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C H A P T E R 9T h e I l i n o i s R e p o r t 2 0 1 2

The Illinois Report 2012

A young man named Jonathan BaldwinTurner left New England for the wild fron-tier of Illinois. After witnessing oppressionand the lack of opportunity for the childrenof the “Industrial Class,” Turner became anoutspoken advocate for higher educationwith an “industrial” focus. In other words,he promoted teaching practical courses inagriculture, science and engineering, inaddition to classics, so that the nationmight have a workforce prepared toaddress the challenges of the industrial rev-olution and support the nation’s expansioninto the West. This plan ultimately becamethe Morrill Act, which established the land-grant universities that now include manyof the world’s best-known research institu-tions, the University of Illinois amongthem. The vision was simple: use universi-ties to support the sustainability (economicdevelopment) of communities.

The juxtaposition of labor and learningbecame the foundation of our modern-daycommunities. With the American univer-sity at its center, industry emerged allaround. Land-grant universities were, firstand foremost, dedicated to agriculturalexperimentation, the primary industry ofthe 20th century, having profoundlyaffected the livelihood of so many Ameri-cans. Likewise, university research soughtto solve grand challenges in manufactur-ing and engineering that were core to thenation’s defense, its people’s health and itsoverall prosperity.

The “industrial” education vision sup-ported expansion of the nation (and itsposition in the world) and recognized theneed for education related to the sciencesand engineering. Remarkably, as the CivilWar loomed, President Abraham Lincoln

The American Research University:A Renewable Resource of InnovationCaralynn V. Nowinski & Lawrence B. Schook

“Industrialeducationprepares theway for amillenniumoflabor”

–JonathanBaldwin Turner(1805-1888)Illinoisadvocate forpublic fundingof “industrial”education

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Caralynn V. NowinskiU of I Office of the Vice President for Research

Vice President Lawrence B. SchookU of I Office of the Vice President for Research

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not only signed the Morrill Act into law(1862), but he also led efforts to developthe National Academy of Sciences (1863)and the transcontinental railroad (1863).Originally formed to expedite solutionsthat addressed the Civil War crisis, the Na-tional Academy served to “investigate, ex-amine, experiment, and report upon anysubject of science or art” as directed by thefederal government.1 Hand in hand withthe land-grant university, the formation ofthe National Academies was a clear signalthat scientific pursuit and achievementwas—and remains, to this day—a neces-sity for American prosperity.

The land-grant university is truly anAmerican idea, one of the primary reasonsthat the higher education system in theUnited States has long been the envy of the

world. It clearly addressed needs not metby private universities that focused on pro-fessional studies of law, clergy, medicineand the arts. The land-grant universitiesalso provided access to more than the priv-ileged class and nobility. Our mid-19th cen-tury leaders identified needs and createdthe American research university as the so-lution. So the challenge confronting usnow is: what does it mean to be a land-grant university 150 years after the pas-sage of the Morrill Act?

The Rise and Fall of Federal Research Support

From the Morrill Act to the creation of theNational Science Foundation (NSF), Amer-ica invested in research, education andinfrastructure that gave way to a growingeconomic base and its position as one of92

1 National Academyof Sciences. History.RetrievedNov. 30, 2011, fromhttp://www.nasonline.org/about-nas/history/.

Figure 1Federal Investment in Research &Development

1973:Cease�re inVietnam

1975-1982:ProjectIndependence(Energy)

1989:Berlin Wallfalls

1999-2004:DoublingNIH

1950

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1975

1980

1985

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Source: GDP figures from Bureau of Economic Analysis, Survey of Current Business, 26 March 2009; R&D figures fromNational Science Foundation, Division of Science Resources Statistics,National Patterns of R&D Resources (annual series).

the world’s leading competitive forces(Figure 1 - Timeline). The Cold War andthe years that followed solidified the na-tion’s global leadership position as Amer-ica advanced its understanding of scienceand contributed to successes of the SpaceAge and the Information Revolution. Theincrease in federal research and develop-ment (R&D) investment in the 1950s, 1980sand again in the early 2000s demonstratedthe government’s commitment to have re-search foster innovation and maintaincompetitiveness.2

As federal investment in R&D increased,the number of patents, a suitable proxy forinnovation, from American research uni-versities grew substantially (Figure 2).3However, the government was not opti-mized to capitalize on such intellectualproperty (IP) and move research to com-mercial development. The Bayh–Dole Actof 1980 was designed to foster such tech-nology commercialization and shifted con-trol for commercializing IP developed as aresult of federal research funding to univer-sities rather than the government. This leg-islation empowered universities to licensetheir technology for commercial develop-ment, an opportunity which previouslyhad been significantly neglected.

Despite the clear relationships betweenfederal R&D funding, innovation and eco-nomic growth, federal R&D spending as afunction of GDP has lagged in recent years,dipping below 1 percent in the 1990s. TheU.S. government’s plans to double the Na-tional Institutes of Health (NIH) budgetfrom 1999-2004 along with an increase indefense R&D led to an increase in federalR&D spending to just above 1 percent ofGDP; however, the fiscal year 2012 R&D in-vestment to GDP ratio is likely to onceagain fall below 1 percent.

R&D investment by industry has partiallycompensated for the decrease in governmentinvestment, although it is critical to notethat industry funding is often biased

toward developmental and applied re-search rather than basic scientific research(i.e., the source of new discoveries and in-novation; also funding the training of futureindustrial researchers and engineers). Still,total national investment in R&D is lessthan 3 percent of GDP and has remainedrelatively flat in recent years, as opposed toAsian countries, such as China, Taiwan andSouth Korea, whose government invest-ments in R&D are growing by more than 10percent annually (Figure 3 on page 94). Atthe same time, the U.S. economy’s share ofglobal GDP continued to decline. (Figure 3aon page 95).

One may argue that the U.S. has grown ig-norant of the formula for prosperity that itcreated. Not only does this country facecontinued challenges in the areas of na-tional defense and infectious disease, butnew challenges have emerged: globaliza-tion, an economic crisis and the growingU.S. budget deficit, energy security, climate

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2 Sources include theCongressionalBudget Office andthe National Sci-ence Foundation.

3 Margolis, R.M., &Kammen, D. M.(1999). “Underin-vestment: Theenergy technologyand R&D policychallenge.”Sciencemagazine285(5428), 690-692.Retrieved fromhttp://www.sciencemag.org/content/285/5428/690.full.pdf.

Figure 2Federal R&D Investment and the Number of U.S. UtilityPatents Granted

U.S

.R&

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U.S. R & D Expenditures

Total Patents Granted

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50

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Source: Patent figures fromU.S. Patent &Trademark Office, Electronic Information Products Division /Patent TechnologyMonitoring Team, TAF Database; R&D figures fromNational Science Foundation, Di-vision of Science Resources Statistics, National Patterns of R&D Resources (annual series).

93

change and the depletion of natural re-sources, and the digital revolution andworkforce evolution. American compla-cency has placed the future of its competi-tiveness at risk.

Maintaining U.S. Global Competitiveness

In their 2011 book, That Used to Be Us: HowAmerica Fell Behind in the World It Inventedand How We Can Come Back, Thomas Fried-man and Michael Mandelbaum write,“there is no chance—none—that Americacan address the great challenges it faceswithout renewing, refreshing, and rein-vesting in its formula.”4 They define Amer-ica’s formula for prosperity as having fivepillars:

• Providing public education for moreand more Americans;

• Building and continual moderniza-tion of our infrastructure;

• Keeping America’s doors open forimmigration to enrich our universities,

start new companies and engineerbreakthroughs;

• Government support for basic re-search and development;

• Implementation of necessary regula-tions on private economic activity.

An examination of America’s response toglobal competitiveness since the Cold Wardemonstrates clear deficiencies. The cost ofattending American public institutions ofhigher education is increasing due to de-clining state government support. In addi-tion, federal and state governmentsinvested little incremental value into thenation’s infrastructure, neglecting theneeds for improved transportation of peo-ple, goods and data. American institutionscontinue to welcome students from aroundthe globe, providing world-class educa-tional experiences, yet U.S. immigrationpolicy significantly hampers these highlytrained individuals from launching orworking at innovative startup companies.More than half of federal R&D fundingcontinues to pay for defense research amidongoing cuts in the overall federal researchbudget, threatening America’s (and indi-vidual states’) pace of innovation. Finally,U.S. public policy appears poorly coordi-nated without a defined end-game with re-spect to using federally funded research(basic discovery for innovation) to stimu-late industry-supported development.

This vision of using federally funded re-search and education to foster economicdevelopment appears at a crossroads. Yet,America’s founders provided a clear for-mula. The Morrill Act defined a role forthe land-grant university as the driver ofeconomic development and to serve as arenewable resource of innovation. Thus, itis the responsibility of America’s researchuniversities to reinvest in the formula forprosperity through:

• Providing for education for entrepre-neurial science and technology;

• Creating infrastructure to supportinformation exchange and innovation;94

The Illinois Report 2012

4 Thomas Friedmanand MichaelMandelbaum.2011. That Used toBe Us: How AmericaFell Behind in theWorld It Inventedand HowWe CanCome Back. NewYork: Farrar, Strassand Giroux.

Figure 3Major Global Economies’R&D Expenditures as Percentageof GDP

0

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United StatesJapanChinaGermanyFrance

South KoreaUnited KingdomRussian FederationCanadaItaly

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Source: OECD, Main Science andTechnology Indicators, volume 2009/1, via National ScienceFoundation, Division of Science Resources Statistics.

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For theland-grantuniversity, theway forward isclear: itmustintegrate intobroaderentrepreneurialecosystems atlocal, nationaland globallevels.

• Retaining the best and brightesttrainees and students through jobcreation and company formation;

• Developing novel funding mecha-nisms to support and optimize inno-vative research endeavors; and

• Embracing a culture that invests inand rewards entrepreneurial pursuits.

In an April 2011 letter to Secretary of Com-merce Gary Locke, the National AdvisoryCouncil on Innovation and Entrepreneur-ship provided ideas to enable university-based technology commercializationthrough student and faculty engagementand awareness, technology transfer sup-port, industry collaboration and connec-tions to economic development initiatives.For the land-grant university, the way for-ward is clear: it must integrate into broaderentrepreneurial ecosystems at local, na-tional and global levels. It will be impera-tive to deliver appropriate resources intothe ecosystem—talent, technology and in-frastructure—to catalyze collaborative inno-vation, foster commercialization and driveeconomic competitiveness.

The University of Illinois Response

In March 2000, the Illinois Senate made aclear proclamation about the University ofIllinois’ (U of I) economic development ef-forts. Senate Resolution 296 stated that“…the State research-based universities ofIllinois (shall) be encouraged to use their fa-cilities, equipment, research scientists’ andstaff’s time and services, and other resourcesfor the development and commercializationof new technological and scientific innova-tions, and that such uses be deemed to be inthe public interest and not in conflict withother uses or purposes that derive fromtheir traditional responsibilities for instruc-tion, research, and public service…”

In practical terms, that proclamation repre-sented both a reassurance and a challenge.Basic science research had long been partof the fabric of the U of I, but the direction

to put that research to work for the good ofthe people of the state had been newly ar-ticulated. The dot-com bubble of the mid-to-late 1990s led to an increased awarenessof the power of innovation to create jobs,and the pressure to pursue applied re-search grew. By early 2000, it was clear thatthe university had a major role to play informing companies, creating jobs and gen-erating revenue.

The timeline (Figure 4 on pages 96–97)highlights the U of I’s investment in educa-tion, research, infrastructure and commer-cialization initiatives since 2000. Over thisperiod, the university has increased its re-search budget by more than 50 percent tomore than $900 million, making it the topIllinois research university in terms offunding. (Figure 5 on page 98). Likewise,the pace of startup company formation,patents and licensing activity, andcollaboration with industry continues to

Figure 3AMajor Economies’Share of Global GDP

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ChinaJapanSouth Korea

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Source:World Bank national accounts data, and OECD National Accounts data files.

increase over time, providing significantand demonstrable economic impact andserving as a national benchmark.The U of I is committed to increasing con-nections between discovery/innovationand commercialization, and forging newpublic-private initiatives as a means ofstimulating and contributing to Illinois’and the nation’s economic development.Furthermore, a vision has emerged fortranslating and extending the success ofthe University of Illinois Research Park inUrbana-Champaign to Chicago, enabling

improved access to industry, startup com-munities and capital resources. The re-maining sections of this chapter illustrateselected initiatives and describe how suchefforts may be expanded (and replicatedby other universities) to deliver greatereconomic impact.

Providing for Education for EntrepreneurialScience andTechnology

The University of Illinois is working tomake entrepreneurship pervasive across96

Figure 4University of Illinois: Technology Development, Infrastructure & Commercialization Initiatives

March 2000 – IllinoisSenate adopted SR296; EconomicDevelopment addedas the fourth missionof the University ofIllinois (UI)

March 2000 –University of IllinoisResearch Park, LLC,incorporated in theState of Illinois by theUI Board of Trustees(BOT)

May 2000 –IllinoisVen-tures, LLC,incorporatedin the State ofIllinois by theUI BOT

Jan 2001 –Motorolaopened itsfacility in theUI ResearchPark as theanchor tenant

Feb 2001 –First 65,000-square-footmulti-tenantbuilding in theUI ResearchPark opened

Dec 2001 – Chicago BiomedicalConsortium established at theUniversity of Illinois at Chicago(UIC), University of Chicago andNorthwestern University withsupport from The Searle Fundsat The Chicago Community Trust

Oct 2002 – IllinoisGovernor George H.Ryan announced$123 million in newfunding as part of thestate’s VentureTECHProgram

Dec 2003 – UIUCnamed one of eightKau!man Campuses,supported by a $5million grant fromthe Kau!manFoundation

2000

2001

2002

2003

2004

2005

2006

June 2003 –Groundbreakingceremony for the$73.5 million,107,000-square-foot Institute forGenomic Biology

July 2003 –Enterprise-Worksopened as a43,000-square-foottechnology

Oct 2003 –Groundbreakingceremony for thenew $30 million,142,000-square-foot NCSAbuilding

May 2004 –Dedication ofthe $80million,225,000-square-footThomas M.Siebel Centerfor ComputerScience

Early Years:Establishment of ‘Economic Development’ Mission

Middle Years:Investments in Infrastructure

all of its campuses. This reflects the recog-nition that cultivating a culture of entrepre-neurship requires many entrepreneurialsupport/programming initiatives and op-portunities that enable the intersection ofscience and commercialization.

STEM Education

The U of I has a responsibility as a land-grant university to deliver science, technol-ogy, engineering and mathematics (STEM)education to prepare the next-generation

workforce. The university’s I-STEM Initia-tive aims to foster accessible, effectiveSTEM teaching and learning at local, stateand national levels, thereby preparing ahighly able citizenry and STEM workforceto tackle pressing global challenges.By joining with units across the universityand external partners that include indus-try, government, professional associationsand local school districts, the initiative pro-vides STEM experiences for students asearly as preschool, STEM teacher develop-ment programs, and undergraduate and 97

Jan 2007 – Completion of a$20 million expansion of theMicro and NanotechnologyLaboratory (MNTL), providing anet total of 117,000 square feetof o"ce and laboratory space

June 2007 – UIUC partnerswith BP, U. of California,Berkeley and LawrenceBerkeley NationalLaboratory to form the$500M-funded EnergyBiosciences Institute

Fall 2008 – UIC InnovationCenter opened as a strategicalliance among the UICColleges of Art and Architec-ture, Business Administrationand Engineering, in partnershipwith Motorola

Oct 2010 –Proof-of-conceptaward programlaunched byUIUC O"ce ofTechnologyManagement

Jul 2011 –EnterpriseWorksnamed by Inc.Magazine as oneof “10 start-upincubators towatch”

2007

2008

2009

2010

2011

2012

Dec 2011 –“2011UniversityResearchPark of theYear”awarded tothe UIResearchPark by theAssociationofUniversityResearchParks

Middle Years:Investments in Infrastructure

The Next 10 Years:Program Achievements and Next Steps

Feb 2010 –First acquisitionof anIllinoisVenturesportfoliocompany (sale ofiCyt to Sony)

Apr 2010 –EnterpriseWorksrecognized by ForbesMagazine as one of“10 technologyincubators that arechanging the world”

graduate STEM research experiences.Preparation of students for STEM-relatedjobs is critical for competitive economicgrowth, and programs such as I-STEMhave the potential to fill our pipeline withworkers to address the growth expected inhigh-wage, knowledge-based occupations(Figure 6).

Entrepreneurial education and programming

In addition to STEM education, a need ex-ists to foster entrepreneurship broadlyacross disciplines. This need may be ad-dressed by non-traditional studies in entre-preneurial programs, such as those offeredby the U of I’s Academy for EntrepreneurialLeadership (AEL) in Urbana-Champaign,the Technology Entrepreneur Center (TEC)at the College of Engineering in Urbana-Champaign, and the Institute for Entrepre-neurial Studies (IES) at the College ofBusiness in Chicago.

These institutes offer formal curricula aswell as co-curricular opportunities toexpose students at all levels—from under-graduates to post-doctoral fellows—to en-trepreneurial endeavors and experientiallearning. From business plan competitionsand classroom lectures to hands-on work-shops and meetings with prominentglobal entrepreneurs, these programs areintended to foster innovative small busi-ness pursuits as well as corporate entre-preneurship.98

Figure 5Growth in R&D Expenditures at Leading Illinois Research Universities

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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Spen

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NorthwesternUniversity

Universityof Chicago

Source: National Science Foundation

Figure 6Growth in Employment in STEMOccupations, Projected2008-2018, as Percent Change

Science, natural

Technology (computer specialist)

Engineering

Mathematical science

Total STEM occupations

Non-STEM occupations

15%

22%

11%

20%

17%

9.8 %

Source: U.S. Department of Labor, Employment Projections Program (EPP), available at:http://www.bls.gov/emp/#tables

The U of I has recently announced severalprograms aimed at extending the reach ofits entrepreneurial education throughoutIllinois. In partnership with government,industry stakeholders, business accelera-tors, and community-based organizations,the university is launching a series ofevents designed to enable more connec-tions between U of I students, faculty andresearch with Chicago-based and down-state industry, startups and investors.

Company incubation and businessdevelopment assistance

In 2003, EnterpriseWorks opened in theUniversity of Illinois Research Park (UIRP)in Urbana. This 43,000-square-foot smallbusiness incubator is designed to helpstartup companies succeed by providingan array of shared facilities, equipmentand support services as well as weeklyprogramming, educational forums and so-cial networking opportunities to encour-age collaboration. More than 120 startupcompanies have launched with the sup-port of EnterpriseWorks, over half ofwhich spun out of a university depart-ment or lab and 45 percent of which reporthaving IP licensed from the Urbana-Champaign campus.

Programming includes the I-Start Program,which provides a suite of company forma-tion services for new U of I entrepreneurs,including business development, legalsetup, SBIR application, bookkeeping andmarketing assistance, and the EIR Program,in which companies work with EIRs (entre-preneurs-in-residence/executives-in-resi-dence) to vet commercial potential, developbusiness plans, identify critical milestonesand seek seed financing.

In September 2011, the U.S. Commerce De-partment’s Economic Development Admin-istration (EDA) awarded the U of I a five-year, $638,000 University Center Programgrant to expand EnterpriseWorks programsto a 2,900-square-mile region that includes 12

counties in central Illinois. Among other ini-tiatives, the East Central Illinois UniversityCenter will create a community incubatorand expand existing entrepreneurial re-sources at Enterprise-Works, such as the EIRProgram, making them more accessible tocommunity entrepreneurs.

EntepriseWorks was named by Inc. maga-zine as one of “10 Start-up Incubators toWatch” in July 2011, and Forbes magazinecalled it one of “10 technology incubatorsthat are changing the world.” The successof EnterpriseWorks on the Urbana-Cham-paign campus has instigated the formationof EnterpriseWorks-North, which willlaunch on the Chicago campus in 2012.The Chicago satellite will leverage the suc-cess of the EIR and I-Start Programs, by in-corporating these programs into broadercommunity efforts through partnershipswith other stakeholders.

Creating Infrastructure to SupportInformation Exchange and Innovation

In addition to educational, training and pro-gramming opportunities, faculty, students,entrepreneurs and industry need physicalinfrastructure to interact, to exchange infor-mation and to foster innovation. Since 2000,the University of Illinois, with support fromthe state and federal funding organizations,has invested more than $500 million towardresearch facilities infrastructure in Urbana-Champaign alone (see Figure 4/Timeline).The university’s investments in refining theprocesses for technology transfer and indus-try collaboration also enable innovation andcommercialization endeavors. In this section,we highlight the university’s role in leverag-ing information exchange networks as wellas the direct economic impact of the Univer-sity of Illinois Research Park (UIRP).

Illinois’ information hub

The U of I’s participation in initiativessuch as I-WIRE and the Starlight program,plus its leadership role in deploying robust

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99

In partnershipwithgovernment,industrystakeholders,businessaccelerators,andcommunity-basedorganizations,the universityis launching aseries of eventsdesigned toenablemoreconnectionsbetweenUof Istudents,faculty andresearchwithChicago-basedand downstateindustry,startups andinvestors.

100

In fiscal year2010, the U of Iwas ranked thetop universityin the nation inNSF supportwith $185million ingrants, 54percent ofwhichwasdirected toNCSA staff.

high-performance computing resourcesthrough the National Center for Supercom-puting Applications (NCSA) in Urbana-Champaign, showcases its commitment toaccelerating research and providing testingfacilities for next-generation ideas and ap-plications. The NCSA is also the home ofthe Blue Waters project, which is intendedto provide the national research commu-nity with a sustained-petaflop supercom-puter. It leads the NSF’s Extreme Scienceand Engineering Discovery Environment(XSEDE), a five-year, $121 million, 17-insti-tution partnership. The university facili-tates a wide variety of collaborativeprojects, including those in the arts andhumanities, biology, nanotechnology andenvironmental engineering, all designed toenable science and engineering discoveryand innovation—and completely free to re-searchers through a competitive peer-re-view process.

Since the NCSA opened in 1986, the centerhas attracted nearly $1 billion in externalfunding from NSF, other federal agencies,and the private sector. In fiscal year 2010,the U of I was ranked the top university in

the nation in NSF support with $185 mil-lion in grants, 54 percent of which was di-rected to NCSA staff. Since 1999, NCSAhas provided fellowships to more than 100Illinois faculty and research staff, served asa launching pad and incubator for multi-ple campus initiatives, attracted partner-ships with Fortune 50 companies, andspawned technologies commercialized bystartup companies.

University of Illinois Research Park

One of the university’s most tangible en-deavors to promote economic develop-ment is the UIRP, which celebrated its 10thanniversary in 2011 and was recentlynamed “2011 University Research Park ofthe Year” by the Association of UniversityResearch Parks. The UIRP is an example ofthe powerful link between robust corpo-rate partnerships, technology innovation,student research and entrepreneurial sup-port. The significant and direct economicimpact that the UIRP has made on thelocal community and the state illustratesits success (Figure 7).

Figure 7University of Illinois Research Park Economic Output, FY09-FY13

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Source: An Economic Impact Report for the Research Park at the University of Illinois at Urbana-Champaign, prepared by Champaign CountyRegional Planning Commission, November 2011

Since 2001, a little more than $100 millionhas been invested in construction of 12buildings spanning 603,721 square feet.Less than $40 million was funded by theuniversity or public sector. More than 200companies have occupied the UIRP, in-cluding 127 startups and 75 current ten-ants. UIRP-based startups have reportedmore than $110 million in venture capitalfunding from 2005-2011. Current publiclytraded corporations at the park includeAbbott Laboratories, ADM, Caterpillar,Deere and Company, Eastman Chemical,Littlefuse, Pearson, Raytheon, Riverbed,SAIC, Sony, State Farm and Yahoo!.

UIRP operations annually contribute $1.3million in tax revenue to ChampaignCounty and $4.1 million to the state ofIllinois. The park’s 1,235 employees havecreated an additional 241 indirect and 508induced jobs in the region, resulting in anannual payroll of $54 million and a directeconomic benefit of $101 million. Indirectand induced jobs garner an additionaleconomic impact of more than $68 millionannually.

Retaining the Best and Brightest throughJob Creation and Company Formation

Unlike many Midwest states, Illinois isgrowing, and its minority and immigrantpopulations are growing fastest of all. Edu-cating first- or second-generation Ameri-cans presents an opportunity to invest inthe “industrial class,” but just as Turnerwanted to reshape higher education toequip students for the realities of the mod-ern world, so too must the U of I evolve itsprograms and its strategic vision. One ofthose new realities is the influx of interna-tional students, future members of a globalworkforce.

No public university is host to more inter-national students than the U of I’s Urbana-Champaign campus, and U of I hoststhousands of international faculty and staffevery year. Ensuring that they have the

opportunity stay in Illinois and to con-tribute to the economy should be one ofthe goals of the new land-grant university.Discussing visa and immigration issues isbeyond the scope of this chapter; however,the following section discusses key initia-tives to attract and retain talent throughnew technology transfer programs, early-stage company funding, innovative federalgrant mechanisms, and public-private col-laborations.

Developing Novel FundingMechanisms toSupport and Optimize Innovative ResearchEndeavors

The venture capital (VC) industry, a histor-ical source of funding for early-stage prod-uct development, has evolved significantlysince 2001 but has fallen dramatically since2008. Faced with capital constraints, pro-fessional investors must seek more ad-vanced product development beforeinvesting in novel technology. Accordingly,research universities, their surroundingcommunities (e.g., angel investors, busi-ness incubators and accelerators, and eco-nomic development groups), corporationsand federal agencies are now charged withthe responsibility of shepherding thesetechnologies to a more advanced stage ofmarket-readiness before venture capital islikely to invest.

Technology transfer office initiatives

Most university faculty members havebeen trained to focus on basic scienceresearch and the publication of such re-search, but a new generation is emerging—one that acknowledges the application ofresearch and is interested in engaging withindustry and investors. The Offices ofTechnology Management (OTM) at theU of I are developing programs to encour-age faculty to consider the commercialpossibilities of their work.

In 2010, the OTM at the Chicago campusco-founded Chicago Innovation Mentors

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No publicuniversity ishost tomoreinternationalstudents thantheU of I’sUrbana-Champaigncampus, andUof I hoststhousands ofinternationalfaculty andstaff everyyear.

(CIM), a multi-institution initiative thatcultivates university technology commer-cialization by matching experienced entre-preneurs, executives and domain expertswith innovating faculty. CIM supports bio-medical opportunities from the Universityof Chicago, Northwestern University andthe University of Illinois at Chicago, in col-laboration with the iBIO® Institute. Bypairing university researchers with a teamof qualified mentors, the program aims tobetter direct early commercial develop-ment efforts and identify value-addedmilestones that may be achieved beforeprofessional investment.

With a similar goal of advancing commer-cial readiness, two proof-of-concept awardprograms were launched at the Urbanacampus in 2010-2011. A third such pro-gram will launch in 2012 on the Chicagocampus to provide development grants,typically between $25,000 and $75,000, toevaluate and develop commercial possibil-ities of university technologies by allowingdevelopment, testing or prototype con-struction. In each case, projects are selectedon the basis of having clear market poten-tial, targeted milestones and well-defineddeliverables, signifying the greatest poten-tial to secure a license from industry, leadto the formation of an investor-backedstartup company, or secure competitivesmall business grant funding, such asfunding from the Small Business Innova-tion Research (SBIR) and Small BusinessTechnology Transfer (STTR) Programs.

The efforts of the OTM have significantly in-creased revenue from licenses and optionsto more than $19.08 million in fiscal year2011, up from $9.03 million just five yearsago. The University of Illinois is the sixth-leading source of patents in Illinois and theonly academic institution in the Top 10. Areport by the Intellectual Property OwnersAssociation (IPO) listing the top 300 organi-zations granted U.S. patents in 2010 in-cluded the University of Illinois as one ofonly 14 universities among that group.

The numbers of licenses and options aswell as startup companies formed also havemore than doubled over the past five years(Figure 8). This is particularly impressivegiven that the U.S. Department of Labor’sBureau of Labor Statistics reported a recordlow number of new business establish-ments launched nationwide in the 12months ending March 2010. Furthermore,data from the 2010 report of the Associationof University Technology Managers sug-gest that technology licensing “plays astrong role in regional economic develop-ment as 77 percent of startup companiesformed in 2010 were located in each institu-tion’s home state, up from 73 percent in102

The Illinois Report 2012

TheUniversityof Illinois is thesixth-leadingsource ofpatents inIllinois and theonly academicinstitution inthe Top 10.

Figure 8Five-Year TechnologyCommercialization Experience at theUniversity of Illinois, FY07-FY11

University of Illinois atUrbana-Champaign

University of Illinois - Chicago

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40

20

0

20

16

12

8

4

0

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4912

37

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43

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55

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71

6

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11

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82

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Licenses and Options

Source: Offices of TechnologyManagement at the University ofIllinois

Institute of Government & Public Affairs

5 Association ofUniversityTechnologyManagers, AUTMU.S. LicensingActivity Survey:FY2010, editorsRichard Kordal,Arjun Sanga, andPaul Hippenmeyer.

6 Based uponinternational studyof University “gap”funding vehicles,reported byinnovosource.

2009.”5 The OTM’s achievement over thepast five years provides further evidencethat the research conducted by U of I fac-ulty is truly an engine of job creation andeconomic development.

IllinoisVentures

In 2000, the U of I conceived a venture cap-ital fund that would invest in companiesderived from faculty-based research, andIllinoisVentures invested in its first portfo-lio company in 2003. To date, IllinoisVen-tures has had extensive impact on thevitality of the Illinois economy. Throughthe creation of two limited-partner invest-ment funds, IllinoisVentures has invested$38 million in 69 startups that employtechnology from the U of I and other Mid-west universities and federal laboratories.These companies have created more than450 jobs and have raised more than $450million from other funding sources—animpressive 12:1 leverage ratio.

While 2-4 percent of VC funds nationally(15-18 percent of funds from Illinois-basedVC firms) are invested in Illinois-basedcompanies, more than 70 percent of activeclients have operations in Illinois, and 82percent of invested capital involves U of Ifaculty or IP. With this track record, in-novosource, a nationally recognized techtransfer consultant, has referred to Illi-noisVentures as a “trend-setter” amonguniversity-based gap-funding vehicles.6

Public-private partnerships

As discussed previously, Figure 9 illus-trates how industry has eclipsed thefederal government as a source of R&Dfunding. A critical distinction betweenindustry-funded and federally-funded re-search lies in the subject of such research.Federal research dollars largely supportbasic research designed to address globaland national grand challenges or simplygaining fundamental knowledge. Further-more, federal research is designed to be

publicly shared to foster collaboration. Incontrast, the industry sponsor often playsa primary role in designing the researchprotocol, directed at providing a solutionto a near-term commercial problem, andcontrols the ultimate use and disclosure ofsuch research. Industry is now challengedby the dichotomy between funding cost-effective research and the need for moreopen innovation pursuits that may fillproduct pipelines and solve longer-termproblems. The U of I engages in ‘open in-novation’ pursuits as well as ‘contract’ orgoal-directed R&D via research collabora-tions with industry.

Figure 9Sources of R&D Investment

Source: National Science Foundation, Division of Science Resources Statistics

80

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Federal (percentage of total US R&D)

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In 2007, the Urbana-Champaign campusjoined with BP, the University of California-Berkeley and the Department of Energy’sLawrence Berkeley National Laboratory inthe largest public-private partnership of itskind in the world. The Energy BiosciencesInstitute (EBI) is a 10-year, $500 millionpartnership, in which BP scientists workalongside academic researchers to addresslarge-scale problems in the development ofnext-generation biofuels. The EBI hosts 60research groups, which are composed of120 faculty members and 200 post-doctoralresearchers, graduate, and undergraduatestudents. To date, 23 inventions have beendisclosed to the Urbana-Champaign OTMas a result of the EBI partnership, half in theareas of gene enzymes and gene regulation.BP is pursuing patents on nine of thesediscoveries.

Similarly, the university’s investment infacilities, training and basic research infra-structure has fostered corporate partner-ships. For example, in 2010, Abbott openedthe Abbott Nutrition facility at the UIRP toresearch and develop nutritional productsfor infants through adults. Abbott Nutri-tion’s initial experience in the UIRPprompted the corporation to explore part-nership opportunities with the university,including the recently announced Centerfor Nutrition, Learning, and Memory,which will be funded by a grant fromAbbott of up to $50 million over the nextfive years.

Smaller-scale public/private partnershipsare also exemplified in the UIRP, which en-gages with new commercial enterprises inaddition to larger corporations. The prox-imity of these partnerships to universityresearch faculty and students has beencited as a critical commercial success factor.

SBIR/STTR funding

Several initiatives have arisen at the fed-eral level to address the gap between inno-vation and commercialization, including

the NSF Innovation Corps and the NIHNational Center for Advancing Transla-tional Sciences (NCATS), as well as a pro-posed expansion of the SBIR/STTRprogram.

The SBIR and STTR programs are competi-tive federal granting mechanisms, cur-rently with more than $1 billion in annualfunding available. These annual grants areawarded to early-stage companies for proj-ects designed to advance basic researchtoward commercialization. Several univer-sity units, including EnterpriseWorks andthe OTMs, direct services toward faculty-based startups to encourage grant applica-tions. Cumulative awards to theUniversity of Illinois Research Park havetotaled $28 million from 2004-2010.

Future Perspective: Embracing a Culturethat Invests in and Rewards EntrepreneurialPursuits

The university’s initiatives each contributeto the evolution of a new university cul-ture—one that invests in and rewards en-trepreneurial pursuits. The evolvingAmerican research university is responsi-ble for crafting and supporting this culturein its efforts to foster economic develop-ment and advance its country’s globalcompetitiveness.

Christopher G. Kennedy, the chairman ofthe U of I’s Board of Trustees, has stated,“Public research universities, like the Uni-versity of Illinois, are our state’s only re-newable resource for innovation. TheUniversity of Illinois provides new knowl-edge, which leads to development of newproducts, which leads to new jobs. Wehave the potential to be a perpetual jobcreation machine.”7

The U of I sits upon a tremendous founda-tion as it looks forward to the next decade ofeconomic development and the 150th an-niversary of the Morrill Act (Figure 10). Con-necting research funding and infrastructure

104

The Illinois Report 2012

7 University of IllinoisOffice for UniversityRelations.2011, Sept. 16.“University ofIllinois lauds patentreforms” [Pressrelease].

TheU of I sitsupon atremendousfoundation asit looksforward to thenext decade ofeconomicdevelopmentand the 150thanniversary oftheMorrill Act.

with entrepreneurial training for faculty andstudent innovators will breed opportunityfor enterprising endeavors. University re-search leads to innovations and technologi-cal advances. When this research iscommercialized, it can lead to new jobs andeven new industries. These industries needskilled workers, and universities train thoseworkers to succeed, innovate and start thecycle over again. Entrepreneurship meanssustainability for our communities. Entrepre-neurs are the key to robust and lively com-munities. This is the American researchuniversity’s role in economic development inits most basic form. It is time for the reinser-tion of the American research university asthe renewable source of innovation and eco-nomic development.

Institute of Government & Public Affairs

105

Figure 10American Research University Innovation Ecosystem

FederallyFunded Basic

Research

Public/Private

Partnerships

TechnologyTransferSupport

Infrastructure-Facilities,Funding,

Information

EntrepreneurialEducation &

Programming

UniversityInnovationEcosystem