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Regions, Industries, and the UniversityRole in Economic Development
Prof. Richard K. LesterIndustrial Performance Center
Massachusetts Institute of Technology
Sloan Industry Studies Annual Conference -- 2007
Cambridge, MAApril 26-27, 2007
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The core questionsHow can we make globalization andrapid technological change work for oursociety?
What choices do we have to build aneconomy that is productive andcompetitive, and that providesopportunities for people in all parts ofsociety to do well?
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FIRMS
PLACES PEOPLE
Three kinds of competition
Different rules; different strategiesRichard K. Lester
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The Globally-Integrated Enterprise
“A globally integrated company locates operations andfunctions anywhere in the world based on the right cost,the right skills and the right business environment . . . . . .
Work flows to the places where it will be done best . It’slike water finding its own level. The forces driving it areirresistible. The genie's out of the bottle, and there's nostopping it.”
-- IBM CEO Sam Palmisano
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As the competition between firmsglobalizes . . . .
. . . . the competition betweenplaces intensifies.
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The IPC’s research agendaHow FIRMS compete to sell productsand services.
How PLACES compete for the mostdesirable economic activities.
How PEOPLE prepare to compete,through education, skill development,etc.
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FIRMS
PLACES PEOPLE
Today’s topic
How can local economic communities prosperin the rapidly changing, increasingly openglobal economy?
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Two competinginnovation scenarios
‘Hollowing-out’ Local companies reaching farther afield to tap
into the global network of ideas and skills, andeventually moving out altogether.
‘Agglomeration’ Local companies strengthening their local ties Local/regional economy emerging as a center
of new knowledge creation and application,stimulating and attracting new enterprise.
What will determine the outcome?
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Focus on universities as ‘engines’of local economic development
For national and local governments Universities are a source of key assets in the
innovation economy (skilled people, ideas, etc.) They attract other key economic development
resources (educated people, firms, VC, etc.) They don’t move!
For firms universities can provide key inputs into innovation
process (also possibly at lower cost)
For universities themselves A new source of revenue . . . . and also new challenges
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“ . . . the bell towers of academia havereplaced smokestacks as the drivers ofthe American urban economy.”
-- Initiative for a Competitive Inner City/ CEOs for Cities
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‘Standard model’ of universityengagement in the local economy
University-initiated technologicalentrepreneurship.
Laboratory research Discovery/invention Disclosure Patenting Licensing Spinoffs
But the model is incomplete. University role isn’t just about ‘tech
transfer’.
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Myth #1: Economic significanceof university spin-offs
New business formation around universitytechnology, though increasing, is still a smallcontributor to the total number of business starts(2-3% or less in the U.S.)
*Startups licensing university IP#Total number of university-related startups: 8,000-10,000/yr
~ 150,000/yr~ 3700/yrPatents
550,000/yr400-500/yr*#Startups
U.S. totalU.S. universities
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Top U.S. Patent Award Recipients -- 2006
116Caltech153...
139MIT127.......
1610Micron Technology10.1672Toshiba9.1732Hitachi8.1771Sony7.1959Intel6.2099Hewlett-Packard5.2229Matsushita4.2366Canon3.2451Samsung2.3621IBM1.
Source: U.S. Patent and Trademark Office, March 2007
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Myth #2: Payoff from universitytechnology transfer Total licensing revenue to universities
is -- and will remain -- a small fractionof research revenues (4-6% in U.S.)
Don’t expect licensing to transformthe finances of the university.
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Myth #3: Role of patenting & licensingin university tech transfer
Licensing university patents is only one ofseveral mechanisms that firms use toaccess university-developed science andtechnology
Indirect mechanisms may be moreimportant (e.g., industry hiring ofuniversity graduates)
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“The most important contribution Stanfordmakes to Silicon Valley is to replenish theintellectual pool every year with new graduatestudents.”
-- Gordon Moore, Chairman Emeritus, Intel
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LIS Project Team
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The LIS Project: An international,interdisciplinary collaboration
SponsorsAlfred P. Sloan Foundation
National Science FoundationTEKES
Norwegian Research CouncilCambridge-MIT Institute (UK)
UTRI (Japan)
Research UnitsIndustrial Performance Center, MIT
SENTE, University of TampereHelsinki University of Technology
Center for Business Research,University of Cambridge
Rogaland Research InstituteUniversity of Tokyo
DisciplinesManagement science
Entrepreneurship studiesEconomics of innovation
Engineering systemsUrban and regional studies
Political science
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An innovative region is innovativebecause of . . .
Strong local generation of new technologies
Low resistance to adoption of new technologies (from all over) √
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‘Outside-in’ perspective onuniversity role
How can universities strengthen theabilities of local firms to take up and applynew technological and market knowledgeproductively?
(This is a broader question than justasking: how well are universitiestransferring their technology to industry?)
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LIS Case Portfolio
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LIS Interviews
764TOTAL
31Norway
84Japan103United Kingdom
238Finland
308United States
Number ofinterviews
An additional 117 interviews were carried out in Taiwan.
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Akron, Ohio
“Out of the Ashes”
From car tires to advancedpolymers From mass production to
customized production
Researcher: Sean Safford
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Charlotte, North Carolina
“Unplanned combustion”
From a backyard hobby to amulti-billion dollar NASCARmotor sports/entertainmentcomplex From mechanical crafts to
mechanical engineering science
Researchers: Carlos Martinez-Vela and Kimmo Viljamaa
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Tampere, Finland
“From ‘old-tech’ to ‘high-tech”
How the mechanicalengineering industry wasinfused by ICT
Researchers: Carlos Martinez-Vela and Kimmo Viljamaa
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Cambridge, Massachusetts
“High-tech synthesis” How the integration of
computational science,biology, and medicine iscreating a new industry.
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Aberdeen (UK) & Stavanger (Norway)
“From ‘black gold’ to ‘human gold’”
Transitioning from a resource-based to a knowledge economy.
Researchers: Sachi Hatakenaka, Martin Gjelsvik, Richard Lester,Petter Westnes, & Wei Gao
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Finding I: Multiple university rolesin the local economy
Create
Attract
Unlock
Adapt
Combine
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Creatiingcodifiableknowledge
Providingpublicspace
Problem-solving for
industry
Educatingpeople
UndergraduatesGraduatesMid-careerExecutive
Contract research
Cooperative researchwith industry
Technology licensing
Faculty consulting
Providing access tospecializedinstrumentation andequipment
Incubation services
PublicationsPatentsPrototypes
• Forming/accessing networksand stimulating discussion ofindustry developmentpathways.
• Influencing the direction ofsearch processes
– Meetings and conferences– Hosting standard-setting
forums– Entrepreneurship centers &
mentoring programs– Alumni networks– Personnel exchanges
(internships, facultyexchanges, etc.)
– Industrial liason programs– Visiting committees– Curriculum development
committees– Creating the built environment
to support this
Finding I: Multiple university rolesin the local economy
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Finding II: Firms seek different inputsfrom different universities
Help with specific problems(‘analytical’)
Staying current; participatingin ongoing conversationsabout the direction oftechnologies, markets,curricula (‘interpretive’)
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Four pathways of regionalinnovation-led growth
I. Indigenous creation of new industrySilicon Valley: Personal computersBoston: Systems biology
II. Transplantation of new industry into regionI-85 corridor (NC/SC): Automotive industryTaipei-Hsinchu corridor (Taiwan): Electronics industry
III. Diversification of existing industry into newAkron, OH: Tires Advanced polymersRochester, NY: Cameras, copiers Opto-electronics
IV. Upgrading of existing industryTampere, Finland: Industrial machineryCharlotte, NC: Motor sports (NASCAR)
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Type I:Indigenous
creation of newindustry
Type II:Transplantationof new industry
Type III:Diversification ofold industry into
related new
Type IV:Upgrading of
mature industry
• Success conditions (and failure modes) foreach of these pathways are different.
• Patterns of innovation in each case aredifferent
• Roles of educational institutions, financialinstitutions, government, and others for eachpathway are different
Richard K. Lester
CREATING NEWINDUSTRIES
UPGRADING EXISTINGINDUSTRIES
Customer-driven; TQM;continuous improvement;‘best practice’
Science-driven;entrepreneurial
Internal financing, supplierfinancing, govt. financingfor demonstrations
Angel/venture capital(private and public);active assetmanagement
Lead firmsLead customers/users
Research universitiesGovernment labs
BS/MS-level engineers;faculty-student knowledgeof industry practices andbusiness problems.Internships, rotations.
Ph.D.-level scientistsand engineers;entrepreneurialbusiness education
Participate in regulatoryprocesses; global scanningfor best practice; ‘foresight’exercises
Long-term relationshipsbetween universities andestablished firms
Creating an identity(‘evangelism’);standard-setting
Proactive techtransfer fromuniversities & gov.labs; startup-oriented
TYPE IV
Technologytransfer
Leadershipin the publicspace
Educationand training
Localanchors
Innovationculture
Financing
TYPE I
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Finding III: University role in local innovation systemdepends on industry development pathway
Creating NewIndustries
(I)
IndustryTransplantation
(II)
Diversification ofold industry intorelated new (III)
Upgrading ofmature industry
(IV)
Forefront science andengineering research
Aggressive technologylicensing policies
Promote/assistentrepreneurial businesses(incubation services,venture mentorship,etc.)
Cultivate ties betweenacademic researchers andlocal entrepreneurs &financiers
Creating an industry identityParticipate in standard-setting
EvangelistsConvene conferences,workshops,entrepreneurs’ forums,etc.
Bridging between disconnected actors Facilitating links between startups and
established firms Creating local consortia and other forums
for promoting local conversations Creating an industry identity
Problem-solving for industrythrough contract research, facultyconsulting, etc.
Education/manpower development BS/MS engineers with industry
knowledge Global best practice scanning Convening foresight exercises Convening user-supplier forums
Education/manpowerdevelopment
Responsive curricula Technical assistance for sub-
contractors, suppliers
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To sum up . . . . .
Not all regions are like SiliconValley.
Not all industries are like biotechand software.
Not all universities are likeStanford.
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New perspectives, new strategies
From technology transfer to technologytake-up
From universities as problem solvers touniversities as public space
From ‘fountains’ to ‘forums
From clusters to hubs
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Conclusions The standard model of the economic role of the
university is too narrow. Universities have manydifferent ways to contribute to local innovation processes.
Avoid a one-size-fits-all approach to the economicrole. Different industries, and different developmentpathways, demand different kinds of universityparticipation in local innovation processes.
Universities can -- and should -- approach their role inlocal innovation processes strategically. This meansaligning university efforts with what is actually happeningin the local economy.
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For further information see:
Richard K. Lester, “Universities, Innovation, and theCompetitiveness of Local Economies”, MIT IndustrialPerformance Center Working Paper 05-010.(available at http://web.mit.edu/ipc/publications/pdf/05-010.pdf)
