Are Faculty Critical? Their Role in University–Industry Licensing

1. INTRODUCTION Are faculty critical to university--industry licensing? The short answer is, of course, yes because without faculty there would be no university inventions to license. To stop here, however, would be short-sighted, because recent research points to faculty involvement well beyond simply disclosing research, with faculty often identifying licensees as well as working with licensees in further development (see, for example, Agrawal and Henderson, 2002; Colyvas et al., 2002; Jensen and Thursby, 2001; Lowe, 2002; Thursby et al., 2001; Thursby and Thursby, 2002). Understanding the nature of this involvement is important for understanding how technology is transferred through licensing as well as more controversial issues, such as the need for university licensing. Some critics of university licensing argue that licensing is unnecessary. The argument is that to the extent faculty disseminate their research through publication, the staff of research and development (R & D)--intensive companies can pick up and use inventions without licensing. To the extent that faculty know-how is important in development, then a simple reading of the relevant literature is not always sufficient for commercialization of university research. A second controversial issue related to faculty stems from the rate at which licensing has increased. The Association of University Technology Managers (AUTM) conducts an annual survey of licensing activity at U.S. universities. Based on the 84 institutions that reported licenses executed in both 1991 and 2000, the number of licenses executed increased 161%. With such an increase, some critics question whether faculty have been diverted from their basic research mission. (1) Again, the extent and nature of faculty activity is at the heart of the controversy. It is not surprising, therefore, that the role of faculty has been the focus of recent research on university-industry technology transfer. Thursby et al. (2001) provide evidence from a survey of university technology transfer personnel to suggest that the majority of inventions licensed are so embryonic that successful commercialization depends critically on faculty participation in further development. Jensen and Thursby (2001) examine the incentive problems associated with obtaining faculty participation. If faculty have a taste for academic research, as is suggested by Levin and Stephan (1991), Jensen and Thursby (2003), and Jensen et al. (2003), then license payments tied to commercial success, such as royalties or equity, are important to attract them to work on commercial development. Similarly, Lach and Schankerman (2003) provide empirical support for the view that faculty disclosure of inventions is positively related to their share of license revenue from their inventions. Unfortunately, the data underlying this work largely come from universities, which may well overestimate the extent of faculty involvement and may overlook important reasons that firms work with universities. This article presents the results of a survey of businesses that license in university technologies. The authors use these data to examine the extent to which licensees use faculty input, not only in identifying inventions of interest but also in further development (either through sponsored research or according to terms of the license itself). These data also allow an examination of the extent to which the nature of faculty research is a factor in the business's interaction with universities. The results reinforce and add to those from earlier university surveys. Businesses in the sample report that the overwhelming majority of university inventions they license are no more than a lab scale prototype and that for early stage technologies they often employ faculty assistance in further development. The data also show that when inventions are too embryonic to license, firms often pursue the invention by sponsoring faculty research in lieu of a license. …