How to find the best university-firm match
University scientists and private firms are increasingly keen to engage in joint entrepreneurship, collaborating on research and development to advance knowledge and bring innovations to market. But only when the partners’ strengths build up, rather than canceling each other out, will the alliance boost innovation.
Everyone has heard about Botox – derived from botulinum toxin – to smooth out wrinkles; but who knows that treatments for migraines, neck muscle spasms and speech impediments were developed from the same lethal neurotoxin? These treatments were the result of a fruitful collaboration between professors at a top US medical school and health care company Allergan – just one example of the many partnerships between academia and the private sector. As Denisa Mindruta points out, there is long-standing evidence that academic research has a significant impact on the productivity of private-sector research and development, as publications are influential channels of knowledge transfer. Unsurprisingly, firms with direct research ties to universities significantly increase their innovative performance. Conversely, scientists are always on the lookout for firms that will move published results towards commercialization. There is a long tradition of such collaboration in the US, Denisa Mindruta explains, citing the example of University of Illinois, where she studied for her Ph.D.: “Universities are more entrepreneurial, they encourage scientists to form start-ups, or ‘spin-offs’, to get venture capital and commercialize their inventions.” But she also sees the trend coming to Europe, where scientists are more and more encouraged to transfer knowledge.
FINDING THE BEST PARTNER
So how can universities and private companies form the most profitable alliances? The factors behind value creation remain underexplored, and Denisa Mindruta decided to study them from a “matching” approach. Economists have typically studied matching – the sorting process in a context of two-sided decision-making and competition for better partners – in marriage and labor markets. The researcher examined the matching of scientists and firms, based on the simple premise that scientists care about the quality of the firm and firms care about scientists’ research excellence. The interaction of these preferences will lead to a sorting of partners, in other words “better” scientists will team up with “better” firms. But as Denisa Mindruta’s research shows, the selection is not made along a linear pecking order, since the process is endogenous, i.e. the choice variables are partly function of other parameters: each party will try to choose a partner whose qualities reinforce their own. To study what drive alliances, the researcher examined collaborations between scientists at a top US medical school and their private-sector partners along three key dimensions, which she figured best reflected the typical strengths of potential partners: publishing capability, patenting capability and knowledge specialization.
PUBLISHING AS AN INNOVATION SIGNAL
The first factor that Denisa Mindruta looked at was the quality of publications, weighing published articles by the number of citations they received. She used publishing as a proxy for dynamic, innovative research, and beyond a way of deploying knowledge, also a signal for a preference for “open science”. Publishing, once the hallmark of academia, is also widespread in the corporate world. “Firms are now on a par with university departments in terms of publication,” says the researcher. For both academic researchers and firms, there is an interest in publishing to advance novel ideas, but also to enhance standing in the scientific community and attract more talented people to work with. “What is important for scientists is also to get interesting projects to work on, or to place their Ph.D. students within firms,” adds Denisa Mindruta. And indeed, her econometric model confirmed that firms’ and university scientists’ publication capabilities are complements in value creation, all other things being equal. In other words, the strengths of each partner build up and boost innovation. An example of such fruitful collaboration was a discovery made by academics, which could potentially reduce mortality in children with Pompe disease, a rare genetic disorder in which most children die before their first birthday. The discovery was based in part on an enzyme replacement therapy initially developed by biotechnology corporation Genzyme.
ONE PARTNER’S COMMERCIAL POWER IS ENOUGH
The second source of value creation examined was patenting capabilities. From the perspective of a university researcher, it makes sense to look for firms that will “take the next step to translate research into a concrete product”, as Denisa Mindruta explains. Her hypothesis, corroborated by her model, shows that this feature is a substitute in value creation. In other terms, the strength of one partner substitutes for the shortcomings of the other. For example, a industry partner can advise a university laboratory on how to start producing drugs on a large scale. But if both partners have strong commercial abilities, they will not add up. In fact, the two are less likely to partner up. “Scientists who patent themselves, especially in the US, already have the opportunity to form their own companies” says the researcher. A final, surprising result of the interaction of capabilities was the negative relationship between a firm’s patenting capabilities and university scientists’ publishing capabilities: biotechnology firm’ high-impact patents did not build up on important scientific papers, a possible sign that marketable inventions and valuable scientific knowledge follow different selection logics.
THE COMPLEMENT BETWEEN BROAD AND FOCUSED EXPERTISE
Finally, Denisa Mindruta looked at the effect of each potential partner’s type of knowledge: broad or specialized. There she found a complementary relationship between partners with different types of knowledge: one specialized partner will benefit from the “big picture” that only the other, more generalist partner will see; conversely, they will sometimes need an expert on another topic. In the example of botulinum toxin, a specialized firm (Allergan) reached out to scientists with broader expertise that could apply the firm’s very specialized, proprietary knowledge to other domains.
Based on an interview with Denisa Mindruta and her article “Value Creation In University-Firm Research Collaborations: A Matching Approach” published in Strategic Management Journal 34: 644–665 (2013).
Because of this trend towards restructuring research towards more commercial partnerships, those involved must bear in mind that it’s not just a question of money. “Many business relationships are no longer formed along buyer/seller lines, or as a bidding process,” points out Denisa Mindruta. It’s about investing in the right type of capabilities, she adds. Then it’s up to universities and firms to look for partners whose strengths will build up on their own.
Denisa Mindruta used a proprietary database that contains the complete set of 447 collaboration contracts between 217 university scientists at a top medical school on the East Coast of the US and 238 industrial partners, spanning the 1995-2004 period. She examined the “one-to-one” matching of scientists and firms along three key dimensions: publishing capability, patenting capability, and the degree of knowledge specialization.