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University spin-offs — some important policy questions

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We’ve just published a new toolkit on university spinoffs and university-industry linkages. It’s part of our bigger package of work supporting Local Industrial Strategies.

There is an important set of policy questions to be asked here, although as I’ll explain, the evidence base is frustratingly hard to read.

Universities potentially contribute to local economies in a number of ways. These institutions are often big employers (the University of Birmingham, where I work, has around 10,000 staff). They train skilled people, many of whom go on to work in the local area. New ideas and knowledge may also ‘spill over’ into the local area, benefiting local firms. In some cases, academic staff may found business ventures to commercially exploit academic research (spin-offs). In others, these links may be formalised through university-industry (UI) linkages, which might be spin-offs but could also be joint ventures.

A big strand of innovation and economic development activity has been about trying to optimise these channels for knowledge spillovers. We look at the evaluation evidence for two types of policy:

1) the rules which govern whether the university or researcher owns (more of) the intellectual property rights and the broader set of incentives provided to academics;

2) the ways in which universities support technology transfer, including through dedicated offices (TTOs). The set of studies that consider these issues also look at the way in which different university or area characteristics affect spin-offs.

It’s important to flag up that there may be upsides and downsides here. Proponents of supporting university spin-offs and UI linkages argue that they are flexible and dynamic, playing an important role in the introduction of new-to-the-market products and the development of high-tech clusters. Critics, on the other hand, urge caution, because of the standard concerns around non-market interventions in innovative activities (e.g. universities supporting academics to create spin-offs may crowd out private sector entrepreneurship) and because of unintended consequences for the universities themselves (e.g. encouraging spin-off activity may remove resources from basic research).

We bring together 17 studies in this toolkit, looking at how policy affects the number of spin-offs, their performance, or both. Here’s the graphical summary:

We have three main headlines from the toolkit:

First, the presence of Technology Transfer Offices (TTOs) helps to increase the number of spin-offs from a university. Second, TTO size (number of employees) plays a big role in driving that result. Third, University-Industry collaborations, besides any knowledge transfer effects they may have, also increase the number of spin-offs.

There are more studies addressing elements of spin-off policy design than we typically find for our toolkits – 17 studies met our toolkit requirements, two from the UK. However, the variety of design elements and objectives covered by these studies, combined with the inconclusive nature of many of the findings, means that we can offer little guidance as to what works best in this area.

For example, we can say little about whether researcher ownership of IPR assists spin-off activity or not; the effects of university policies on equity; or university rules on spinoff processes; the role of university patenting activity and patent quality; or the respective roles of public and private funding.

More broadly, the evidence is inconclusive on the *quality* of spin-offs generated (e.g. stock market valuation; the importance of new products and services generated and employment effects). Nor does it have anything conclusive to say on the cost-effectiveness of these policies.

This is clearly problematic for local decision makers who want to put research findings into practice. As often with industrial policy, more policy experimentation is needed. In this case, there is also a strong argument for collaboration across universities — and local government — to make sure that we can compare, and learn from, the findings of these new interventions.