Technology transfer from universities is an area of interest for policymakers. Given the history of inventions which have originated with universities, including penicillin production, insulin, polio and COVID vaccinations, plexiglass, and even Gatorade, many understandably want to harness the social and economic benefits of publicly-funded research. Public officials responsible for entrepreneurial activity may be keen to ensure that spinouts contribute to local employment, too.

Some may even look with jealousy at the tens of millions of dollars of income generated by the leading global technology transfer offices (TTOs – the university departments charged with commercialisation) and wonder if their own ecosystem could produce the same.

However, it is important for political leaders not only to have realistic expectations, but also to appreciate that universities do not operate in isolation – and hence, neither should their policies.  

To start, while there are different routes to market – principally, either licensing a technology to an existing company, or forming a new spinout company – the choice between these will depend in part on the maturity of the surrounding ecosystem. In an under-developed ecosystem, it will be much harder to get a spinout off the ground and more guidance will be required by the TTO in the process, thus limiting its throughput.

Licensing may be a better option in many situations, though this is not without its challenges. Finding an appropriate licensee is often very time consuming, and the less that local industry is actively engaged in open innovation, as well as general research and development, the more a TTO will need to establish global contacts. Added transaction costs invariably occur across borders.

Additionally, policymakers may be disappointed if they expect university spinouts to transform local employment or quickly become a major revenue stream for universities. Scaling spinouts often takes a decade or two and, while many spinouts do indeed create significant value, the inherent nature of technological innovation tends more towards high-productivity, low-employment firms. Moreover, most technology transfer offices around the world do not generate a profit at all.

That is not to say that the process is futile – quite the contrary. Commercialization brings many benefits, such as maintaining the practical relevance of scholarly work and reinforcing the social contract between taxpayers and the academics they fund. More importantly, whether or not TTOs are profitable, university innovations can play a huge role in solving social problems and in improving productivity for industry. As William Nordhaus and others have shown, it is the users who typically benefit most from technological innovation, more than the originators. However, the lack of profitability underscores that public policy has an important role in subsidizing and encouraging the process.

So what should policymakers do?

First, and most fundamentally, officials must ensure that there are adequate incentives for commercialisation, at both the individual and institutional levels. For instance, I’ve encountered institutions where academics face an effective 100% tax on commercialisation income, where scholars are promoted or otherwise rewarded solely on their publication record and where their teaching load means that researchers must give up their personal time for industry engagement, and where the university itself receives exactly the same public funding regardless of its impact. Changing this may require national-level directives and hence not be easy. But if incentives for commercialisation are insufficient to contend with the competing demands of teaching and publishing, then most initiatives are likely to be worthless.

Second, policymakers should stimulate university-industry collaboration and open innovation. Technology transfer can be seen as a subset of a much wider set of collaborative activities, which reinforce one another. Establishing relationships through activities such as academic-industry conferences, continual professional development, executive education, and consultancy helps to build trust and understanding between the two worlds of industry and academia. This supports deeper engagement in the form of collaborative research and licensing. Too often, these worlds simply don’t understand each other at all.

Third, public funding should be used to build capacity in local TTOs, including staff training. Technology transfer is now an established profession, with internationally-recognised qualifications (such as the Registered Technology Transfer Professional certification). Unfortunately, some universities treat it as just another administrative function, and remain disconnected from the global bodies which promote good practice. There may also be benefit in collaborating with other institutions to pool resources, since subscale TTOs are less able to employ sectoral specialists and hence are less effective.  

Fourth, policymakers should pay attention to other components of the local startup ecosystem, such as business angel networks, the availability of venture capital, mentors, entrepreneurial talent, supporting organizations such as accelerators, and so on. The more developed the surrounding ecosystem, the easier it is for spinouts to form and scale.

Beyond this, there are also a myriad of smaller interventions that can help, ranging from enterprise education to template agreements to proof-of-concept funds. And, clearly, foundational aspects such as clear IP laws and well-functioning national IP offices are also needed. Focusing on the four components mentioned above will help policymakers develop a holistic technology transfer strategy which integrates research, industry, and the wider innovation ecosystem.