Senior Fellow and Research Director, Economic Policy
Institute for Research on Public Policy
NAME: Jeremy Leonard
POSITION: Senior fellow and research director, economic policy, Institute for Research on Public Policy, Montreal, Canada
BACKGROUND: Policy analyst, Committee for Economic Development, Washington, DC; economist, Manufacturers Alliance/MAPI, Arlington, Virginia; MA in economics, McGill University; BA in philosophy, University of Pennsylvania
Canada is doing a poor job turning its academic research into industrial innovations, and would benefit from adopting policies that encourage businesses to provide more input into research funding decisions, according to a study released last week by a Montreal-based think tank.
The report, entitled “Connecting the Dots between University Research and Industrial Innovation,” was commissioned by the Institute for Research on Public Policy, an independent, nonprofit organization that seeks to improve public policy in Canada.
In the report, author Jorge Niosi, a professor of management and technology and research chair on the management of technology at the Université du Québec à Montréal, presents evidence supporting the idea that the “supply side” of university technologies is reasonably healthy in Canada — that is, the country’s investment in basic academic research is relatively high compared with other countries.
However, the study also argues that the demand for university technologies from industry — despite pockets of strength in the pharmaceutical and electronics industries — is “surprisingly” low, especially compared with the US.
The result is essentially a “supply-push” approach to technology transfer, and the study argues that a “demand-pull” approach, in which businesses seek out and cultivate university technologies, would result in much more industrial innovation and productivity.
To that end, the author suggests that Canadian policy-makers would be wise to adopt programs mirroring those in the US – such as the Small Business Innovation Research and Small Business Technology Transfer programs. Such programs, the report notes, would encourage more cooperation between Canadian businesses and academic institutions, and would allow industry to provide more input into the direction of publicly funded research, stopping short of dictating the specifics of the research.
The study, which can be downloaded from the IRPP website, also features commentaries from Indira Samarasekera, president of the University of Albertaa; and Ilse Treurnicht, head of the MaRS innovation consortium in Toronto.
This week, Jeremy Leonard, a research director at the IRPP that co-directed the study’s production, spoke with BTW about the genesis of the report and its implications for tech transfer at Canadian academic institutions. An edited transcript of the interview follows.
What was the impetus for this study?
The main impetus was a little bit broader than biotech. We’ve got a program here at the institute focused on productivity and innovation, more generally, as catalysts for long-term economic growth.
When I’m thinking of innovation I am thinking of biotech because that has an important influence on quality of life and how long people live, as well as economic growth because the pharma sector is a big engine of growth – certainly in the states, maybe less so in Canada, but certainly still an important source of innovation that can be transferred to other sectors.
What we found in Canada is that we invest a lot of resources into university research. If you look at the numbers of OECD comparisons for university-funded research, it’s actually pretty high. But when you look at the other end of the question – whether the fruits of that research are being manifested in industrial innovation and ultimately economic growth and productivity, Canada actually performs fairly poorly on those methods.
The hypothesis is that there is some kind of a disconnect between the knowledge that is created in universities and the industrial sector. That was really the motivation for this. We asked Jorge Niosi, who is a recognized expert on tech transfer to investigate this disconnect, find out where and why it is happening, and where Canada should invest resources and public policy to improve connections between university and industry.
One argument made in the report is that academics in Canada might not have the incentive to conduct research with an eye toward commercialization. But it also argues that legislation like Bayh-Dole – which some argue did increase this incentive in the US – might not be appropriate for Canada.
On the first issue – that is absolutely true. Universities are first and foremost clearly institutions of higher learning, and the notion of academic liberty and not being overly influenced by outside sources is something that most universities pride themselves on. That is sacred territory In Canada much more so than in the US.
The result is that the influence of businesses and the private sector on the kind of research that goes on in public universities is fairly undeveloped in Canada. As an example – there are many programs in the US where there are government subsidies to fund pre-competitive research that sometimes happens at universities. In programs like these typically the business community is involved in helping determine which proposals actually get funded. They don’t determine what gets done, but they certainly can look at a group of proposals before them and identify those that have commercial potential.
In Canada the equation is a little turned around. There are similar programs that provide government money to academic research on a project-by-project basis with the ultimate goal of commercialization. But the decisions on what gets funded are made by people on a board [comprising] mostly university and government officials, with very little involvement from businesses. There is no real way that businesses can communicate what might be of interest to them in terms of research priorities in universities.
That’s a problem from a tech-transfer perspective. If you’re a purist about universities you would say, ‘That’s the way it’s supposed to be.” But I think certainly in the view of the author that Canada is at an extreme of that spectrum, and we’re paying the price in terms of our overall economic competitiveness, both in biotech and other disciplines.
The issue of Bayh-Dole – there is a lot of controversy about this. It essentially gives part ownership of intellectual property to the people who actually carried out the research rather than those who funded it. There certainly is an argument that could be made that that could be effective.
The main reason Mr. Niosi is skeptical of that from the Canadian perspective is that the innovation ecosystem is just a little bit different here. Many technologies that are developed at universities are licensed to companies rather than patented by the creator of the technology. Given the fact that the tech transfer happens in other ways besides the patent process, a Bayh-Dole-type act here may not do that much because there is so much IP that is transferred that would not be subject to the provisions.
He also cites some empirical research that was done in the US that basically looked at the trajectory of patenting and IP transfer from three large universities, and the study concluded that it probably wasn’t any larger than it would have been in the absence of Bayh-Dole.
At the same time, there was an expert panel on commercialization that advanced a claim that the Bayh-Dole Act in the US had resulted in a lot more startup companies and the creation of a lot of jobs, particularly in biotech. The problem with this is that it is very hard to untangle. There has been an explosion in biotech knowledge since Bayh-Dole, but the question is whether Bayh-Dole stimulated that or whether it would have happened in the absence of Bayh-Dole. I don’t know that anyone has the right answer on that, [and] a Bayh-Dole-type act [in Canada] may or may not stimulate patenting, but one thing that Niosi is right on is that given the way IP has historically been transferred in Canada; and given rules about patenting and IP, which vary widely by university; is that this type of legislation would miss a lot of potential tech transfer that could happen. In other words, on its own this would not be sufficient to open up these university-industry channels.
Do you believe that industry has more influence on the direction of university research in the US than in Canada?
To be clear, I don’t mean global funding, like when the National Science Foundation provides funding – it’s not business people who dominate the board of the NSF. But when we began thinking about different kinds of research at universities, there is one aspect that is uncovering basic new ideas, and just pushing the frontiers of knowledge. But then when you get closer to what I term pre-competitive research, in which you are actually working with ideas and looking at potential applications for those ideas, but they are too risky for businesses to undertake because the IP can’t be protected sufficiently, and they’re unsure whether it’s going to amount to anything.
When you’re talking about that space, it is clear that governments are interested in supporting that research, because it’s the kind of research that, through market failures, business will not adequately support. But at the same time, part of the goal of that research, at least from a policy-maker’s eye, is to maximize the likelihood of commercialization. So we’re talking about very specific kinds of research. We’re not talking about the vast majority of research done in universities, but we are talking the piece that has the potential for a commercial gain. It is in those programs that the business community has a seat at the table in terms of where money is going to go and which projects will be supported.
We’re talking about a much smaller universe, and it may seem like a fine detail, but in the view of the author it is a very important detail, because if the business community is not at that table, there is no way to tap into the market savvy of those people to have a better idea of what is commercializable. That’s where the notion of demand-pull and supply-push comes from. Essentially since universities do not have the market savvy and knowledge to know which of these pre-competitive technologies have the best potential, then the argument is: Why should they be the ones, combined with government officials, to decide where the money should go?
Isn’t a lot of this circumvented by industry-sponsored research? Does this occur in Canada as much as it does in the US?
It does in some sectors. It’s happening much more so in the biotech sector than others. It is a bit curious in that … Canada has one of the highest rates of industry sponsorship of university research. I don’t know whether that is illustrative of the inability to capitalize on the discoveries, or whether those were bad investments, so that’s a bit of an anomaly.
The study also revealed that industries such as pharmaceuticals and electronic equipment have ‘pockets’ of strength in potential demand for technologies developed in Canadian universities. Are the life sciences or biotech outliers in any other categories?
Actually, I think that biotech is a major outlier in the analysis. There are a couple of different data points – they account for a disproportionate number of university spinoff companies. Globally Canada has very few university spinoff companies, but of those a plurality are in the life sciences. I think that illustrates partly the fact that the interests of the business sector are better aligned with what’s going on in universities than in other disciplines, for the simple reason that they’re both interested in improving the quality and length of human life. The motivations for pushing the knowledge frontiers and developing new technologies are better aligned than in some other industries like engineering and other sciences. So that is a case where when you have an alignment with business market desires and the motivations of professors, then you’ll have good synergy between what’s going on in universities and industry, irrespective of whether you have industry people at the table.
In fact, that shows up in the data, both in the number of spinoff companies from universities that ultimately become successful, but also that pharmaceutical companies are much more frequent licensors of university technologies. In fact, the Canadian pharmaceutical sector is more R&D-intensive than in the US, although it is much smaller in relative terms.
So I think that biotech is an outlier, and it illustrates the fact that if you can align private and market needs and desires with the motivations and research directions going on at universities, you can see the payoff in terms of innovation, economic growth, or whatever metric you’re using.
Besides adopting funding programs that might be similar to SBIR or STTR, what other recommendations can you make to help industry provide input into academic innovation?
The other major one is to try and encourage businesses to collaborate and form consortia … but I also think that part of it is building some policy mechanisms to connect companies to universities. The paper raises and important issue in a surprising number of small- and medium-sized companies in Canada don’t do any R&D at all, and they don’t really have connections to universities. That means we need to build more partnerships, and there is no simple solution to that, but one possibility is to encourage companies to form consortia to enter into formal research partnerships. Rather than having a single small business apply for a grant, you could conceive of a program where, if a group of companies formed a consortium, and the government could put up some matching funding, then those companies could go and survey the university landscape, see what’s of interest, and see if academics would be interested in embarking on a project that they would fund in part.
Do you think there is a pull from industry in other countries for technologies coming out of Canadian universities and academic institutions?
I think it is happening, because when professors are making decisions about licensing or commercialization, they’re thinking more about their own self-interest. Given that the US market is so large, and access to venture capital is more developed, the chances of success in the US are greater. It’s clear that one thing that hampers university spinoffs in Canada is that it is often hard to access venture capital in the amounts that you need to grow. And you need to grow to survive when you are a startup.
These are the types of questions we’ll actually be looking at moving forward in future studies: access to venture capital, even things like the competitive environment in certain sectors – regulations, barriers to entry, tax rates, etc. The thing about innovation and tech transfer is that there is no silver bullet that is going to solve the problem, but you have to attack the problem at a number of different pressure points.