Industrial Innovations Arising from Academic Research

The sharing of basic knowledge among scientists is essential to the progress of many areas of science. It prevents an enormous amount of redundancy and unnecessary experimentation. Yet, because basic research is often published in scientific journals and shared among colleagues, it cannot be owned the way someone might own a patent. It is generally not possible for the benefits of basic research to be captured only by the scientists and institutions that conduct it. The spillovers, or ripple effects, of basic research have often yielded high returns to subsequent applied research or have had positive effects for consumers of final goods or services that rely on the new technology. Consequently, the overall net benefits of basic research to private investors and to society may be quite high, even when such returns cannot be captured by the individuals and institutions that originally performed the basic research. Basic research frequently is funded by public sources of support or by industrial alliances among private companies that can pool together funds for basic research (Romer, 1993). Basic research is also viewed as a necessary and/or important investment by numerous industrial firms in an effort to remain competitive and to open new markets.

Basic research very often generates knowledge involving many different domains of study including the systematic examination of the physical and biological world as well as human activity, interaction, and behavior. Because such research cuts across many disciplines and industrial categories, there traditionally has been widespread consensus on the important role of government funding of basic research. Basic scientific research that is supported through public funding is carried out primarily in academic settings. In a recent study, Mansfield (1995) examined the importance of academic research in the development of new industrial products and processes. He surveyed a total of 76 firms in seven industries and asked them about the new products and processes they developed. The firms reported that approximately 10 percent of their new products and processes could not have been developed without academic research. (See text table 8-2.) This type of analysis is understood more easily, and appears to be less ambiguous, than the aforementioned studies on productivity. Moreover, Mansfield's findings confirm the notion that some industries do benefit considerably from certain types of research, including academic research. (For more information on Mansfield's research in this area, see chapter 5, Academic Research and Development: Infrastructure and Performance, Selected Research on University/Industry R&D Linkages.)

Rosenberg and Nelson (1994) examine the interrelationship between industrial and academic research. They observe, as many others have done, that academic research is oriented more toward acquiring fundamental knowledge in the sciences, while industrial research focuses more on immediate market applications of R&D. They remark:

Rosenberg and Nelson also recognize a relatively strong association between academic and industrial research in several areas of medicine and electronics, which they attribute, in part, to research support from the Department of Defense and the National Institutes of Health. They observe that, in 1990, universities accounted for 18 percent of U.S. patents in genetic engineering and recombinant DNA, 16 percent in natural resins/peptides or proteins, 12 percent in chemicals involving microbiology and molecular biology, 11 percent in organic compounds under patent class #536, and 11 percent for superconductor technology (Rosenberg and Nelson, 1994).

Jaffe (1989) also examined academic research and industry patents, exploring the possibility of regional effects, in which companies conducting research may benefit from universities in their general location. He argued that such a relationship between industry and academia is consistent, for example, with "conventional wisdom that 'Silicon Valley' near San Jose, California, and Route 128 around Boston owe their status as centers of commercial innovation and entrepreneurship to their proximity to Stanford and MIT" (Jaffe, 1989, p. 957). Using data from the NSF Industrial R&D survey, Jaffe compared research conducted in academic departments with incidences of industry patents within the same state. He carried out the analysis for 29 states for the years 1972-77, 1979, and 1981, covering five broad areas of research: pharmaceuticals and medical technology; chemical technology; electronics, nuclear technology, and optics; mechanical arts; and all other research. He found a significant positive relationship between industrial patents and university research conducted on the same topic in the same state. The strongest effect was in pharmaceuticals and medical technology; followed by chemical technology; and electronics, nuclear technology, and optics. On the other hand, Jaffe mentions that his study does not rigorously establish the causal relationship between university research and industrial patents. That relationship may be reversed, to some extent, by feedback mechanisms, in which industrial patents encourage further research by local universities.

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