University Proof of Concept Centers: Empowering Faculty to Capitalize on Their Research
In March 2011, President Barack Obama announced the creation of a Proof of Concept Center (PoCC) program as part of the i6 Green Challenge to promote clean energy innovation and economic growth, an integral piece of his Startup America initiative. Managed through the Economic Development Administration (EDA), the program encouraged the creation of PoCCs aimed at accelerating the development of green technologies to increase the nation’s competitiveness and hasten its economic recovery. In September 2011, EDA awarded $12 million to six university-affiliated organizations in response to the Challenge competition; and in 2012, EDA awarded $1 million to each of seven new PoCCs. The 2014 solicitation broadened the i6 Challenge to include awards up to $500,000 for growing existing centers or developing commercialization centers to focus on later-stage research. The program raises an important question: What’s a PoCC and how is it different from other efforts to stimulate innovation?
PoCCs are designed to help address the particularly troublesome gap between the invention of a specific technology and its further development into new products or applications. The problem is that in most cases neither the faculty researcher who makes a discovery nor the university itself has the information needed to understand its value to outsiders or the contacts and incentives necessary to develop it. In the jargon of economics, there are informational, motivational, and institutional asymmetries.
Public funding of PoCCs represents a new approach to technology development. Whereas the Small Business Innovation Research and Small Business Technology Transfer programs administered through the Small Business Administration provide support to small organizations to develop focused research with a goal of commercialization, PoCCs support university faculty and students who typically lack the networks and experience necessary to understand more fundamental aspects of technology development and entrepreneurship.
Many people became aware of PoCCs only with the current federal initiative, but the first PoCCs were established more than 10 years ago and were part of a broader trend emphasizing the development, transfer, and commercialization of university technologies.
For years, university reputations hinged on the capability of faculty to obtain sponsored grants (typically from the federal government), conduct research, and publish results that contribute to the broader body of knowledge. This process, however, can also yield new inventions or discoveries that may be useful for social or economic purposes beyond fundamental science. Aside from a few universities, such as the University of Wisconsin at Madison (technology transfer office founded in 1925) and the Massachusetts Institute of Technology (technology transfer office founded in 1950), prior to the 1980s, research institutions either ignored these discoveries or did not have the means to explore their value, much less to develop them into promising new technologies or companies.
This environment began to change in the late 1970s as the United States confronted a severe downturn in industrial productivity, accompanied by bankruptcies, layoffs, and plummeting world market shares for U.S. firms. U.S. economists and policymakers concurrently observed the stunning success of the Japanese keiretsu: an industrial alliance through which large manufacturers, suppliers, and public institutions collaboratively developed and produced high-quality products for export. National leaders in the United States consequently sought to improve federal policies relating to industrial performance by scaling back burdensome federal regulations, removing barriers to industrial collaboration and improving the return on investment for federally-funded university research.
First steps
Policymakers were specifically concerned that valuable technologies were either sitting on the shelf within universities or mired in red tape within federal mission agencies. Senator Birch Bayh (D-IN), was especially interested in ways to disseminate and accelerate the development of new biomedical technologies derived from federally-funded research. Bayh wrote legislation to stimulate innovation, which he promoted in a letter to his Senate colleagues: “Many people have been condemned to needless suffering because of the refusal of agencies to allow universities and small businesses sufficient rights to bring new drugs and medical instrumentation to the marketplace. The exact magnitude of this situation is unknown, but we are certain that the cases we have uncovered to date are but a small sample of the total damage that has been done and will continue to be done if Congress does not act.”
Bayh joined Senator Robert Dole (R-KS) to propose and pass the University and Small Business Patent Procurement Act of 1980 to improve the introduction of new, university-developed technology into the private sector. Referred to by the Economist as possibly “the most inspired piece of legislation to be enacted in America over the past half-century,” the so-called Bayh-Dole Act did this by aligning technology transfer policies among mission agencies to give universities title to intellectual property stemming from federally-funded research and development.
The immediate impact fell short of expectations. Not only were universities slow to understand the implications of Bayh-Dole, but with some exceptions, high-technology companies rarely viewed universities as a source for useful technologies. This perception on the part of industry began to change, however, with the emergence of a few highly-publicized licensing deals, such as the wildly lucrative Axel patents, the first of which was assigned to Columbia University in 1983. These patents sought to protect a method developed by Richard Axel for introducing foreign DNA into cells. Not only did the patents earn Columbia nearly $790 million in licensing revenue, much of this windfall was put back into Axel’s research, eventually leading to a Nobel Prize in 2004.
Gradually, understanding the financial potential of technology licensing and commercialization, an increasing number of universities responded by establishing technology transfer offices to manage the legislatively mandated invention disclosure process and determine whether to file for intellectual property protection. In fact, between 1980 and 2013, nearly 150 new technology transfer offices were established at U.S. universities. Further, universities and regions created their own attendant commercialization infrastructure, including science parks, entrepreneurs-in-residence, and early-stage seed funds, to encourage and support technology transfer and commercialization outcomes.
By all accounts, Bayh-Dole has been a resounding success. University disclosures, licensing deals, and spinoff companies—blunt but commonly used metrics of technology transfer activity—have grown consistently over the past 25 years. Well-known technology companies, such as Lycos, Yahoo, Amgen, and Google can trace their lineage back to university research. And each year, the Association for University Technology Managers (AUTM) publishes a list of the most important technologies that have been licensed from universities that year.
But there are concerns, too. Although growth in the number of disclosures, licenses, and spinoffs has continued apace, our analyses of technology transfer outputs finds that little relative improvement has been made in the proportion of university disclosures that become licensed technologies, an outcome one might not expect given the aforementioned investment in infrastructure.
The extant research points to three possible explanations. First, the technology transfer metrics collected by AUTM do not necessarily provide a clear picture of the impact of technology transfer. For example, government and university leaders often cite the number of new spinoff companies established from universities—data collected by AUTM—as evidence of economic development. However, these figures give us little indication as to the growth, survival, and economic impact of spinoffs. Recent research finds, in fact, that many university spinoffs generate little economic activity and produce no tangible outcomes.
Second, the technology transfer infrastructure may not be what is most needed to accelerate commercialization and entrepreneurship. Twenty years of empirical research shows that the success of incubators, science parks, and early-stage capital funds is mixed. Of course, the efficacy of these services depends critically on how they are implemented, where, and by whom. At worst, recent research shows that services administered by some universities can have a detrimental impact on post-spinoff technology commercialization.
Finally, our own research and reviews of the extant empirical literature find that one of the most important factors affecting technology commercialization may be the most overlooked: the background, behaviors, and networks of individual university researchers. Faculty researchers typically have little experience or training in technology development or entrepreneurship. University researchers are trained by other university researchers and develop professional networks of individuals with training, experiences, and goals similar to their own. The downside is that they become locked into social networks that lack representation from other professions and groups. Thus, when faculty members discover a new technology, not only do they not have the background to understand and develop its potential utility, they also do not have a network of individuals with the financial, entrepreneurial, or technical background to help them do so.
Conversely, studies show that researchers who have experience working in or consulting to industry have a better track record at commercializing new technologies and are more likely to establish a spinoff company. Technology commercialization is a team endeavor, and the experience of working with industry or previous attempts to spinoff a company introduce otherwise sheltered academic researchers to a new world of technologists, professional managers, funders, accountants, attorneys, and regulators who can provide useful knowledge, services, and resources important for technology commercialization and entrepreneurship. Without understanding the extant realities of academic culture, including the professional motivations, backgrounds, and training of individual researchers, almost any technology development infrastructure is sure to fail.
PoCCs
Whereas early technology development infrastructure efforts focused on creating physical spaces, such as incubators and science parks, for technology development activity, PoCCs focus further upstream on the individual university researcher. As mentioned, PoCCs are a collection of services, tools, and resources designed to enable individual university researchers to bridge the gap between discovery and further technology development.
The first PoCCs included the Von Liebig Center at the University of California at San Diego and the Deshpande Center at the Massachusetts Institute of Technology, founded in 2001 and 2002, respectfully. Both centers were established with the help of entrepreneur-philanthropists who believed that what was really missing at these universities was a way to not only support already-entrepreneurial faculty, but also to accelerate the cultural transformation of these institutions.
In 2008, David Audretsch and Christine Gulbranson, both affiliated at that time with the Ewing Marion Kauffman Foundation, published a widely discussed article introducing the first PoCCs as institutions ‘‘devoted towards facilitating the spillover and commercialization of university research.’’ They found that the two PoCCs provided faculty with entrepreneurship classes, modest seed grants, and—perhaps most important—coaches with experience developing technologies and establishing companies. Although both efforts were relatively modest, their strength lies in creating relationships between well-respected scientific institutions and robust entrepreneurial communities within the surrounding regions. In other words, the creation of productive relationships is valued more than a specific outcome metric.
As of the end of 2012, at least 30 additional PoCCs had been established. To our surprise from this inventory, PoCCs offer a range of services and focus areas almost as varied as the centers themselves. Some centers provide financial capital, others provide human capital, and still others simply network the relevant actors.
For example, the Boston University-Fraunhofer Alliance for Medical Devices, Instrumentation and Diagnostics, founded in 2007, partners Boston University researchers with Fraunhofer Institute engineers to accelerate the development of medical innovations. The QED Proof of Concept Program, founded in 2009 and housed at the University City Science Center in Philadelphia, provides seed money to help promising technologies bridge the so-called valley of death. And the University of Southern California Stevens Institute for Innovation, founded in 2007, networks student innovators and faculty with external startup mentors and funding sources. The Maryland Proof of Concept Alliance, founded in 2010 at the University of Maryland, has a similar mission.
Perhaps even more interesting is the recent state-wide PoCC initiative by the New York State Energy Research and Development Authority (NYSERDA). NYSERDA funds technology development and entrepreneurship from a small “tax” on electricity use—a so-called system benefits charge added to each individual power bill in the State of New York. In 2013, NYSERDA made awards to three different applicants: Columbia University, New York University (NYU), and a consortium of schools and groups around Rochester. NYSERDA created the PoCC program as part of a larger technology-development strategy in the clean-energy field that includes early-stage gap funding, incubators, and a state-wide entrepreneur-in-residence program, among other services. The NYSERDA PoCC program seeks to tie these disparate programs together in order to accelerate the commercialization of university technologies. Interestingly, once the awards were made, Columbia and NYU joined together to form a Power Bridge consortium to focus on building additional scale in New York City.
Other states also perceive the benefits of PoCCs. For example, Colorado Governor John Hickenlooper recently supported his state’s General Assembly in the passage of the Advanced Industries Accelerator Act to promote entrepreneurship and technology commercialization in advanced industries through proof-of-concept research.
Although our understanding of the effectiveness and structure of PoCCs is in its infancy, there are some indicators that such infrastructure might be an invaluable investment for universities and their stakeholders. Among the 32 active university-affiliated PoCCs we identified, there is systematic evidence that university startups increased after the university became affiliated with a PoCC. We discussed previously the challenges of using blunt metrics to gauge technology transfer success, yet startups at least serve as a proxy for the diffusion of innovations important to regional growth and development.
Our intent here is not to suggest that PoCCs are a panacea for broader institutional and regional technology commercialization and entrepreneurship strategies, but it is to say that the recent flurry of policy interest and activity is a convincing call for further systematic investigation of the structure and economic impact of these centers.
Christopher S. Hayter ([email protected]) is an assistant professor at the Center for Organization Research and Design located within the School of Public Affairs at Arizona State University. Albert N. Link ([email protected]) is a professor of economics at the University of North Carolina at Greensboro.