University-industry collaboration: New approaches for turning great research into great marketplace outcomes

The academic world is creating a new environment for innovation

It is no secret that universities are abundant breeding grounds for novel ideas with enormous commercial potential. Stanford’s patent on Google’s foundational page-ranking algorithm and MIT’s patent on the data transfer method that ushered in one of the world’s largest distributed-computing platforms in Akamai evidence some of the more famous collaborations between the private sector and the academy. But opportunities for businesses to partner with universities to develop and commercialize new technologies are plentiful well beyond those bastions of innovation in Palo Alto and Cambridge.

In a time when all but the largest companies operate without in-house research and development, universities are positioned as never before—indeed critically so—to serve as key partners in innovation. Those taking up the challenge are in the vanguard of dispelling the notion of the proverbial detached ivory tower in favor of a ready collaborator attuned to creating the highly interactive innovation ecosystems that turn great research into great products and services, jobs and opportunity.

Universities are increasingly keen on living up to the promise frequently embodied in their charters to serve their communities. And in an era where resources are simply not available at the federal level, leadership at the regional political and academic level has a renewed importance. State and city leaders and their university counterparts are much less constrained by partisan politics and more able to work across the aisle for practical initiatives well-calibrated to the natural strengths and needs of their communities. This focus on the practical and concrete is a key shared interest of local government and university leadership—an interest that is profoundly pro-business.

The importance of innovation to a community’s economic well-being places universities at the hub of growth and opportunity. IP-intensive industries accounted for more than a quarter of all jobs in the economy in 2010. Universities are able to provide what many businesses alone cannot: loose networks of numerous researchers brought together in physical proximity. This clustering of research efforts has the advantage of leading to scientific breakthroughs more often than other models such as independent unaffiliated teams widely dispersed across separate research parks. Studies show that labs located within a half-mile cluster are about three times more likely to patent, and three times more likely to have one of their patents cited, than labs outside of a half-mile cluster.

To the extent the federal government is placing bets on core research, it is doing so increasingly in the context of such regional innovation clusters. There are 56 regional cluster initiatives supported by the U.S. Small Business Administration (SBA), and the early data indicate that they are working. According to SBA’s Year One report on its 10 pilot clusters, more than two-thirds of participating businesses reported developing new products or services, more than half reported being able to commercialize new technology, with employment growing by 11.2 percent. The $30 million in federal funding committed to the National Additive Manufacturing Innovation Institute, which brought together nine research universities, five community colleges, 40 companies and 11 non-profit organizations in the Cleveland-Youngstown-Pittsburgh corridor, demonstrates the extent to which regional university/industry collaboration will be the cornerstone of future economic revitalization efforts.

So what are America’s universities doing differently now that makes them better business partners than in the past? Critically, they are shifting the paradigm of technology transfer from maximizing licensing revenue toward forging durable, long-term relationships with research funders.

Cornell University, which upset Stanford in making the winning bid for an ambitious new Roosevelt Island innovation campus in New York City, has been at the forefront of this change. A 2009 task force chaired by Cornell’s president found that New York had the top two universities in terms of licensing revenue (and three of the top 10) but generated a mere 35 start-ups—compared to 58 in California and 60 in Massachusetts. As part of its commitment to improve this track record, at the hotly anticipated Cornell-NYC Tech campus Cornell will offer project overseers contracts designed to facilitate frictionless collaboration in place of protracted legal battles over IP.

The University of North Carolina-Chapel Hill, another leader in private sector collaboration, performed a comprehensive study of its innovation ecosystem in 2008. Finding that its scattered offices and labyrinthine policies made the school a black box to industry, UNC-Chapel Hill focused on streamlining processes and harmonizing practices across university units. Newly opened communication channels contributed to a threefold increase in industry funding over five years—from $8.67 million in 2007 to $26 million in 2012. Innovation initiatives include a template agreement emphasizing diffusion of new technology over licensing revenue, a broad entrepreneurial network retaining at least nine Entrepreneurs-in-Residence, and a local business accelerator that houses 18 businesses selected through a competitive process.

Cornell and UNC-Chapel Hill are just two examples of an emerging business-friendly trend across the American academic landscape. Joining leaders at Stanford and MIT, these universities and others like them nationwide are open for business. Organizations searching for allies in innovation that have written off university partnerships in the past might consider taking a second look.

Contributing Author

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David J. Kappos

David J. Kappos is a partner at Cravath, Swaine & Moore LLP. He is widely recognized as one of the world's foremost leaders in the...

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