Commercializing University Research Systems in Economic Perspective: A View from the Demand Side

Abstract

Universities face incredibly difficult, complex decisions concerning the degree to which they participate in the process of commercializing research. The U.S. government has made an explicit policy decision to allow funded entities to obtain patents and thereby has encouraged participation in the commercialization of federally funded research. The Bayh-Dole Act enables universities to participate in the commercialization process, but it does not obligate or constrain them to pursue any particular strategy with respect to federally funded research. Universities remain in the driver's seat and must decide carefully the extent to which they wish to participate in the commercialization process.

The conventional view of the role of patents in the university research context is that patent-enabled exclusivity improves the supply-side functioning of markets for university research results as well as those markets further downstream for derivative commercial end-products. Both the reward and commercialization theories of patent law take patent-enabled exclusivity as the relevant means for fixing a supply-side problem - essentially, the undersupply of private investment in the production of patentable subject matter or in the development and commercialization of patentable subject matter that would occur in the absence of patent-enabled exclusivity.

While the supply-side view of the role of patents in the university research context is important, a view from the demand-side is needed to fully appreciate the role of patents in the university research context and to fully inform university decisions about the extent to which they wish to participate in the commercialization process. Introducing patents into the university research system, along with a host of other initiatives aimed at tightening the relationship between universities and industry, is also (if not primarily) about increasing connectivity between university science and technology research systems and the demands of industry for both university research outputs (research results and human capital) and upstream infrastructural capital necessary to produce such outputs.

In this chapter, I explore how university science and technology research systems perform economically as infrastructural capital and explain how these systems generate social value. I explain how the availability of patents, coupled with decreased government funding, may lead to a slow and subtle shift in the allocation of infrastructure resources.

Note: This paper was commissioned by The Karl Eller Center at the University of Arizona and the Kauffman Foundation. It will be published in the Elsevier Science/JAI Press Series, Advances in the Study of Entrepreneurship, Innovation, and Economic Growth Volume 16: University Entrepreneurship and Technology (2005). I anticipate expanding upon the ideas in this paper in subsequent work; so comments are welcome.

Keywords: University research, patents, infrastructure, university entrepreneurship, technology transfer, intellectual property policy, innovative activity, faculty innovation, commercialization and licensing

JEL Classification: I20, L30, O31, O32, O33, O34