Minds, Money, and Markets

An emerging style of collaboration between industry and the universities is causing considerable soul-searching on campus and in the boardroom. It is closer, larger in scale, and governed by different terms than are traditional grants to outstanding researchers or routine consulting arrangements. For participating universities, the new arrangement means huge sums of money for research; for donor corporations, it promises an inside track on the commercial development of new discoveries.

The new collaboration was dramatized last June by a $23.5 million grant from the Monsanto Company to its neighbor, Washington University in Saint Louis. The grant was hardly unprecedented. A $50 million grant in 1981 from the German pharmaceutical firm Hoechst A.G. to Massachusetts General Hospital (affiliated with Harvard) was bigger and had many similar provisions. But it was large enough and innovative enough to focus attention on the potential conflicts between university objectives and the goals of profit-making institutions implicit in such arrangements.

Only three months before the Monsanto grant, a group of leading university presidents and business leaders met at Pajaro Dunes, California, to discuss the implications of the emerging style of partnership. The issues were considered sufficiently touchy to warrant the exclusion of outsiders in order to assure a full and frank discussion. By the end of the year, the partnership question was high on many agendas. According to the British periodical, New Scientist, university-industry relations are "matters of equal concern in Britain where the Prime Minister last autumn asked the Advisory Council for Applied Research and Development to report on university-industry links." They also were reported to be on the agendas of the Association of American Universities and the American Association of University Professors. A December conference on industry and universities as Partners in the Research Enterprise drew 400 scientists, business representatives, and others to the University of Pennsylvania, and Business Week detected the flowering of an "unprecedented spirit of cooperation" in business-university relationships that "deserves careful nurturing." The magazine also acknowledged "the legitimate concerns" of educators about academic values, concerns that received particular attention in educational and scientific publications. At Philadelphia as well as Pajaro Dunes, the participants stressed the need to avoid setting rules or establishing formal guidelines. They were intent primarily on identifying issues and examining their implications.

Whether the new style of collaboration proves salutary or troublesome, significant or only marginal, for the moment at least, it occupies center stage.

The quid pro quo

Several provisions distinguish the Monsanto agreement and others like it from traditional corporate grants. The agreement sets forth an institution-to-institution relationship and provides for close working relations between company and university researchers. It establishes a board of four representatives from the company and four from the university to decide which grant applications from faculty should be supported, sets up an outside advisory board to comment both on the quality of the science and the effects of the program on Monsanto and Washington University, and grants the company an exclusive license to develop any discovery financed solely by the firm that has commercial application (the patent being retained by the university). The right of researchers to publish their findings is affirmed, but with a procedural modification: publication will be delayed for thirty days while the company reviews the article and considers its implications for commercial follow-up; any royalties will go to the university, rather than to the individual researcher. The general field of research is specified, but not individual projects.

The Monsanto-Washington University provisions were reported in Science magazine, which devoted considerable space during the year to university-industry relations. Science also noted that to prevent a preoccupation with applied problems, the agreement specified that 30 percent of the money was to be devoted to basic research.

Precedents existed for most of the specific provisions in other agreements, though the precise details took some three year to work out. The Hoechst agreement, for example, provided for exclusive licenses; an especially touchy issue and one that drew considerable attention at the Philadelphia meeting.

Implications for technology

University-industry partnership has implications for technological innovation as well as for scientific inquiry. The process of technological innovation, which encompasses minds, money, and markets, has been of increasing concern in the United States for many reasons—declining productivity, increasing foreign competition, controversies over the size of federal support for research and development, the need to develop substitutes for scarce materials or ways to make existing resources go farther, the search for ways to reduce pollution, and so on.

A corporate rationale for supporting an academic partnership is that it is likely to have a better payoff than a comparable expenditure on company laboratories. In some areas—biotechnology has been cited—some university researchers are ahead of their colleagues in industry. Collaboration can give a corporation access to more advanced work and at the same time provide an opportunity for company scientists to catch up or move into new areas.

To the extent that the partnership enables companies to speed up the development process—to reduce the lag between discovery and commercial exploitation—the consequences have broad economic implications. Economists long have stressed the role of the market in inducing technological advances. As they see it, when a resource is in short supply, its price rises and an incentive thereby is provided to introduce new technology that can alleviate the shortage. Historically in the United States, the shortage was labor, thus creating a strong incentive to develop labor-saving inventions; later, high wages stimulated automation and robotics. In an era characterized by increasing concern about material shortages, resource-saving innovations rise to the top of the incentive list. It could be argued that the greater sensitivity to market needs that presumably characterizes the corporation could more effectively be expressed through a partnership with university research.

But innovation does not merely reflect the pull of the market: a good deal of technology develops semiautonomously. Consumers and industry may not know what they want or what they could use profitably until the logic of a discovery has carried research and development fairly far along. To make researchers wholly beholden to company needs easily could choke off lines of inquiry whose potential cannot be detected until a later stage of development.

The most productive university-industry partnerships cannot, of course, assure success. The specter of uncertainty, if not failure, cannot be banished, even in an area as highly touted as genetic engineering. Last year provided a reminder of an old lesson: not every firm that is an early entry into a new field and that seems destined for success will survive. One widely heralded firm, Southern Biotechnology, filed for bankruptcy when it lost its partner in a projected joint venture and was unable to find a buyer for its large stock of interferon. Wall Street reports generally reflect a dimmer view of biotechnology than was the case even a year ago. Money for biotechnology firms is difficult to raise and there is talk of a possible shakeout in the industry.

Long-run consensus needed

Research and development and technological innovation are inescapable concerns for anyone interested in long-run resource availability. Twenty-five years ago RFF sponsored a public forum in which leading scientists explored the outlook for technological advances, and RFF researchers have continued to try to take into account technological factors in analyzing public choices. Currently a seminar series is exploring the feasibility of a broad study of technology and natural resources.

Funding represents only one concern. Others include the supply of scientists and engineers, the development of new energy sources, the possibilities of genetic engineering and other biological research, and corporate strategies for developing new technology. As in the funding issue, each of these areas requires the delicate balancing of industry and university objectives. And to one degree or another, each requires the tacit approval—in some cases the explicit approval—of the larger society.