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A New Generation of Entrepreneurs to Commercialize Innovations

Mark Marich

Kauffman Senior Fellow Dane Stangler spoke before the U.S. Congress Joint Economic Committee hearing titled “Fueling Local Economies: Research, Innovation and Jobs,” on Tuesday, June 29, 2010. PDE staff report:

The hearing, moderated by Congresswoman Carolyn Maloney, featured testimonies fromĀ  Cornell University Professor Zachary Shulman, President of Stony Brook University Samuel Stanley, and Dane Stangler, Senior Fellow at the Kauffman Foundation, who represented his co-author and Vice-President at the Foundation Dr. Robert Litan.

All three witnesses agreed on the impact of research universities on regional economies. The regional impact of research universities can be seen in Ithaca, NY and the Silicon Valley, where the economies surrounding Cornell University, Stanford University and the University of California at Berkeley were stimulated by jobs created as a result of university research. Hearing witness Samuel Stanley cited other examples from a Science Coalition study that traced the origins of 100 companies, including global industry leaders like Google, Genentech, and Cisco Systems as well as up-and-comers and start-ups across a spectrum of industries, back to breakthrough research conducted at a university and sponsored by a federal agency. Collectively, the 100 companies traced employ over 100,000 people.

Stangler offered a view on innovation commercialization and job creation from the lens of entrepreneurship. He pointed out that almost all net job creation results from new firms, and that since many of these firms are established by star scientists, the U.S. can get more economic “bang for our buck” if we recognize the limitations on innovation and commercialization of new technologies and work to remove them.

One great limitation to the commercialization of technologies born at universities is presented by the current peer review system. Its “clubiness” imparts a bias against new research and innovative thinking. Congressman Kevin Brady showed special interest in Stangler’s views on how to fix this system. In his introduction, the Congressman gave an example of peer review abuse, citing an incident at East Anglia University where professors squelched research by scientists that contradicted mainstream theories of global warming. This kind of behavior hinders innovation and sabotages scientific inquiry in pursuit of a political agenda.

Attracting young professors to peer review boards may encourage more innovative thinking in research and academia, according to Stangler. The government could also ask agencies to report on progress made in the research and development stage to help expedite the creation of new technologies and hold institutions accountable for money they accept to conduct research.

New government incentives are needed, according to the witnesses. After the landmark Bayh-Dole Act of 1980, universities began concentrating licensing in one office to organize the commercialization of their innovations. Unfortunately, this focus on the TTO in effect created artificial, legal monopolies that bottleneck the commercialization of new technologies. To encourage more commercialization, Stangler suggested that the government could require research grant applicants to show some kind of potential for future commercialization, and reward outstanding research with prize incentives. The purpose of this would not be to “pick winners in advance” by trying to guess what research will yield commercial success, but to at least encourage commercialization as a possible outcome of research. Therefore, education about how to commercialize technology should be available to those who want it.

Prof. Shulman also advocated a role for the government, although his suggestions did not aim at fixing the current structures and processes. Based on his experience at Cornell, he suggested that the government mandate that a university recipient of research dollars apply a small percentage these funds to actual company investment.

Attracting foreign talent in the fields of science and mathematics is also crucial to maintaining the United States’ status as a leader in research and development, pointed out Stangler. A policy that “staples a green card to every diploma” earned by a foreigner studying in the U.S would encourage star scientists from other countries to stay in the U.S. and start businesses here, creating new firms that will create jobs. Stangler explained that highly educated and skilled immigrants do not take away jobs from Americans, but actually create jobs when allowed to start firms in the United States. Instead of forcing foreign entrepreneurs to start businesses in their countries of origin, why not allow them to establish firms here in the U.S.?

We hope that Congress takes this inquiry further. We must encourage measures that streamline the process of turning research and development into marketable products. By attracting more scientific talent and investment into the research and development industry and removing hindrances to the commercialization of new technologies, the U.S. can add jobs and boost its economy.

[Reported by Catherine Munson]

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