Toward a Business Model for Industrial Participation in Cooperative Research Centers

Page 1 TH Glasgow 2009

Industry/University Cooperative

Research Centers

Toward a Business Model for Industrial Participation in Cooperative

Research CentersDenis O. Gray, PhDDenis O. Gray, PhDDrew Rivers, PhDDrew Rivers, PhD

North Carolina State UniversityNorth Carolina State UniversityRaleigh, NC Raleigh, NC

USAUSA



Research Centers

Background

• Cooperative Research Centers (I-U-G) are immensely important to Cooperative Research Centers (I-U-G) are immensely important to the U.S. “innovation system”the U.S. “innovation system”– 1,500-5,0001,500-5,000

– 70% of industry support for universities (Cohen et. al, 1994)70% of industry support for universities (Cohen et. al, 1994)

– Industry funding = 7.5%Industry funding = 7.5% » ““co-mingled research” (I-G) ~ 20-25% university research co-mingled research” (I-G) ~ 20-25% university research

• Major Focus of number of government agenciesMajor Focus of number of government agencies– NSF, NIH, DoD, DARPANSF, NIH, DoD, DARPA

• Assumed to have a big impact on “technology transfer”Assumed to have a big impact on “technology transfer”– Primarily in the form “strategic fundamental research”Primarily in the form “strategic fundamental research”

» IP and invention typically happen within firmIP and invention typically happen within firm



Research Centers

Background

• Conducting research on CRC operations for two Conducting research on CRC operations for two decadesdecades

• Recent studies have had an industry focus:Recent studies have had an industry focus:– Trying to estimate the economic value of various center benefits Trying to estimate the economic value of various center benefits

(e.g. cost avoidance)(e.g. cost avoidance)

– The critical roles played by the IAB memberThe critical roles played by the IAB member

– Understand the factors that affect the decision to join/not join a Understand the factors that affect the decision to join/not join a centercenter

• Industry member challenged us to move beyond tech Industry member challenged us to move beyond tech transfer to produce a “center business model” (BM)transfer to produce a “center business model” (BM)

– a comprehensive model that explains and justifies a firm’s a comprehensive model that explains and justifies a firm’s involvement in a CRCinvolvement in a CRC



Research Centers

Motivation

• Universities/Centers: Universities/Centers: – Recruiting firms is an expensive and time consuming activity; Recruiting firms is an expensive and time consuming activity;

pursue 10-20 for every membershippursue 10-20 for every membership– Need help “selling” CRCNeed help “selling” CRC

• Firms:Firms:– CRC champions find it increasingly difficult to justify CRC champions find it increasingly difficult to justify

membership in these centersmembership in these centers– Need/want help explaining the benefits to their managementNeed/want help explaining the benefits to their management

• PolicyPolicy– Help provide guidance for the construction of new partnership-Help provide guidance for the construction of new partnership-

based modelsbased models

• TheoryTheory– Help explain what makes some CRCs vital and others notHelp explain what makes some CRCs vital and others not



Research Centers

Foundation for BM

Thirty Year Program of Research on NSF Industry/University Cooperative Thirty Year Program of Research on NSF Industry/University Cooperative Research Center (IUCRC) and related programs (STC)Research Center (IUCRC) and related programs (STC)

Program ProcessesProgram Processes• Communication Networks in IU Centers (Eveland)Communication Networks in IU Centers (Eveland)• Assessment of technology gatekeepers (Tansik) Assessment of technology gatekeepers (Tansik) • Evaluation of inter-center (“tie”) cooperative research projects (Goodrich)Evaluation of inter-center (“tie”) cooperative research projects (Goodrich)• Role of industry boundary-spanner in promoting center outcomes (Tarant & Gray)Role of industry boundary-spanner in promoting center outcomes (Tarant & Gray)Studies with Comparison GroupsStudies with Comparison Groups• Comparison of IU Projects vs. IU Centers (Gray) Comparison of IU Projects vs. IU Centers (Gray) • Follow-up evaluation of IUCRC graduates (Scott)Follow-up evaluation of IUCRC graduates (Scott)• Unintended consequences: IUC impact on student academic freedom (Behrens & Gray)Unintended consequences: IUC impact on student academic freedom (Behrens & Gray)Across Center ComparisonsAcross Center Comparisons• Technology transfer processes and outcomes (Russo; Scott; Geisler)Technology transfer processes and outcomes (Russo; Scott; Geisler) • Analysis of strategic planning strategies used by NSF STCs (Steenhuis and Gray)Analysis of strategic planning strategies used by NSF STCs (Steenhuis and Gray)Multivariate PredictionsMultivariate Predictions• Multivariate prediction of member retention (Gray et al)Multivariate prediction of member retention (Gray et al)• Space of innovation: Impact of IUC work space on collaboration & innovation (Toker)Space of innovation: Impact of IUC work space on collaboration & innovation (Toker)• Multivariate prediction of faculty outcomes (Meagher & Gray)Multivariate prediction of faculty outcomes (Meagher & Gray)• Predictors of center student satisfaction and other outcomes (Schneider & Gray)Predictors of center student satisfaction and other outcomes (Schneider & Gray)• Why firms join cooperative centers (Rivers)Why firms join cooperative centers (Rivers)Outcome AssessmentOutcome Assessment• Quantifying benefits of member participation: cost avoidance (Gray and Steenhuis)*Quantifying benefits of member participation: cost avoidance (Gray and Steenhuis)*



Research Centers

Assumptions for a CRC BM

• Opportunity to access a Opportunity to access a portfolioportfolio of benefits of benefits– Need to understand the array of benefits firms might want to Need to understand the array of benefits firms might want to

access access

• Membership also involves risksMembership also involves risks– Need to understand the potential risks like non-exclusivity of IPNeed to understand the potential risks like non-exclusivity of IP

• Benefits require making investments and having certain Benefits require making investments and having certain capabilities capabilities

• Members have different business objectives and weight Members have different business objectives and weight the significance of specific benefits differentlythe significance of specific benefits differently

Business model makes sense for specific firm; what Business model makes sense for specific firm; what makes sense for one firm may make no sense for the makes sense for one firm may make no sense for the nextnext



Research Centers

Financial Support(Memb. Fee +)

TimeGuidanceExpertise

Scientific

Human and Physical Capital

Social Capital

CRC

Input

Business Objective



Research Centers

Financial Support(Memb. Fee +)

TimeGuidanceExpertise

Scientific


Social Capital

Faculty, Students Networks; Facilities

Highly Leveraged (~20-1)Multidisciplinary

Research Program

Primary (Other members) and

Secondary Networks

(colleagues of faculty, etc.)

CRC

Input



Research Centers

Scientific


Social Capital

CRCExceptional Graduate

Students

Informal Consulting

One-of-a kind Facilities

Consensus on Industry Problems/Issues

Identify/Influence Partners & Supply

Chain

Ideas from extended network

Strategic reconnaissance

and alliances

Entrée to Other Scientists

• Ideas & Feedback• Enhanced

recruitment of new employees

• Increased absorptive capacity

• Access to unique Facilities

$???



Research Centers


Social Capital

Very relevant, would do yourself within 1-2

years

Highly relevant, would like to do if you had more time or money

Outside core competence but might

be helpful or destructive

Research Research

Amplification

Near core

compet-ence

Emerg-ing/

CompetitiveTech.

Not relevant tothis firm



Research CentersVery relevant, would do yourself within 1-2

years

Highly relevant, would like to do if you had more time or money

Outside core competence but might

be helpful or destructive

Cost avoidance~$200K

Center IP

Anticipate and respond to transformational or destructive

Technologies $???????

Dead ends to avoidShortened/accelerated

progress on current projectsPromising new areas or paths

to pursueIP inside firm

$????


Social Capital

Research Research

Amplification

Near/ core

compet-ence

Emerg-ing/

CompetitiveTech.



Research Centers

Near Core CompetenceResearch

Research Amplification

Emerging/CompetitiveTechnologies


Social Capital

CRC

Early access to …• New knowledge

• New analytical tools and methods

• Tacit knowledge about techniques

•IP within Center

R&D• Dead ends to avoid

•Shortened/accelerated progress on current projects

•Promising new areas or paths to

pursue•Emerging threats and opportunities

Proximate Near Later

Commercialization

IP/Trade Secrets inside

firm

Improved/New

•Products

•Processes

•Services

• Ideas & Feedback• Enhanced

recruitment of new employees• Broadened scientific

NetworkEquipment use

Strategic reconnaissance

and alliances



Research Centers

Strategic Research RelevanceWhy they joinedWhy they joined• “We don’t do in house very much theoretical work to

advance the state of the art. However, sometimes we get right at the edge of or beyond our ability to do certain kinds of calculations or certain kinds of analyses. Its good to have an internationally recognized entity that you can go to get support in these kinds of situations.” (Construction firm)

• “Well, we as a company and an industry are I think looking at externally harvesting innovations from sort of parallel industries. …there are many technologies and products that could be married to our products that we see that are available that we’d like to pay more attention to, and thought this would be a good forum to engage on that.” (Packaging firm)



Research Centers

Financial Support-Memb. Fee

Absorptive Capac.-Time, $

-Expertise

Input

Business Objective

Internal Center Network

External Center Network

Research Research Amplification

Business Objective



Research Centers

Strategic Research Relevance

Did not Join:Did not Join:

• ““The first decision was ‘is it strategic to what The first decision was ‘is it strategic to what we’re doing?’ And when the answer was we’re doing?’ And when the answer was obvious to me that it was not, then we didn’t obvious to me that it was not, then we didn’t make any progress on any other matters”. make any progress on any other matters”. ((Agricultural products firmAgricultural products firm))

• ““...We already had a program in place [in a very ...We already had a program in place [in a very critical area] and all the mock ups; there really critical area] and all the mock ups; there really wasn’t much they could contribute to that really. wasn’t much they could contribute to that really. They were behind us in this particular area. They were behind us in this particular area. Some of the projects they do weren’t really that Some of the projects they do weren’t really that relevant exactly to what we were doing” (relevant exactly to what we were doing” (private private R&D supplierR&D supplier))



Research Centers

Strategic Research Relevance

• ““... we have to present first a business case that ... we have to present first a business case that outlines the Net Present Value of the research outlines the Net Present Value of the research that’s going on in our company...what benefit that’s going on in our company...what benefit might the internal program get from joining the might the internal program get from joining the center... it [our project] was deemed to be fairly center... it [our project] was deemed to be fairly early in development...the value was sort of early in development...the value was sort of fuzzy because we were early on...the decision fuzzy because we were early on...the decision was because of the lack of clear net present was because of the lack of clear net present value type evaluation on what we were trying to value type evaluation on what we were trying to do, that we would not join the center...3 or 4 do, that we would not join the center...3 or 4 months later our joint project was cancelled”.months later our joint project was cancelled”. (Large Chemical Company)(Large Chemical Company)



Research Centers

Financial Support-Memb. Fee

Absorptive Capac.-Time, $

-Expertise

Input

Business Objective

Internal Center Network

External Center Network

Research Research

Amplification

Near/ core

compet-ence

Emerg-ing/

CompetitiveTech.

XX XX

Decision Decision Making Making

& IP& IP



Research Centers

Other Strategic Factors

IAB CompositionJoined

• “Access to customers in the US was a primary benefit or reason for joining. The current members were key players in the US industry” (chemical firm)

Not join

• “We know where our competition is and we pretty much avoid that universe.” (Aerospace/ defense firm)



Research Centers

IP ConcernsJoinedJoined

• ““The IP issues with the legal guys was a problem, and the The IP issues with the legal guys was a problem, and the overriding thing there was that we said, “...the chances of our overriding thing there was that we said, “...the chances of our divulging anything to the center that is going to be a problem divulging anything to the center that is going to be a problem is low...In terms of how we take advantage of the IP the is low...In terms of how we take advantage of the IP the center generates...although nobody liked it [agreement]...but center generates...although nobody liked it [agreement]...but not too different than other university deals we get into” not too different than other university deals we get into” ((Industrial equipment/components firmIndustrial equipment/components firm))

Did not joinDid not join

• ““[My initial impression was] basically a windfall for our [My initial impression was] basically a windfall for our company...my legal people did not recommend that we company...my legal people did not recommend that we sign up for that [NSF document] agreement...a typical sign up for that [NSF document] agreement...a typical university grab involved in IP” (university grab involved in IP” (Aerospace/defense firmAerospace/defense firm).).



Research Centers

Firm CapabilitiesDid not joinDid not join

FinancialFinancial • ““... Financial limitations have kept them from joining.”... Financial limitations have kept them from joining.”• ““one reason is financial, basically the budget reason”.one reason is financial, basically the budget reason”.• ““Sometimes when the economy is good and we have Sometimes when the economy is good and we have

some extra money and say, “Let’s spend it. Let’s find some extra money and say, “Let’s spend it. Let’s find something” something”



Research Centers

Firm Capabilities

Absorptive CapacityAbsorptive Capacity

• ““...we felt we were not ready yet. In other words, ...we felt we were not ready yet. In other words, what they do is a little far reach for us. We what they do is a little far reach for us. We haven’t got the knowledge base, we think, to haven’t got the knowledge base, we think, to utilize their output. utilize their output. “We’re not doing a whole lot ourselves, so our “We’re not doing a whole lot ourselves, so our decision was “OK, let’s start it ourselves and do decision was “OK, let’s start it ourselves and do a little bit of work so we understand it better, a little bit of work so we understand it better, then in a couple of years we’ll try them out.” then in a couple of years we’ll try them out.” ((Automotive equipment/ components firmAutomotive equipment/ components firm))



Research Centers

Summary• CRCs are complex cooperative R&D mechanisms that CRCs are complex cooperative R&D mechanisms that

have the potential to deliver a diverse portfolio of have the potential to deliver a diverse portfolio of benefits but also contain some embedded risksbenefits but also contain some embedded risks

• Firms also add complexity to the mix: their ability to Firms also add complexity to the mix: their ability to extract value from a CRC will depend on their business extract value from a CRC will depend on their business objectives, their inputs, investments and capabilities objectives, their inputs, investments and capabilities

• The proposed CRC BM provides a vehicle for firms and The proposed CRC BM provides a vehicle for firms and centers to try to make sense out of the CRC value centers to try to make sense out of the CRC value proposition proposition

• Key remindersKey reminders– Centers need to attend to all three benefit subsystems: scientific; Centers need to attend to all three benefit subsystems: scientific;

human and physical capital; social capitalhuman and physical capital; social capital– Firms must invest $, time, expertise and provide guidance to Firms must invest $, time, expertise and provide guidance to

insure benefits are extractedinsure benefits are extracted– Beauty is in the eyes of the beholder: the importance and Beauty is in the eyes of the beholder: the importance and

likelihood of specific benefits will vary from firm to firmlikelihood of specific benefits will vary from firm to firm» Centers need to engage members carefully to be sure they are Centers need to engage members carefully to be sure they are

meeting their needsmeeting their needs



Research Centers

Acknowledgement

Funding for this study provided by NSF IUCRC Funding for this study provided by NSF IUCRC and STC program.and STC program.

Documents

Toward a Business Model for Industrial Participation in Cooperative Research Centers