre-competitive research. New programs being introduced by federal and provincial agencies seem to meet the needs of high-technology SMEs better, although an emphasis on colleges in some regions, together with a national technology extension initiative (the Canadian Technology Network) and the development of new electronic tools, indicate a more broad-based approach. The challenge remains to reach SMEs in traditional sectors. In British Columbia, Quebec and Ontario, this problem is being partially tackled with an emphasis on technology diffusion and transfer at colleges and technical institutes, and includes student industrial projects and contract technology training and development. Networking, including electronic, provides an element of co-ordination to these provincial efforts.
In the United States, federal funds have successfully supported U-I collaboration, according to recent investigations on this topic. While overall support of university R&D by industry is just over seven percent, industrial support of these research centres alone is in the neighbourhood of 31 percent. Approximately 15 percent of the academic research staff (faculty and other doctoral-level scientists) are involved in these centres. In Canada, analyses of this nature are not available, and future work in this area is recommended.
In other countries, various programs exist to encourage U-I collaboration. In some, the emphasis seems to be on training, with joint supervision of graduate students and their eventual absorption by industry. In others, U-I research centres combined with integrated U-I training are important, and colleges are being assigned important roles in local economic development and in technology diffusion to SMEs. In many countries, national electronic technology extension networks are being supported, capitalizing on information technology to enhance a national system of innovation.
Examination of the literature on the U-I interface from the perspective of the actors and agencies, supported with anecdotal evidence from a small survey, gives depth to the earlier discussion on regional economic development. The interface is examined in three areas: teaching and training linkages, research relationships and organizations relevant to U-I collaboration. There are various forms of teaching and training links, and circumstantial evidence indicates both sides of the relationship benefit from these mechanisms, but rigorous statistics to support this assertion are lacking.
Similarly, data on research-oriented linkages, of which there are many different types, are inadequate and unreliable but do indicate some general trends. Measures include the extent of industrial sponsorship of research and development at universities, invention disclosures, patents issued, active licences, biological agreements, royalties earned and spinoff companies generated. The data show large differences between universities in Canada, with some achieving substantial success in negotiating licensing agreements and generating spinoffs. Some of these differences, such as royalty income and the number of spinoffs, can be partly explained by the age and orientation of the university's research commercialization office, by its culture and by the personalities of those in charge of U-I activities. Other differences, such as the industrial funding of university research, can be explained at least partially by provincial variations.
Several organizations are relevant to U-I collaboration at the local level, including industry liaison offices (ILOs) at universities, colleges and technical institutes; the firms themselves and a subset of these, the university spinoff companies; regional development organizations; research parks; and industrial or academic consortia.
Unlike the situation a decade ago, most Canadian universities have an industrial liaison or technology transfer office or unit. Very few university ILOs are self-supporting financially, although the royalties are becoming significant for some universities. A rule of thumb is that such offices may expect to be self-financing by the end of 10 years. Large universities in the United States have realized significant revenue returns from royalties collected on inventions. There is reason to believe that such success could be achieved by many Canadian ILOs with adequate support for their activities. Indeed, in cases where sufficient resources and professional personnel have been assigned to university technology transfer, substantial activity has occurred. Interviews with survey participants suggest that a lack of funding hampers their activities, and that more support should be forthcoming from budgets set aside for economic development and job creation, rather than education budgets.
Firms on the U-I interface may be divided into a four types — large firms in either high-technology or traditional industrial sectors and small firms in high-technology or traditional industrial sectors. In the course of the small survey conducted for this study, representatives from large firms, and university ILOs alike, stressed the importance of sustaining basic research excellence at Canadian universities.
The literature in Canada suggests that spinoff companies form as a result of a lack of receptor capacity of local firms, despite the higher financial stakes involved in licensing. Academics who start companies do not always have the time, skills or motivation to manage companies. They must prevail against the traditional norms of, and barriers in, universities which, in career decisions, value researchers for publications rather than for inventive or entrepreneurial activity. Despite the odds, recent analysis on spinoff companies in Canada indicates that there could be as many as 300 of them, and that they have made a significant contribution to economic activity and job creation. Other, complementary research shows that those spinoff companies with the highest rates of initial growth come from research-intensive faculties with an external orientation, such as co-op programs, research networks and co-operative arrangements with regional development organizations, as well as being located in universities with a well-established ILO.
We draw several conclusions from this study.
- University research and development and U-I linkages generate a high social rate of return.
- Basic research should continue to be adequately supported at universities. Research excellence was reported by firms and ILOs alike to be one of the primary factors underlying technology transfer and the supply of personnel to industry.
- Because Canadian universities perform a large share of domestic research and development and Canadian firms are not, on the whole, highly innovative, the efficient transfer of technology to the domestic market is important.
- University and college ILOs, when professionally staffed and allocated sufficient resources, are an important asset for U-I linkages and technology transfer. A well-run office appears to have a significant impact on the commercial activity generated by a given university.
- Other intermediary organizations, such as networks, consortia and regional economic development organizations also have critical roles to play in local U-I linkages and technology transfer and diffusion activities, and SMEs find them more approachable. Local economic development, including the forming of U-I links, appears to operate effectively when the different organizations, including ILOs, co-ordinate their activities and complement one another. The most effective technology-transfer and -diffusion activity seems to take place where the initiative arises locally.
- Industrial sponsorship of university-based R&D is on the rise in Canada. It is critical that sufficient resources are available to improve statistics and analyze this phenomenon, and that policy implications of this trend, such as the impact on the free exchange of knowledge, are thoroughly explored.
One finding of this background study is that the topic of U-I relations does not appear to attract a great deal of scholarly interest in Canada, despite the seeming importance of the subject area. To repair this lack of knowledge, the following areas are suggested for further research:
- estimations of the social rate of return of U-I links in Canada, giving attention to the probable differences among industrial sectors and geographical regions;
- analyses of the role of the higher-education sector in regional economic growth in Canada, using a case-study approach to generate role models;
- determination on the extent of, and trends in, industrial sponsorship of university-based R&D in Canada, based on improved statistical information and analysis;
- analysis of the relationship between university training activities (traditional and externally oriented) and the cultivation of U-I linkages, across all sizes of firms;
- investigation of the commercialization activities of Canadian industry liaison offices (ILOs) at universities, related research institutes, technical institutes and colleges, including the development of standardized measures; and
- exploration of the economic benefits generated by university spinoff companies, including testing the notion that such companies are building technological receptor capacity in Canada.
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