From research to product - Case's Scott Shane explores the rise of university spinoffs in new book

04/26/04

CLEVELAND--Giants like Google, Lycos and Genentech began in the labs and minds of university researchers, who eventually spun off their brainstorms into venture companies that grew into major businesses. Scott Shane, Case Western Reserve University professor of economics at the Weatherhead School of Management, chronicles the rise of these and other university spinoffs in the new book and shows how a spinoff from a typical university is 108 times as likely to go public as an average new company, Academic Entrepreneurship: University Spinoffs and Wealth Creation (from Edward Elgar Publishing's New Horizons in Entrepreneurship series).

Drawing from his seven years of research, Shane defines the university spinoff as a company founded to exploit the intellectual property created in the academic setting.

Shane is also Case's academic director for the Center for Regional Economic Issues--a group that ignites new ideas to boost at economic development. In the fiscal year 2003, Case generated $10 million in gross income--placing it in the top 20 revenue-producing universities, with its two spinoff companies and 15 licenses or options to license. At Case, the tech transfer strategy is an integral part of the university's mission to strengthen its research and education roles as well as provide a benefit to society.

The spawning of these companies fuels local and national economies, benefits society and improves the university's ability to raise funds and move forward its teaching and research missions.

"University spinoffs have become an important part of the economic landscape," says Shane. As he tracked the rise of these spinoffs, he noticed that university spinoffs are remarkably high-performing companies.

Academic spinoffs have early roots in the formation of the modern university in Germany during the 18th century as research discoveries began to trickle into the mainstream. As momentum excelled, lab findings were turned into marketable products and services to meet government and industrial needs during World War II and the ensuing Cold War. But, since the passage of the Bayh-Dole Act in 1980--which gave universities the property rights from federally funded research--a gush of new developments has flooded the market. Prior to the act's passage, only a handful of new companies formed each year, but in 2000 more than 500 ventures came to be. A mix of factors has made some universities more successful than others at turning research discoveries into successful new businesses. These influences range from the cultural climate at a university receptive to spinoffs that, in turn, generate a cadre of role models of successful entrepreneurs to the skills of personnel at the university's tech transfer offices to the university policies that support the formation of spinoffs.

Shane uncovered that most university inventions are embryonic stage, or what he describes as two stages, before the traditional venture capital seed stage. He found that transforming the invention into a commercial new product or service takes an average of $4 million in investments, and as much as four years of additional development beyond the university findings.

Shane's book intentionally leaves the reader with questions. Instead of inquiries about the impact of spinoffs, he proposes future exploration that will add to an understanding of how these spinoffs affect universities, why some spinoffs are formed and succeed and what influences the permanent formation of these spinoffs have on the university.

"Our knowledge of spinoffs is still fragmentary and limited," he says.

He states that he hopes his book is the first step in understanding the spawning of spinoffs and that other researchers also will take up the baton for an in-depth and systematic examination of the phenomenon that is taking hold globally.

Source: Eurekalert & others

Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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