Transcending the Tacit Dimension:
Markets, Relationships, and
Organizations in Technology Transfer
Peter Lee
UC Davis School of Law
[email protected]
April 30, 2011
Technology Transfer


How do technologies move from one organization to
another?
University-industry technology transfer
 “Last
year, we made the largest investment in basic
research funding in history - an investment that could
lead to the world’s cheapest solar cells or treatment that
kills cancer cells but leaves healthy ones untouched.”
 President
27, 2010
Barack Obama, State of the Union Address, Jan.
Technology Transfer

Modes of technology transfer
 Informal
 Publishing,
symposia, placing graduate students
 Formal
 Patenting

and licensing via the Bayh-Dole Act
Context (FY 2009)
 Universities
received 3,417 patents
 5,328 total licenses and options executed
 596 new companies formed
Agenda



Markets: commodifying and exchanging technology
Relationships: tacit knowledge and personal
interactions
Organizations: various modes of “integration”
between universities and firms to transfer tacit
knowledge
A Market-Oriented Conception of
Formal Technology Transfer


Relies on markets to move technologies to highervalued uses
Prospect theory
 Efficiency
gains from enabling one entity to orchestrate
the development of a technological prospect

Law
 Patents
directly reward invention, not commercialization
 Markets facilitate transition to commercial product

Policy: Bayh-Dole Act
 Universities

hold patents but do not make products
=> Critiques based on transaction costs, strategic
behavior
The Role of Patent Disclosure in
Facilitating Market-based Transfer

Disaggregating formal
technology transfer:
 Legal
 Cognitive


Patents effectively
“codify” an invention
35 U.S.C. § 112
 Enablement
 Written
description
 Best mode

Transferring legal rights is tantamount to transferring a
technology
Refining the Market Conception:
Academic Technology Transfer


Empirical accounts of university-industry technology
transfer
Licensing markets are not robust:
 78%
of university licenses only had one bidder
 University inventors frequently critical to finding
licensees based on personal networks

Relationships rather than anonymous market
transactions predominate
A
high degree of geographic clustering in university
licensing rather than true national markets
Tacit Knowledge and the Insufficiency
of Patents

Tacit knowledge
 “[W]e
can know more than we can tell.”
 Michael
 Difficult
Polanyi
or impossible to codify
 “Tacitness”
is a question of degree
 Technical
“know-how” not captured in the patent
disclosure

Tacit knowledge particularly important for patented
university inventions
 75%
of inventions licensed from universities are earlystage prototypes or “proofs of concept”
Tacit Knowledge and the Insufficiency
of Patents

Transferring tacit knowledge often requires direct
interpersonal interaction
 For
71% of university inventions licensed, continued
cooperation of the inventor and the licensee was
required for further development
A Relationship-oriented Model of
Technology Transfer

Stakeholders routinely cite personal relationships as
important to technology transfer:
 Entrepreneurs
(75%)
 Technology transfer administrators (67%)
 University scientists (80%)

Ongoing relationships rather than one-off market
transactions
Organizational Forms and UniversityIndustry Technology Transfer


How do universities and commercial licensees
overcome the limitations of formal technology
transfer?
Theories of the firm and vertical integration

“Make or buy”
 Buy
from an independent supplier
 Vertically integrate and make in-house

Contractual hazards between two independent
parties counsel in favor of vertical integration
 Opportunistic
behavior
 Incomplete contracts
Technology Transactions, Patents, and
Tacit Knowledge


The difficulties of conveying tacit knowledge
represent another “contractual hazard”
Private sector responses:
 Patents
can facilitate the transfer of tacit knowledge
 Bundling
licensing rights and tacit knowledge
 Intensifying ties between licensors and licensees
 Various
modes of organizational integration
 High-tech
industries: biotech, IT
 Joint ventures, corporate partnering, iterative collaboration,
“virtual integration”
Organizational Forms and UniversityIndustry Technology Transfer


Firms in research-intensive fields face a “make or
buy” decision regarding early-stage technological
inputs
“Buy” from universities
 Licensing
patented inventions from universities
 “Outsourcing”
 Difficulties

basic research functions
of transferring tacit knowledge
Deepen organizational ties
 Extending
firm research into university laboratories
 Integrating faculty inventors into the firm itself
Blurring the Boundaries of Universities
and Firms


In parallel to patent licensing, faculty inventors,
universities, and firms are engaged in various forms
of organizational integration
Examples:
 Star
academic scientists and the rise of biotechnology
 Scientists
integrated into private firms
 MIT
licensing of engineering and computer science
patents
 Engaging
the academic inventor positively impacted the
likelihood of commercialization and amount of royalties
 Transfer
 Strong
of Air Force technologies to the private sector
laboratory-user relationships and joint projects
Blurring the Boundaries of Universities
and Firms

A continuum of modes of “integration”:
 Sponsored
research, collaborations with faculty, co-
publishing
 Academics serving as consultants and scientific advisors
 Academics joining the management teams of licensee
firms and obtaining equity stakes
 Licenses to university spin-outs headed by academic
entrepreneurs

Direct absorption of academic human capital to
convey tacit knowledge and transfer technology
Implications

How do technologies move from one organization to
another?
 Technology
transfer is not an anonymous, one-off market
transaction
 Based on social/professional connections and long-term
relationships

The limitations of patents (and other forms of
codification)
 Patents
may not transfer all valuable information
relevant to an invention
 Tacit knowledge is critical
Implications

Organizational response: integrating faculty
inventors into licensee firms
 Blurring
the boundaries between universities and private
companies

The nature and necessity of normative conflict
 Academic

participation is key to commercial success
Optimizing technology transfer
A
multidimensional model of formal technology transfer
 Legal
(licensing patents)
 Relational/organizational (integrating human capital)
Questions