MIT and the Rise of Entrepreneurial Science

Henry Etzkowitz

• Publisher: Routledge
• Year: 2002
• Topic: Business
• eBook ISBN:
  9781134495634
• Subtopic: Business General
• Index: Business

MIT and the Rise of Entrepreneurial Science is a timely and authoritative book that analyses the transformation of the university's role in society as an expanded one involving economic and social development as well as teaching and research. The Massachusetts Institute of Technology invented the format for university-industry relations that has be

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THE SECOND ACADEMIC REVOLUTION

As academic science is transformed into an economic as well as an intellectual endeavor, the separation between science and industry to which most universities traditionally adhered breaks down, as the university itself becomes an entrepreneur. Until quite recently only a relatively few schools, such as the Massachusetts Institute of Technology (MIT), saw it as an important part of their mission to develop a close relationship with industry or to take steps to commercialize their research. During the past two decades a broad range of universities, well beyond MIT, Stanford University and a few other schools with traditional ties to industry, have undertaken to mine their research resources for profit.

As their interest in making money from their research resources grows, universities compete in a new arena. When Columbia University announced a patent, covering both US and international rights to co-transformation, a genetic engineering technique invented by faculty member Richard Axel, the university’s director of technology licensing exclaimed, “We captured both in one.”¹ The implicit comparison was to the Stanford Cohen-Boyer patents, the basis for genetic engineering, which had failed to gain such a high level of protection because the two researchers had already disclosed the techniques before their university could apply for patents in Europe and Japan.

Academic institutions participate in various ways in the capitalization of knowledge and its transmutation into factors of production. The University of Colorado and Columbia University accept equity in faculty formed firms. Washington University, St Louis and MIT take the role of venture capitalist and Harvard has participated in ventures through its corporation. A university licensing administrator outlined the new academic regime: “Instead of publishing it and giving it away, you license, publish, but don’t give it away.”² For example, Rockefeller University announced the receipt of a $20 million payment for a patent license for the “obesity gene” from Amgen, a biotechnology company, “with an agreement to pay many times that amount if the protein proves useful in treating fat people.”³ The entrepreneurial university is a continuation of the development of a medieval institution for the conservation and transmission of knowledge into a multifaceted institution that also creates new knowledge and transforms it into practical uses.

Precursors of entrepreneurial science

Opportunities to translate research into industrial applications were always present, yet few academics took advantage of them. The few who did were a distinct and unusual minority. In early nineteenth-century Germany, several instances have been noted of ill-paid chemistry professors initiating commercial ventures, and supervising production processes, to supplement their incomes. One entrepreneurial effort stands out from these mundane ventures, Liebig’s mid-ninteenth-century use of chemical theory to develop an artificial fertilizer. Although unsuccessful, this venture represented a significant precursor of contemporary academic efforts to originate marketable products.

Universities have acquired the capabilities to engage in business activities, well beyond the traditional bursary functions such as collecting student fees and paying faculty salaries. Transcending their traditional industrial role of training persons for employment, the new entrepreneurial role of universities is based upon creating new knowledge-based firms, locally, as well as selling technology to the highest bidder among existing firms, nationally and internationally.

As technology transfer activities expand, they are often grouped within a distinctive administrative structure even as they are linked to previous academic missions through industry–university research centers and entrepreneurship training programs. A school’s portfolio of industrial connections (industrial liaison programs, technology transfer offices, incubator facilities, etc.) is the organizational attribute of entrepreneurial science, much as research specialties and distinctive courses of study distinguished universities from one another in the past. A transformation of the university’s mission is underway that is comparable to the academic revolution of the late nineteenth and early twentieth centuries, when research became an accepted academic task.⁴

The first academic revolution

An academic revolution would appear to be a contradiction in terms. As a medieval institution, going back more than one-thousand years to its founding in Paris and Bologna, universities appear to change at a glacial pace. Originally conceived as institutions of cultural conservation, preservation and transmission, they existed solely for that purpose for many centuries. The university has retained its original purpose even as it has expanded its purview to encompass new missions.

The continuity of the university resides in its history of development: each new task has evolved out of an effort to meet a previous goal. Research emerged, initially in philology and then in other disciplines, from a concerted effort to revive classical learning in the eighteenth century. New knowledge was inevitably created and a better understanding gained through the innovative methodological techniques invented to retrieve the meaning of Greek and Roman texts.

The seminar, an innovative advanced teaching method also arose out of the development of philological research. The cooperative examination of texts took place though presentations by advanced students and professors, with discussion of findings among them. This led to both levels of academics becoming inquirers into new knowledge. The seminar supplemented lectures and enhanced the educational mission of universities even as it became a basic format for organizing research in the humanistic disciplines.

As research became a distinctive activity at some universities in Europe, the experimental sciences were also incorporated into the university. The invention of the teaching laboratory in chemistry at Giessen University in Germany in the mid-nineteenth century was accompanied by the development of a precise methodology in organic chemistry. A senior researcher, utilizing advanced students to conduct direct supervision, could train dozens of students at a time. This basic format persists in academic science teaching to this date.

In the United States the first academic revolution originated in the midnineteenth century at some of the older teaching institutions such as Harvard and Columbia, where professors, often inspired by their German doctoral mentors, sought to initiate research training programs and advanced degrees. However, the gap between academic vision and available resources was evident for virtually all US academic institutions during the mid-nineteenth century, with the notable exception of those working in agricultural research.

The attempt to establish chemical research laboratories according to the German model largely failed.⁵ Harvard’s Eben Horsford, for example, was able to raise the funds to build a building but not to hire assistants and buy supplies, let alone heat the laboratory. There were simply not enough funds available to realize the research ambitions of the increasing number of American scholars who returned from Europe with their PhDs.

Since research funds did not come with academic positions as was typical in Germany, individual researchers were responsible for seeking their own sources of support. The organization of doctoral research was a creative response to these financial constraints. Research expanded beyond an individual effort when academics employed as teachers obtained small amounts of money to purchase research materials and to hire students to help carry out research.

Academic research was greatly advanced later in the century by the founding of new universities such as Johns Hopkins and Chicago. These institutions adhered to a model of pure research, outlined by Johns Hopkins physicist Henry Rowland in the late nineteenth century. Early in his career Rowland had been a consultant to industry but when he took office and gave his inaugural address as President of the American Association for the Advancement of Science, he put this industrial career behind him in raising the banner of pure research.

Until the late nineteenth century, in the USA no clear distinction was made between basic and applied research. The infusion of funds into academia from the great industrial fortunes created in the late nineteenth century was accompanied by fears that donors would attempt to influence the research agenda. The creation of an ideology of basic research was part of the effort to carve out a protected, yet financially secure, space for science. The practically oriented leaders of academic science in the mid-nineteenth century, such as the Sillimans at Yale and Columbia’s Chandler, well known as consulting chemists, were pushed aside by a younger generation devoted to pure science who became the academic exemplars.

The distinction held until World War II when scientists who had grown up in the basic research culture found themselves immersed in war-related engineering projects, such as radar, which also led to the development of radio astronomy and the elucidation of theoretical issues in cosmology during the post-war period. The somewhat surprising emergence of theoretical issues during their wartime service, ostensibly devoted to practical issues, closed some of the gap between pure science and engineering for these researchers. Built with foundation and industry funds early in the century, the US academic research system was greatly expanded with federal funds during and after World War II. It has brought with it an increased velocity of scientific activity and pressures to further increase funding in order to support existing research groups and form new ones. Emanating from the research base created by the first revolution, economic development is becoming an academic mission, as well.

The second academic revolution

The role of the university in society is currently undergoing a transformation comparable in scale and scope to the first academic revolution of the late nineteenth and early twentieth century when the university integrated research along with teaching into its academic mission. As the first academic revolution spread to the sciences, a second revolution was set in motion. Making findings from an academic laboratory into a marketable product requires a series of intermediate steps that follow from acquiring the intention to sell as well as to publish one’s research. In these circumstances, organizations as well as individuals act as entrepreneurs.

In 1963, Clark Kerr, then Chancellor of the University of California, Berkeley, set forth a vision of the future of the university, extrapolated from the recent history of his campus.⁶ He called it the multi-versity to encompass a proliferation of activities. Conventional discipline-based departments were cross-cut by interdisciplinary research centers covering newly emerging fields such as materials science and foreign area studies, giving the university a matrix-like structure. Greatly expanded divisions of continuing education offered credited and non-credited courses to the general public on an even wider variety of topics than could be found in the regular academic catalog.

Parallel to the trends that Kerr identified, and in part based upon them, another academic transformation was gathering force based upon the commercialization of academic research. For example, the Alumni Foundation of the University of Wisconsin marketed patents derived from academic research to industry and financed faculty research projects with the monies made. These funds enabled Wisconsin to become a major research center in biology in the 1930s and 1940s.⁷

Transformation of the academic–industry interface

Academic scientists have a long history of working with industry, having helped establish the early industrial research laboratories in the United States.⁸ Until quite recently most university–industry connections separated academic and commercial practices. Even as ongoing relationships, consulting arrangements were usually conducted apart from academic research, although based on the academic’s expertise accumulated from campus-based research. Consulting relationships typically involved brief visits to industrial sites or conducting discrete projects on university premises. A consequence of this separation was that it left control of commercial opportunities of academic research in the hands of industry whereas control over the direction of research and choice of research topics was left to academic scientists. Although regular payments were made to individual consultants, the large-scale transfer of funds from industry to the university was left up to the generosity of companies.

The older forms of university–industry connections involved payment for services rendered, whether it was received directly in the form of consultation fees or indirectly as endowment gifts. Thus, the traffic between university and industry was policed so that those boundaries were maintained even as exchanges took place through consultation and philanthropy. From the early years of the research university in the late nineteenth century, university–industry relationships were largely established at the behest of industry to serve the needs of existing companies. Engineering schools reorganized themselves to serve the research needs of the growing science based electrical and chemical industries and to supply them with personnel. The linkages included cooperative programs which sent students to industry for part of their training, university professors undertaking research at the request of industry and donations of money and equipment by industrial firms to support engineering education.⁹

University–industry relationships declined in the 1930s due to the financial stringency of the depression and became relatively less important in the postwar era with the growth in government funding of science. Traditionally, academic–industry relations denoted the provision of research support from a firm to a campus-based researcher. Such funding, despite offering far fewer restrictions than government support in many cases, and thus being viewed favorably by academic research staff, has represented a very small proportion of academic research support during the post-World War II period, even though it has recently increased from a low of 2 percent to 7 percent.

Most of these funds flowed through consulting relationships with faculty members who provided advice (on campus to visitors from the company and at the industrial lab), conducted tests of materials and products in their laboratories and occasionally carried out small research projects for a company. Based upon the consulting model, some universities like MIT and Cal Tech established liaison programs to link up firms with professors. In its most developed format, a liaison program staff member would keep up with the technical interests of a group of companies who paid a fee to a member of the program and then received suggestions of faculty members to contact.

New forms of university–industry relationships involve the multiplication of resources through the university’s and faculty members’ participation in capital formation projects such as real estate development in science parks and formation of firms in incubator facilities. These also include academic scientists’ involvement in firms, for example through membership of advisory boards or boards of directors, stockholding in exchange for consultation services, assumption of managerial responsibilities and direct involvement in the formation of firms.

During the past two decades, a broad range of US universities have taken on the tasks of economic development, at times because of external pressures including funding constriction, but also as the result of internal initiatives arising from the expansionary dynamic of scientific research. Professors’ participation in the founding of firms based upon their academic research represents a new stage in the development of academic–industry relations. The objective is to multiply the value of intellectual property derived from academic research through the stock market, either directly through the formation of a new firm or indirectly through a stream of royalty income from an existing firm.

The new focus of relations with industry builds upon the development of scientific research capabilities and the creation of a series of boundary-spanning mechanisms, including technology transfer offices and spin-off firms. Incubator facilities provide a home and support services for new firms while research parks are designed to link successful firms to academic resources, in a format designed to be compatible with academic goals. Whether this goal can be achieved is a matter of considerable academic soul searching and debate.

Controversies over relations to industry

This transformation of the university brings with it a shift in values and practices as faculty and students take on entrepreneurial roles, within and outside the university. Roles such as faculty member, researcher and firm founder may be in conflict and also confluence with each other as well as with traditional academic roles. The combination of entrepreneurial activities with the university’s traditional roles of education and research has created a hybrid organization in pursuit of multiple goals that simultaneously conflict with and support each other. Thus, research may cause a time conflict with teaching even as research infuses teaching with new ideas and examples. Firm formation from academic research may cause a conflict of obligation with service to the department even as it provides new resources and ideas for investigation. While conflicts of interest are often viewed negatively as potential malfeasance, they also signal transition to a new academic model. They expose assumptions about the purpose of higher learning and the legitimacy of an economic role for the university.

One axis of opposing views about the utility and propriety of academic–industry ties concerns whether it is possible for the university to contribute significantly to the economy – the practical question. The overall modest level of this activity, despite a steady increase in income earned from patents and a number of multi-million-dollar research contracts, has led some observers to conclude that relations with industry are, and will continue to be, of minor import in comparison to university ties to government. For example, it has been argued that universities are ill-advised to commit resources to the marketing of technology, especially since companies prefer that academic institutions concentrate on making information freely available.¹⁰

The ethical question posed is whether such participation will detract from the traditional educational and research missions of the university – the value dimension.¹¹ There is concern that attention to economic issues will cost the university its independence. Some of these same fears were expressed by academics opposed to federal research support in the 1930s. Critics of academic–industry relations believe that the university risks losing its independent identity and special purpose by engaging in such activities.

Controversies have erupted such as the one at Harvard in 1980, when the administration proposed that the university participate financially in a firm based on the research of one of its faculty members. The ensuing debate rapidly escalated into a struggle over the goals of the university, the purpose of science and the professional ethics of scientists. ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Acknowledgements
• Introduction
• 1: The Second Academic Revolution
• 2: MIT
• 3: Controversy over Consultation
• 4: The Traffic among MIT, Industry and the Military
• 5: Knowledge as Property
• 6: The Regulation of Academic Patenting
• 7: Enterprises from Science
• 8: The Invention of the Venture Capital Firm
• 9: Stanford and Silicon Valley
• 10: Technology Transfer Universalized
• 11: The Making of Entrepreneurial Scientists
• 12: Innovation
• Notes