Canadian Universities, the Innovation Gap, and Leaping the Landline

Canadian Universities, the Innovation Gap, and Leaping the LandlineMany people view Canada as a less populated, snowier version of the U.S. That’s just not true. For one, the average Canadian ice skates far better than the average American. Then, Canadians like their french fries dipped in a cheesy goo called poutine — no ketchup involved. But wait… here’s a big cultural difference: on average, despite claims that Canadian universities lack a commercial focus, as a percentage of total research funding, many top Canadian universities attract as much — if not proportionately “more” — research funding from companies than their counterparts in the U.S.

Why is this surprising? Because Canadian universities are frequently (and unfairly) accused of being a contributor to a national “innovation gap” that prevents university technologies from flowing freely to companies, therefore stifling the development of the Canadian economy. According to this line of reasoning, Canadian universities — unlike those in the U.S. — lack a commercial focus and a clear set of national-level rules governing university research commercialization.

As the CBC described it, “In the United States, the 1980s Bayh-Dole Act outlines a clear set of rules determining IP ownership early in the process of federally funded innovation. But in Canada, there is no set method for transferring technological research and knowledge from public institutions.”

It’s not really that simple. Last week I had the honor of spending two days in Toronto at the Ontario Centres of Excellence Discovery Conference. For a talk I gave there, I explored the notion that there’s no single right way to bring university research to market. In fact, the less defined national system in Canada, rather than being a weaker version of the U.S., actually enables Canadian universities to test out innovative approaches that may actually be as (or even more effective) than those used by U.S. universities.

Comparing U.S. universities to Canadian universities

Wait, why should any university have a “commercial focus?” After all, isn’t the purpose of a research university to well, do research? Yes, and no.

Most U.S. research universities today own a patent portfolio which they license to companies in exchange for royalties. These universities formally claim ownership to inventions that come from on-campus labs that were funded by tax-payer research. One way to look at it could be that the U.S. approach bears the evolutionary markings of a model of knowledge transfer that views university R&D as intellectual property.

For example, when they’re hired, new employees at U.S. universities sign over their patent rights to their new employer and must disclose inventions to a central technology transfer office. Some universities claim ownership of inventions that arise from faculty consulting engagements, off campus, using company resources. (True, lots of university inventions flow through informal channels to industry, but to some, this grey market is not always considered a vibrant alternative model, but a “leak.”)

In contrast, Canada never passed a national-level uniform policy that guided universities into a single direction. Instead, the decision of how to handle federally funded university inventions was left up to the individual university. Canadian universities have the option to take title to patents. Yet, despite this option, Canadian universities still exhibit quite a bit of diversity in how they bring university R&D to the private sector, and how they set up research partnerships with companies.

  • About half of Canadian universities have taken a similar approach to the U.S., requiring employees to disclose inventions to a central office and hiring staff dedicated to managing inventions, getting patents and seeking commercial patent licenses.
  • Others, like the University of Waterloo, let university researchers make their own commercialization decisions on their research.
  • MaRSInnovation in Ontario commercializes patents from 17 different regional research organizations.
  • A patent pool, led by the University of British Columbia, makes it easier for external organizations and humanitarian agencies to tap into university biotech research
  • and more

Like Darwin exploring the Galapagos

Today, after 30 years of different national policy and variations in local interpretation, like Darwin exploring the wildlife on different islands in the Galapagos, we have before us to two distinct, but similar living ecosystems. Now, the U.S. system has a lot of good things about it. And industry research funding isn’t the whole story. For example, many U.S. universities have enthusiastically invested resources to help spin off faculty-led tech companies; according to data collected from universities, the result has been an increase in the number of tech startups based on university patents.

My goal here is not to claim that either approach is inherently superior. Instead, to me, the key takeaway is this: the U.S. model is too uniform. U.S. universities should borrow from Canadian ones and explore alternative modes of knowledge transfe not built on the notion that all companies prefer patents as the unit of transaction when working with university researchers.

The fact remains that Canadian universities manage to attract a hefty amount of industry funding for research. This indicates that perhaps not all companies want university patent rights to become a factor when negotiating university research collaborations. My sense is that in general, Canadian universities are less inclined to view university R&D as a potential revenue source. However, this attitude doesn’t seem to impede Canadian university’s ability to work with company researchers. In fact, maybe Canada’s more relaxed attitude about intellectual property ownership helps its university researchers connect with company research projects.

Running the numbers

I did a few simple back of the envelope calculations of performance data from the past 30 years to compare Canadian to U.S. universities. I selected three different metrics that represent three different facets of the university knowledge transfer process: each university’s activity in inventions, publications and industry funding per million dollars of total university research funding.

  • University-industry research partnerships: this is how much money university researchers are able to attract from companies to do research together on-campus (Source AUTM, 2010)
  • Turning university R&D into inventions: This metric is the reported number of new invention disclosures submitted to a university’s technology transfer unit each year (Source, AUTM, 2010)
  • Traditional knowledge transfer: a university’s total number of scholarly papers published per year (Source: ISI)

For this particular comparison that I presented at the Discovery conference, I selected the top 20 best-funded Canadian research universities and the top 20 best-funded U.S. research universities. Once I had my group of 40 U.S. and Canadian universities, I corrected to remove the distorting effect of differences in the amount of research funding received by each university.

(This is somewhat akin to an analysis on applied university innovation I did last year, using bubble charts to compare the knowledge transfer capacity of U.S. universities according to these same three axes.)

Here’s what I found -

Industry funding

Five Canadian universities rank in the top ten when it comes to getting funding for industry research partnerships. This simple calculation opens the possibility that maybe the Canadian model, while less focused on patents and intellectual property clauses in research contracts, may be actually be very much in sync with company needs.

Recently the Canadian government shifted much of its research funding from basic to applied in hopes of closing this so-called “innovation gap.” Time will tell, but I wonder whether the shift to fund less science and more commercially applicable research in Canadian universities is really necessary.

Industry funding — more than revenue from patent licenses — is a significant indicator of university researchers in sync with companies. Not surprisingly, university researchers who get money from industry are quite adept at applying their lab research to addressing industry problems. According to two researchers who study the connections between university researchers and the private sector,

“We find that involvement in informal interaction is associated with higher probability of undertaking collaborative research with industry…” (Ponomariov and Boardman, Technovation, 2009)

Invention disclosures

Next, I compared the number of invention disclosures per million dollars of research funding.

Another surprise here. Four Canadian ranked in the top ten in terms of generating inventions per millions of dollars of research funding. This insight is especially intriguing considering that only roughly half of Canadian universities (unlike the U.S.) require that their researchers disclose their inventions to a central technology transfer office.

Scholarly publications

Finally, scholarly publications per millions of dollars of research funding. Perhaps not surprisingly, Canadian universities do well here. Canadian universities take up most of the top ten slots in generating scholarly publications. Some may wonder why scholarly publications are a performance metric for a university’s ability to transfer knowledge to companies. Turns out that good, old scholarly papers remain one of the biggest conduits of university technology and know-how to company product development teams. Many industry researchers report that a primary way they keep abreast of their university colleagues (in addition to mingling at conferences and hiring faculty as consultants) is by reading scientific papers and articles. (Markman, Gianodis and Phan 2006).

Leaping the landline

What does this data tell us? First, it tells us that more investigation is necessary. These are quick calculations based on incomplete data and there are many unexamined variables in play here. Clearly, it’s too early to draw solid conclusions. For example, U.S. graduate students are mostly funded indirectly through federal research grants which is reported by the university as research funding. In Canada, graduate students get their funding directly from government fellowships. So we would need to pick apart what monies exactly, are reported by universities in both systems as total research funding.

It would be interesting to talk to the companies that sponsor research at Canadian universities and ask them to compare their experience doing the same thing in the U.S. Do they notice a difference in the process? What about VCs that want to fund a university tech startup? At universities where the researcher manages her own commercialization process, do they have better luck getting their research into commercial play? Why or why not?

It is important to point out that unlike the fairly evenly-sized islands that Darwin studied in the Galapagos, the U.S. and Canada are very different in terms of size and economy. The U.S. economy and population are roughly ten times as large as Canada’s. As a result, Canada has far fewer large research universities and only a handful of native Fortune 500 businesses. Much of the Canadian economy has historically been built on its abundant natural resources. Canada has interpreted patent law differently, particularly around lucrative university biotech patents.

Public debate over how universities manage publicly funded research is a good thing. It means people care. The U.S. government made a bold back in 1984 by giving universties the right to obtain and license patents and much of the outcome has been positive. For example, many university researchers prefer the commercially-oriented U.S. model since — fairly enough — as inventors, they get a cut of company profits that come from their invention. For entrepreneurial faculty or graduate students, obtaining a patent or founding a startup is no longer viewed as a non-scholarly activity.

Finally, (and this one matters perhaps less to most people, but a lot to me), the U.S. model has enabled the development of a fascinating new field for people who are drawn to the challenge inherent in getting great university research from the labs out to the rest of the world.

However, what’s interesting to me about the U.S. system is how little variation exists across universities. For example, U.S. universities do not “have” to claim ownership of university inventions or research — they just have the option to in case they decide to. The original federal legislation that was passed back in the 1980s was essentially a mostly-blank canvas that offered lots of room for universities to tinker with at the local level. For whatever reason, unlike their Canadian neighbors, U.S. universities have hestitated to fully exploit this blank canvas.

Like variation between species of tortoises or finches residing on different islands, neither the U.S. nor Canadian university research commercialization model is necessarily “better”, just different. Yet, the world’s economy continues to rocket forward and strategy must rocket along with it to remain effective.

The thought that came to my mind was that Canadian universities are too frequently still measured according to a U.S. oriented yardstick that measures success as revenue from patent licenses. Different measures suggest otherwise. Perhaps Canadian national university commercialization strategy has simply skipped over a few phases that now characterize the U.S. If diversity is the future, then maybe Canadian universities demonstrate an economic phenomenon called “leapfrogging.” Leapfrogging, in an economic context, according to Wikipedia, is defined as:

“When companies holding monopolies based on incumbent technologies have less incentive to innovate than potential rivals and therefore eventually lose their technological leadership role when new radical technological innovations are adopted by new firms.”

Examples of technological leapfrogging include skipping fiber optic cable and jumping directly into high-speed, wireless infrastructure (Eastern Europe). Or skipping gasoline made of fossil fuels in favor of fueling cars using ethanol made from sugar cane (Brazil). Freedom from previous investment in a single incumbent technology (or strategy) enables innovative technology (or strategy) to leapfrog the incumbent.

U.S. universities could be viewed as incumbents that have invested heavilty in their current strategies and hence have less incentive to try out alternative, more innovative knowledge transfer strategies. Canada’s approach, characterized by with several innovative strategies with no single one dominating, could be viewed as one that’s poised to leapfrog forward. More investigation is needed but I wonder whether — like a telephone landline – U.S. universities remain too faithful to a once-useful but increasing antiquated method of transferring university research to the people and companies that need it.

Canadians already know quite a bit about the U.S. system. Yet, many very sharp and forward-thinking tech transfer practitioners in the U.S. aren’t as familiar with Canada’s national-scale “living lab” that demonstrates different models of university knowledge transfer in action. If flexible, regionally defined and less patent-oriented knowledge transfer models are the future, perhaps more of us in the U.S. should journey up to points North to see what we can learn.

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Melba KurmanMelba Kurman writes and speaks about innovative tech transfer from university research labs to the commercial marketplace. Melba is the president of Triple Helix Innovation, a consulting firm dedicated to improving innovation partnerships between companies and universities.

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