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MIT AND THE RISE OF

ENTREPRENEURIAL SCIENCE

MIT and the Rise of Entrepreneurial Science is a timely and authoritative book
that analyses the transformation of the university’s role in society as an
expanded one involving economic and social development as well as teaching
and research. The Massachusetts Institute of Technology invented the format
for university–industry relations that has been copied all over America and
latterly the rest of the world. This excellent book shows that these ground-
breaking university–industry–government interactions have become part of the
foundations of modern successful economies.

Henry Etzkowitz has written a book that will be of great interest not only to all
those with a connection to MIT, but also to anyone with a more general
interest in entrepreneurial universities, innovation and economic development
as a whole.

Henry Etzkowitz is Director of the Science Policy Institute at State University


of New York.
STUDIES IN GLOBAL COMPETITION
John Cantwell
University of Reading, UK
David Mowery
University of California, Berkeley, USA

JAPANESE FIRMS IN EUROPE


Edited by Frédérique Sachwald

TECHNOLOGICAL INNOVATION, MULTINATIONAL


CORPORATIONS AND NEW INTERNATIONAL COMPETITIVENESS
The case of intermediate countries
Edited by José Molero

GLOBAL COMPETITION AND THE LABOUR MARKET


Nigel Driffield

THE SOURCE OF CAPITAL GOODS INNOVATION


The role of user firms in Japan and Korea
Kong-Rae Lee

CLIMATES OF GLOBAL COMPETITION


Maria Bengtsson

MULTINATIONAL ENTERPRISES AND TECHNOLOGICAL


SPILLOVERS
Tommaso Perez

GOVERNANCE OF INTERNATIONAL STRATEGIC ALLIANCES


Technology and transaction costs
Joanne E. Oxley

STRATEGY IN EMERGING MARKETS


Telecommunications establishments in Europe
Anders Pehrsson
GOING MULTINATIONAL
The Korean experience of direct investment
Edited by Frédérique Sachwald

MULTINATIONAL FIRMS AND IMPACTS ON EMPLOYMENT,


TRADE AND TECHNOLOGY
New perspectives for a new century
Edited by Robert E. Lipsey and Jean-Louis Mucchielli

MULTINATIONAL FIRMS
The global–local dilemma
Edited by John H. Dunning and Jean-Louis Mucchielli

MIT AND THE RISE OF ENTREPRENEURIAL SCIENCE


Henry Etzkowitz

TECHNOLOGICAL RESOURCES AND THE LOGIC OF CORPORATE


DIVERSIFICATION
Brian Silverman
MIT AND THE RISE OF
E N T R E P R E N EUR IA L
S C I E N CE

Henry Etzkowitz

London and New York


First published 2002
by Routledge
11 New Fetter Lane, London EC4P 4EE

Simultaneously published in the USA and Canada


by Routledge
29 West 35th Street, New York, NY 10001

Routledge is an imprint of the Taylor & Francis Group

This edition published in the Taylor & Francis e-Library, 2003.

© 2002 Henry Etzkowitz

All rights reserved. No part of this book may be reprinted or


reproduced or utilised in any form or by any electronic,
mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in
writing from the publishers.

British Library Cataloguing in Publication Data


A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data


A catalog record for this book has been requested

ISBN 0-203-21667-9 Master e-book ISBN

ISBN 0-203-27283-8 (Adobe eReader Format)


ISBN 0–415–28516–X (Print Edition)
CONTENTS

Acknowledgements ix

Introduction: MIT and the rise of the entrepreneurial


university 1

1 The second academic revolution 9

2 MIT: the founding of an entrepreneurial university 20

3 Controversy over consultation 31

4 The traffic among MIT, industry and the military 42

5 Knowledge as property: the debate over patenting academic


science 55

6 The regulation of academic patenting 66

7 Enterprises from science: the origins of science-based


regional economic development 78

8 The invention of the venture capital firm: American


Research and Development (ARD) 89

9 Stanford and Silicon Valley: enhancement of the MIT model 102

10 Technology transfer universalized: the Bayh-Dole regime 113

11 The making of entrepreneurial scientists 127

12 Innovation: the endless transition 139

Notes 152
Index 163
ACKNOWLEDGEMENTS

I wish to express my thanks to Professor Everett Mendelsohn of the History of


Science Department, Harvard University, in whose summer seminar this study
originated. I also wish to express my deep appreciation to the late Edward Shils
who encouraged my research on entrepreneurial science and shepherded several
articles through publication in Minerva. My thanks also to Professors Robert K.
Merton and Harriet Zuckerman for providing a venue to test my ideas in their
seminar on the Sociology of Science at Columbia University.
My special thanks to the archivists at MIT and Stanford for providing access
to materials, and to faculty members, students and administrators for acceding
to interviews. I wish to acknowledge financial support from the National
Science Foundation, the National Endowment for the Humanities and the
Andrew Mellon Foundation. My special appreciation goes to Dr Rochelle
Hollander of NSF for her long-term interest in this project.
New York, 14 November, 2001

ix
INTRODUCTION
MIT and the rise of the entrepreneurial university

MIT has played a distinctive role in US academia, creating formats for interac-
tion with industry and then diffusing them to other schools. Although the idea
of science as the basis of economic development is not new, policies encour-
aging the university to become a driver of the science-based economy are
relatively new and sometimes controversial. Logically, however, much of that
controversy should dissipate in the light of how the university’s engagement in
this key economic role is inherent in its first mission, teaching, and manifest in
its second, research. Nevertheless, just as tension has persisted between
teaching and research even as it has been found to be fruitful to locate them
jointly in the same institution, so may we expect a continuing friction between
the university’s newest mission and its older ones.
The MIT model, combining basic research and teaching with industrial
innovation, is displacing Harvard as the academic exemplar. Until quite
recently, pursuing the “endless frontier” of basic research was the primary ideo-
logical justification of elite US academic institutions.1 Harvard University was
the model, with numerous schools identifying themselves as the “Harvard” of
their respective regions. Such claims are seldom heard anymore. With an
entrepreneurial mode increasingly followed at Harvard, and at academic institu-
tions that model themselves upon it, the prediction that MIT would eventually
conform to the traditional US research university mode has been disconfirmed.
Instead, the reverse process has occurred as liberal arts research universities
adopt a mission closer to the “land grant” tradition of regional economic devel-
opment, MIT’s founding purpose and historic forte.
The thesis of this book is that a new academic model – the entrepreneurial
university – is created as universities combine teaching and research with the
capitalization of knowledge. The university’s assumption of an entrepreneurial
role is the latest step in the evolution of a medieval institution from its original
purpose of conservation of knowledge to the extension and capitalization of
knowledge. As the university increasingly provides the basis for economic
development through the generation of social and intellectual, as well as
human, capital, it becomes a core institution in society.

1
INTRODUCTION

MIT and the rise of entrepreneurial science


This book analyzes the origins and development of the entrepreneurial univer-
sity model at MIT, its transfer to Stanford and its subsequent spread throughout
the academic world. Four individuals were central to the creation of the
contemporary entrepreneurial university that combines research and teaching
with regional economic development through creation of high-tech spin-off
firms: William Barton Rogers, Karl Compton, Vannevar Bush and Frederick
Terman.
The founder of the Massachusetts Institute of Technology (MIT) was
William Barton Rogers, a geologist from the University of Virginia, with family
ties in the Boston area, then (the mid-nineteenth century), as now, a tech-
nology center. Rogers originally conceived of a science-based university
committed to the industrial development of its region. That vision, however,
was considerably greater than the reality of the resources then available to
support its realization, even with 30 percent of Massachusetts “land grant”
funds committed to the new MIT. Later, Karl Compton, MIT’s President in the
1930s and 1940s, specified Rogers’ vision of a university role in fostering
regional economic development; he pioneered the venture capital firm as a
transmission-belt between academia and industry, supplying seed capital and
business counsel to academic firm-founders.

Vannevar Bush: from consultation to firm formation


It wasn’t until the 1920s that Rogers’ conception began to take tangible shape,
when Vannevar Bush, MIT professor, administrator and consultant to industry,
systematically originated the university-based high-tech firm. Vannevar Bush
attained renown as a World War II science policy administrator and as origi-
nator of the post-war “Science as an Endless Frontier” thesis. Earlier in his
career Bush adumbrated the model of the entrepreneurial academic as consul-
tant, patent holder and firm founder. A graduate of Tufts College, he earned
one of the first MIT PhDs in electrical engineering and stayed on to teach. As a
young professor, just after World War I, Bush spent his own money to get an
invention patented but lost his investment when he found that no one was
interested in licensing the patent. Bush learned from this experience that
inventing a new device, “building a better mouse trap,” was not enough. Further
steps had to be taken. During the 1920s Bush worked part time in the R&D labs
of local companies as a consultant. He also passed along problems to his
students to work on and some of the industrial problems fed back into academic
research on campus.
Bush became a firm believer in the value of the consulting relationship for
bringing new issues into academic research. He also kept an eye out for research
with commercial potential. In the course of work for Amrad, a firm sponsored
by J.P. Morgan, Bush met an inventor of a device that the financier was not
interested in. Bush, however, saw a use for the technology in the emerging radio

2
INTRODUCTION

industry. Through college acquaintances, Bush was well connected in the


Boston financial community. With these financial and technical colleagues,
Bush helped organize the Raytheon Corporation, an early electronics company
that grew into a major firm. As with other such ventures, the fate of the
company gives value to the stocks, enriching the holders, if successful. If not, it
leaves them with handsomely engraved papers stored in their university desk
drawers and a rueful tale to recount.
Vannevar Bush’s consulting and firm formation activities provided an influ-
ential model, especially since Bush later rose in the administrative ranks to
vice-president and Dean of the Engineering School. Nor was he alone in this
practice. Several firms in the businesses of consulting and production of scien-
tific instruments emerged out of MIT and Harvard in the late nineteenth and
early twentieth centuries. One of these firms, the Arthur D. Little Company
(ADL), founded in 1886, was located adjacent to the Institute and drew upon
its teachers. Dozens of MIT faculty members, over the years, have augmented
their modest academic pay by moonlighting as consultants for ADL. A few of
them received annual retainers from ADL for merely agreeing not to do
consulting work for anybody else. Often, in reciprocation, they would recom-
mend to their most gifted students that after graduation they consider
employment at ADL.
Bush’s experience exemplified the prospect for the unity of conduct and
commercialization of research, with each activity enriching the other. Given
the industrial experience and close industrial connections of many teachers at
the Institute, an interactive approach to consultation, research, teaching and
invention was commonplace. Vannevar Bush reported that he obtained many of
his research ideas from his consulting practice. He would then have his students
at the Institute work on their academic implications, under his supervision. At
times, new practical implications would emerge from these investigations.
The final element, closing the loop, was to place these ideas into industrial
use either in existing firms or new ones formed for the purpose. Bush told the
Temporary National Economic Commission that he had never directly made
any money from a patent.

But indirectly is another matter, as they well understood. I was early a


professor and also a consultant to industry. It was a salutary combina-
tion; it drew me out of the ivory tower and put life into my teaching,
and it greatly helped the family budget.2

Through his college roommate, Laurence K. Marshall, Bush made the acquain-
tance of a group of Boston financiers. They invested in several technical
enterprises, such as the Spencer Thermostat Company, that Bush helped orga-
nize as a consultant during the post-World War I years. Through a series of
mergers, the Thermostat firm eventually became part of Texas Instruments.3
These instances inspired MIT Treasurer Horace Ford’s 1930s vision of a

3
INTRODUCTION

“research row” of technologically based firms derived from Institute research to


be established between MIT and Harvard on Cambridge’s Memorial Drive.
Indeed, while a few technology firms such as Edwin Land’s Polaroid
Corporation did establish themselves on the Drive, the notion of a roadway as
the string for a necklace of technology firms was realized on a larger scale after
World War II on Route 128. Nevertheless, Ford’s vision of MIT as the source of
a technology complex began to be translated into a regional economic develop-
ment strategy in the mid-1930s, during Karl T. Compton’s presidency.
Compton and his colleagues in the Boston financial and academic communi-
ties originated a model for science-based regional economic development,
linking a venture capital instrument to academic research groups. The venture
capital firm provided a systematic method for organizing high-tech firms based
upon academic research, codifying Bush and other early academic
entrepreneurs’ individual experiences. Georges Doriot, a professor at Harvard
Business School and head of the American Research and Development
Corporation (ARD), a venture capital firm established in 1946, eventually put
this academic entrepreneurial model into practice, bringing together technical
expertise from MIT with business expertise from Harvard.
ARD provided business advice and seed funding to potential entrepreneurs in
academia. The officers of the firm would tutor them in firm formation and serve
on their boards of directors. The firms were sometimes housed in under-utilized
space in MIT’s own buildings, which served as a proto-incubator. Harvard’s
Georges Doriot realized his MIT colleagues’ vision for a new role for the univer-
sity and helped found the venture capital industry during the early post-war era.
The practice of firm formation from academic research assisted by venture
capital became widespread. MIT’s entrepreneurial model was transferred to
Stanford University by Frederick Terman, who had been Bush’s PhD student at
MIT. A professor of electrical engineering and later Stanford’s Provost, he
improved upon the model by systematically creating research centers, larger-
scale research units, built from several related research groups, to speed the
production of commercializable innovations.
Terman also found creative ways to fund Stanford’s expansion, hiring addi-
tional faculty members with revenues generated by a shopping center and an
industrial park constructed on the university’s extensive land holdings. In doing
so, he inadvertently invented the science park, as high-tech firms, including
Hewlett-Packard, created from Stanford research in the 1930s, located their
facilities within Stanford’s industrial park in the 1950s and 1960s, in order to
maintain close ties to the university.
In the late 1970s a confluence of opposition to academic technology transfer
and a desire to find a way to allow government to assist industry led to the
passage of the Bayh-Dole Act. This legislation amended the Patent and
Trademark Act to provide that the intellectual property emanating from feder-
ally funded research at universities be turned over to them to patent and market
as a condition of receipt of government funds. At one and the same time the Act

4
INTRODUCTION

legitimated academic technology transfer and closed the gap between academia
and industry opened up by the endless frontier linear model of government
funding of academic research. Before Bayh-Dole, there had been no assurance
that the results from publicly funded research would be transferred to industry.
Thus, the loop in a spiral of institutional innovation, begun in the mid-
nineteenth century, was completed in the mid-twentieth century. In the
interim, many of the firms in the textile and metalworking industries had disap-
peared, but they were replaced during the post-war era by electronics and
computer firms. These companies were often started in the abandoned factories
of older industries, and now, in turn, they are being displaced by genetic engi-
neering and software firms. Although the firms and technologies have changed
over the decades, the vision of knowledge-based industrial development that
William Barton Rogers expounded to a nineteenth-century industrial leader-
ship in the Boston region has been realized, and has since spread widely.
Just as a research ethos was universalized throughout the academic sphere, so
now is a concern with maximizing the economic uses of research that was
formerly the province of a specialized academic sector – the land grant schools.4
Still, industrial research funding and receipts from licensing of intellectual prop-
erty rights are small in absolute terms in comparison to government funding
sources that have become traditional, with their controversial origins forgotten
by succeeding academic generations.5 Nevertheless, a secular trend can be
projected of an academic system, closely involved with industry as well as govern-
ment. During the 1980s industry funding of academic research rose from 4 percent
to 7 percent and, by the end of the 1990s, to 10 percent. Much of this increase was
concentrated in a few fields with strongly perceived industrial relevance such as
biotechnology and civil engineering. University research centers closely tied to
industry increased nearly 2½ times during the 1980s. The number of patents
awarded to US universities tripled between 1984 and 1994.6 While still small in
scale – if not in scope – a new academic model is emerging from its chrysalis.
As to the question of whether this is significant in terms of the future capi-
talization of knowledge, universities are now taking equity in these firms. If we
look back just 20 years to the firms that came out of Stanford University when
it was not the policy to take equity, several of these firms, such as SUN and
Silicon Graphics, are now multibillion dollar firms. Within ten years, universi-
ties will hold significant equity in similar firms and the universities will be
transformed from eleemosynary institutions based on receiving resources from
others into at least partially self-generating institutions, generating resources
not only for industry but also for themselves, and this will be the way out of the
universities’ funding dilemma.

Understanding the dynamics of entrepreneurial science


To examine how the university’s new and old roles (economic development,
research and education) interact and conflict with each other, more than 150

5
INTRODUCTION

in-depth interviews were conducted with academic entrepreneurs, other faculty


members and administrators. A sample of eight public and private universities,
at the Carnegie I and II levels, was selected to represent universities and depart-
ments with newly emerging and long-standing connections to industry. The
disciplines studied included: physics, chemistry, computer science, electrical
engineering and biological sciences. Following a pilot study of two disciplines
(physics and biology) at two universities in the early 1980s, interviews were
conducted in two waves, in the mid-1980s and mid-1990s. Documentary mate-
rials, including patent guidelines and committee minutes relating to the
assumption of an economic mission, were also examined. Archival research was
carried out at MIT and Stanford University.
The premise of this investigation is that the university is not merely a
support structure supplying human capital to other organizations. Its daily
research activities involve a continual flow of young people who are future
inventors. No industrial or consulting firm has access to such a broad stream of
talent. The inventions that come out of universities typically come from
students rather than directly from professors. As teachers, professors provide
guidance and resources, but the actual work and often the ideas come from
students. The university’s teaching function, therefore, cannot be divorced from
its emerging “third mission” of economic development.
Economic legitimating themes are becoming as important as cultural ones as
universities are increasingly viewed as drivers of economic growth. These
themes are not contradictory. Although academic research in an increasing
number of fields in the natural and social sciences, for example in molecular
biology, artificial intelligence and risk management, is carried out in full recog-
nition of its commercial possibilities, the traditional academic reward system –
the esteem of colleagues, the ultimate accolade of a Nobel or other prestigious
prize – remains a powerful incentive. Pecuniary motives have not displaced the
pursuit of academic honors: rather, each incentive overlays and reinforces the
other.
Chapter 1 depicts the transformation of the university through the introduc-
tion of research and then economic and social development as academic
missions, the first and second academic revolutions, respectively. Chapter 2
discusses how the Massachusetts Institute of Technology was founded in 1862 to
infuse Boston and environs, the United States’ first industrial region, with new
technology. The concept for MIT integrated three academic strands: the
European Polytechnic School focused on applied research, what we today call
the basic research university and the combination of research, training and
outreach in an academic institution focused on agricultural innovation, which
later became known as the “land grant” model. Indeed, MIT’s founding was
partially financed by the Massachusetts land grant.
Chapter 3 begins the discussion of the invention of various modes of
university–industry relations designed to realize MIT’s founding purpose. The
hiring of industrial engineers as professors to introduce research at MIT

6
INTRODUCTION

provoked a controversy over “conflict of commitment.” Its resolution through


establishment of the one-fifth rule of one day per week, allowing professors to
work for industry in moderation, provided a regulated framework for
academic–industry relations. The rule spread throughout US academia,
becoming so taken for granted that few, even at MIT, are aware of its origin.
Chapter 4 shows how formats for university–government relations were built
upon those established for university–industry relations. Thus, an office created
to manage a program for contracts with companies, created to resolve a post-
World War I financial crisis, was utilized during World War II to manage
government-funded wartime research projects at MIT. Thus originated the
contemporary academic Contracts and Grants Office, with the “contract” a
template for linking university and government, both financially and meta-
phorically.
Chapter 5 returns to the evolution of university–industry relations, how
formats were originated to patent the commercializable results of academic
research, while taking into account the objections of opponents. The initial
format maintained a certain distance between academia and business by
utilizing an intermediary organization to assess and market intellectual property
rights. Chapter 6 discusses controversies over academic patenting and how they
were resolved, creating overlaps between academia and industry
Chapter 7 discusses the extension of academic consultation into the forma-
tion of new firms. Examples of firm formation at MIT in the 1920s became the
basis of a regional growth strategy that was adopted by a university–industry–
government coalition in New England during the 1930s. Chapter 8 shows how
New England’s comparative advantage, a concentration of research, was turned
into new economic activity. In collaboration with Harvard Business School,
MIT invented the venture capital firm and filled a gap in the New England
“innovation environment” by providing business advice and seed capital to
academics who might not otherwise have taken steps to found a firm.
Chapter 9 tells the story of how the entrepreneurial university model was
introduced into Stanford from MIT. The post-war high-tech conurbations of
Route 128 and Silicon Valley shared a common origin in university–industry
relations. The unique aspect of the Stanford case was the generation of high-
tech industry from a newly established “critical mass” of academic research with
industrial potential in a region which largely lacked an industrial base in the
early twentieth century. In both instances, post-war government funding,
largely for military purposes, expanded upon an industrial–academic dynamic
that had been set in motion as early as the turn of the previous century.
Chapter 10 delineates how the entrepreneurial university model was general-
ized throughout the US research university system as part of a response to the
decline of US industry and the economic downturn in the 1970s. Deleterious
economic circumstances coincided with a controversy over how to dispose of
intellectual property rights emanating from federally funded research, the post-
war expansion of university–government links established during World War II.

7
INTRODUCTION

The resolution of this controversy, through the passage of the Bayh-Dole Act of
1980, an amendment to the Patent and Trademark Law, merged previous
formats for university–industry and university–government links into a common
framework for university–industry government relations: the triple helix.
Chapter 11 returns to the implications of these developments for academic
institutions and academic scientists. An entrepreneurial dynamic that was
introduced in US universities as part of the introduction of research was
extended into firm formation. Entrepreneurship was part of the culture of the
research university even before the commercial implications of research became
apparent.
Chapter 12 discusses the emergence of the entrepreneurial university as part
of a triple helix dynamic. The entrepreneurial university plays an increasingly
important role in society as industry becomes more knowledge-based. As the
university takes a more central place in the institutional firmament as the basis
of economic activity, it may, in the future, become a self-sustaining institution.

8
1
THE SECOND ACADEMIC
REVOLUTION

As academic science is transformed into an economic as well as an intellectual


endeavor, the separation between science and industry to which most universi-
ties traditionally adhered breaks down, as the university itself becomes an
entrepreneur. Until quite recently only a relatively few schools, such as the
Massachusetts Institute of Technology (MIT), saw it as an important part of their
mission to develop a close relationship with industry or to take steps to commer-
cialize their research. During the past two decades a broad range of universities,
well beyond MIT, Stanford University and a few other schools with traditional
ties to industry, have undertaken to mine their research resources for profit.
As their interest in making money from their research resources grows,
universities compete in a new arena. When Columbia University announced a
patent, covering both US and international rights to co-transformation, a
genetic engineering technique invented by faculty member Richard Axel, the
university’s director of technology licensing exclaimed, “We captured both in
one.”1 The implicit comparison was to the Stanford Cohen-Boyer patents, the
basis for genetic engineering, which had failed to gain such a high level of
protection because the two researchers had already disclosed the techniques
before their university could apply for patents in Europe and Japan.
Academic institutions participate in various ways in the capitalization of
knowledge and its transmutation into factors of production. The University of
Colorado and Columbia University accept equity in faculty formed firms.
Washington University, St Louis and MIT take the role of venture capitalist
and Harvard has participated in ventures through its corporation. A university
licensing administrator outlined the new academic regime: “Instead of
publishing it and giving it away, you license, publish, but don’t give it away.”2
For example, Rockefeller University announced the receipt of a $20 million
payment for a patent license for the “obesity gene” from Amgen, a biotech-
nology company, “with an agreement to pay many times that amount if the
protein proves useful in treating fat people.”3 The entrepreneurial university is a
continuation of the development of a medieval institution for the conservation
and transmission of knowledge into a multifaceted institution that also creates
new knowledge and transforms it into practical uses.

9
THE SECOND ACADEMIC REVOLUTION

Precursors of entrepreneurial science


Opportunities to translate research into industrial applications were always
present, yet few academics took advantage of them. The few who did were a
distinct and unusual minority. In early nineteenth-century Germany, several
instances have been noted of ill-paid chemistry professors initiating commercial
ventures, and supervising production processes, to supplement their incomes.
One entrepreneurial effort stands out from these mundane ventures, Liebig’s
mid-ninteenth-century use of chemical theory to develop an artificial fertilizer.
Although unsuccessful, this venture represented a significant precursor of
contemporary academic efforts to originate marketable products.
Universities have acquired the capabilities to engage in business activities,
well beyond the traditional bursary functions such as collecting student fees and
paying faculty salaries. Transcending their traditional industrial role of training
persons for employment, the new entrepreneurial role of universities is based
upon creating new knowledge-based firms, locally, as well as selling technology
to the highest bidder among existing firms, nationally and internationally.
As technology transfer activities expand, they are often grouped within a
distinctive administrative structure even as they are linked to previous
academic missions through industry–university research centers and
entrepreneurship training programs. A school’s portfolio of industrial connec-
tions (industrial liaison programs, technology transfer offices, incubator
facilities, etc.) is the organizational attribute of entrepreneurial science, much as
research specialties and distinctive courses of study distinguished universities
from one another in the past. A transformation of the university’s mission is
underway that is comparable to the academic revolution of the late nineteenth
and early twentieth centuries, when research became an accepted academic
task.4

The first academic revolution


An academic revolution would appear to be a contradiction in terms. As a
medieval institution, going back more than one-thousand years to its founding
in Paris and Bologna, universities appear to change at a glacial pace. Originally
conceived as institutions of cultural conservation, preservation and transmis-
sion, they existed solely for that purpose for many centuries. The university has
retained its original purpose even as it has expanded its purview to encompass
new missions.
The continuity of the university resides in its history of development: each
new task has evolved out of an effort to meet a previous goal. Research
emerged, initially in philology and then in other disciplines, from a concerted
effort to revive classical learning in the eighteenth century. New knowledge was
inevitably created and a better understanding gained through the innovative
methodological techniques invented to retrieve the meaning of Greek and
Roman texts.

10
THE SECOND ACADEMIC REVOLUTION

The seminar, an innovative advanced teaching method also arose out of the
development of philological research. The cooperative examination of texts
took place though presentations by advanced students and professors, with
discussion of findings among them. This led to both levels of academics
becoming inquirers into new knowledge. The seminar supplemented lectures
and enhanced the educational mission of universities even as it became a basic
format for organizing research in the humanistic disciplines.
As research became a distinctive activity at some universities in Europe, the
experimental sciences were also incorporated into the university. The invention
of the teaching laboratory in chemistry at Giessen University in Germany in
the mid-nineteenth century was accompanied by the development of a precise
methodology in organic chemistry. A senior researcher, utilizing advanced
students to conduct direct supervision, could train dozens of students at a time.
This basic format persists in academic science teaching to this date.
In the United States the first academic revolution originated in the mid-
nineteenth century at some of the older teaching institutions such as Harvard
and Columbia, where professors, often inspired by their German doctoral
mentors, sought to initiate research training programs and advanced degrees.
However, the gap between academic vision and available resources was evident
for virtually all US academic institutions during the mid-nineteenth century,
with the notable exception of those working in agricultural research.
The attempt to establish chemical research laboratories according to the
German model largely failed.5 Harvard’s Eben Horsford, for example, was able
to raise the funds to build a building but not to hire assistants and buy supplies,
let alone heat the laboratory. There were simply not enough funds available to
realize the research ambitions of the increasing number of American scholars
who returned from Europe with their PhDs.
Since research funds did not come with academic positions as was typical in
Germany, individual researchers were responsible for seeking their own sources
of support. The organization of doctoral research was a creative response to
these financial constraints. Research expanded beyond an individual effort
when academics employed as teachers obtained small amounts of money to
purchase research materials and to hire students to help carry out research.
Academic research was greatly advanced later in the century by the founding
of new universities such as Johns Hopkins and Chicago. These institutions
adhered to a model of pure research, outlined by Johns Hopkins physicist Henry
Rowland in the late nineteenth century. Early in his career Rowland had been a
consultant to industry but when he took office and gave his inaugural address as
President of the American Association for the Advancement of Science, he put
this industrial career behind him in raising the banner of pure research.
Until the late nineteenth century, in the USA no clear distinction was made
between basic and applied research. The infusion of funds into academia from
the great industrial fortunes created in the late nineteenth century was accom-
panied by fears that donors would attempt to influence the research agenda.

11
THE SECOND ACADEMIC REVOLUTION

The creation of an ideology of basic research was part of the effort to carve out a
protected, yet financially secure, space for science. The practically oriented
leaders of academic science in the mid-nineteenth century, such as the
Sillimans at Yale and Columbia’s Chandler, well known as consulting chemists,
were pushed aside by a younger generation devoted to pure science who became
the academic exemplars.
The distinction held until World War II when scientists who had grown up
in the basic research culture found themselves immersed in war-related engi-
neering projects, such as radar, which also led to the development of radio
astronomy and the elucidation of theoretical issues in cosmology during the
post-war period. The somewhat surprising emergence of theoretical issues
during their wartime service, ostensibly devoted to practical issues, closed some
of the gap between pure science and engineering for these researchers. Built
with foundation and industry funds early in the century, the US academic
research system was greatly expanded with federal funds during and after World
War II. It has brought with it an increased velocity of scientific activity and
pressures to further increase funding in order to support existing research groups
and form new ones. Emanating from the research base created by the first revo-
lution, economic development is becoming an academic mission, as well.

The second academic revolution


The role of the university in society is currently undergoing a transformation
comparable in scale and scope to the first academic revolution of the late nine-
teenth and early twentieth century when the university integrated research
along with teaching into its academic mission. As the first academic revolution
spread to the sciences, a second revolution was set in motion. Making findings
from an academic laboratory into a marketable product requires a series of inter-
mediate steps that follow from acquiring the intention to sell as well as to
publish one’s research. In these circumstances, organizations as well as individ-
uals act as entrepreneurs.
In 1963, Clark Kerr, then Chancellor of the University of California,
Berkeley, set forth a vision of the future of the university, extrapolated from the
recent history of his campus.6 He called it the multi-versity to encompass a
proliferation of activities. Conventional discipline-based departments were
cross-cut by interdisciplinary research centers covering newly emerging fields
such as materials science and foreign area studies, giving the university a
matrix-like structure. Greatly expanded divisions of continuing education
offered credited and non-credited courses to the general public on an even
wider variety of topics than could be found in the regular academic catalog.
Parallel to the trends that Kerr identified, and in part based upon them,
another academic transformation was gathering force based upon the commer-
cialization of academic research. For example, the Alumni Foundation of the
University of Wisconsin marketed patents derived from academic research to

12
THE SECOND ACADEMIC REVOLUTION

industry and financed faculty research projects with the monies made. These
funds enabled Wisconsin to become a major research center in biology in the
1930s and 1940s.7

Transformation of the academic–industry interface


Academic scientists have a long history of working with industry, having helped
establish the early industrial research laboratories in the United States.8 Until
quite recently most university–industry connections separated academic and
commercial practices. Even as ongoing relationships, consulting arrangements
were usually conducted apart from academic research, although based on the
academic’s expertise accumulated from campus-based research. Consulting rela-
tionships typically involved brief visits to industrial sites or conducting discrete
projects on university premises. A consequence of this separation was that it left
control of commercial opportunities of academic research in the hands of
industry whereas control over the direction of research and choice of research
topics was left to academic scientists. Although regular payments were made to
individual consultants, the large-scale transfer of funds from industry to the
university was left up to the generosity of companies.
The older forms of university–industry connections involved payment for
services rendered, whether it was received directly in the form of consultation
fees or indirectly as endowment gifts. Thus, the traffic between university and
industry was policed so that those boundaries were maintained even as
exchanges took place through consultation and philanthropy. From the early
years of the research university in the late nineteenth century,
university–industry relationships were largely established at the behest of
industry to serve the needs of existing companies. Engineering schools reorga-
nized themselves to serve the research needs of the growing science based
electrical and chemical industries and to supply them with personnel. The link-
ages included cooperative programs which sent students to industry for part of
their training, university professors undertaking research at the request of
industry and donations of money and equipment by industrial firms to support
engineering education.9
University–industry relationships declined in the 1930s due to the financial
stringency of the depression and became relatively less important in the post-
war era with the growth in government funding of science. Traditionally,
academic–industry relations denoted the provision of research support from a
firm to a campus-based researcher. Such funding, despite offering far fewer
restrictions than government support in many cases, and thus being viewed
favorably by academic research staff, has represented a very small proportion of
academic research support during the post-World War II period, even though it
has recently increased from a low of 2 percent to 7 percent.
Most of these funds flowed through consulting relationships with faculty
members who provided advice (on campus to visitors from the company and at

13
THE SECOND ACADEMIC REVOLUTION

the industrial lab), conducted tests of materials and products in their laborato-
ries and occasionally carried out small research projects for a company. Based
upon the consulting model, some universities like MIT and Cal Tech estab-
lished liaison programs to link up firms with professors. In its most developed
format, a liaison program staff member would keep up with the technical inter-
ests of a group of companies who paid a fee to a member of the program and
then received suggestions of faculty members to contact.
New forms of university–industry relationships involve the multiplication of
resources through the university’s and faculty members’ participation in capital
formation projects such as real estate development in science parks and formation
of firms in incubator facilities. These also include academic scientists’ involve-
ment in firms, for example through membership of advisory boards or boards of
directors, stockholding in exchange for consultation services, assumption of
managerial responsibilities and direct involvement in the formation of firms.
During the past two decades, a broad range of US universities have taken on
the tasks of economic development, at times because of external pressures
including funding constriction, but also as the result of internal initiatives
arising from the expansionary dynamic of scientific research. Professors’ partici-
pation in the founding of firms based upon their academic research represents a
new stage in the development of academic–industry relations. The objective is
to multiply the value of intellectual property derived from academic research
through the stock market, either directly through the formation of a new firm or
indirectly through a stream of royalty income from an existing firm.
The new focus of relations with industry builds upon the development of
scientific research capabilities and the creation of a series of boundary-spanning
mechanisms, including technology transfer offices and spin-off firms. Incubator
facilities provide a home and support services for new firms while research parks
are designed to link successful firms to academic resources, in a format designed
to be compatible with academic goals. Whether this goal can be achieved is a
matter of considerable academic soul searching and debate.

Controversies over relations to industry


This transformation of the university brings with it a shift in values and practices
as faculty and students take on entrepreneurial roles, within and outside the
university. Roles such as faculty member, researcher and firm founder may be in
conflict and also confluence with each other as well as with traditional academic
roles. The combination of entrepreneurial activities with the university’s tradi-
tional roles of education and research has created a hybrid organization in
pursuit of multiple goals that simultaneously conflict with and support each
other. Thus, research may cause a time conflict with teaching even as research
infuses teaching with new ideas and examples. Firm formation from academic
research may cause a conflict of obligation with service to the department even
as it provides new resources and ideas for investigation. While conflicts of

14
THE SECOND ACADEMIC REVOLUTION

interest are often viewed negatively as potential malfeasance, they also signal
transition to a new academic model. They expose assumptions about the purpose
of higher learning and the legitimacy of an economic role for the university.
One axis of opposing views about the utility and propriety of
academic–industry ties concerns whether it is possible for the university to
contribute significantly to the economy – the practical question. The overall
modest level of this activity, despite a steady increase in income earned from
patents and a number of multi-million-dollar research contracts, has led some
observers to conclude that relations with industry are, and will continue to be,
of minor import in comparison to university ties to government. For example, it
has been argued that universities are ill-advised to commit resources to the
marketing of technology, especially since companies prefer that academic insti-
tutions concentrate on making information freely available.10
The ethical question posed is whether such participation will detract from
the traditional educational and research missions of the university – the value
dimension.11 There is concern that attention to economic issues will cost the
university its independence. Some of these same fears were expressed by
academics opposed to federal research support in the 1930s. Critics of
academic–industry relations believe that the university risks losing its indepen-
dent identity and special purpose by engaging in such activities.
Controversies have erupted such as the one at Harvard in 1980, when the
administration proposed that the university participate financially in a firm
based on the research of one of its faculty members. The ensuing debate rapidly
escalated into a struggle over the goals of the university, the purpose of science
and the professional ethics of scientists. According to one observer, “What has
drawn Harvard into this quagmire is the heady expectations of a genetic
Eldorado.”12 In the face of widespread faculty opposition, Derek Bok, the
President of Harvard University, withdrew the university from the plan to
invest in a joint university/faculty-initiated biotechnology firm.
Instead, he issued a statement eschewing such projects in the name of
protecting the disinterested stance of the university while reserving the right to
capture the economic worth of university research through other means. In
1988, a joint venture involving the Harvard Corporation, an administrative
entity, and the university’s medical school was announced. Although the New
York Times questioned whether traditional academic values were being aban-
doned, there were no reports of on-campus opposition as there had been eight
years before.
Academic–industry relations provide a litmus test of a university’s goals. Just
as a litmus test partially changes color indicating degree of acidity, conflicts over
relations with industry signal the stage of transition that a university is in,
shifting from a feudal to a capitalist mode of production. How much has
changed during the past two decades and how much has not? In the early 1980s,
the New Scientist reported that a London University professor proudly refused to
assert an economic interest in the results of his research.

15
THE SECOND ACADEMIC REVOLUTION

Along with the announcement from Edinburgh that Dolly Parton’s name-
sake was a cloned sheep, was the mention that the academic institution where
the research was conducted had helped found the biotechnology firm that had
part funded the research. Capitalized on the London stock exchange, the
present firm was the result of a merger with a US company, founded by faculty
at Johns Hopkins University and Virginia Polytechnic Institute, with support
from their state science agencies. The New York Times also reported interviews
with scientists at the University of Wisconsin who asserted that the NSF
would never have funded the Edinburgh research, it simply wasn’t basic
enough!13
Universities try to balance their academic and business roles in the increas-
ingly brief interval between discovery and utilization of research findings. Once
academic research is redefined from a free to a marketable good and treated as
intellectual property, the traditional forms of dissemination, such as publication
of articles in academic journals and presentation of papers at conferences,
continue but under a new set of conditions. “Limited secrecy” becomes the
watchword as publication is delayed to allow time for patenting.
If universities take a strong stand for openness and do not want the time span
for delay to be long, companies will usually agree. Nor, once a university has a
technology transfer office ready to act quickly is there any need to take a long
period of time to file an intention to patent. Having a paper published in a major
journal can be advantageous to a company seeking funds to support product
development or an appreciation in the price of its stock. Forces within the
academic technology transfer process militate for and against the freedom of
scientific information as the university creates a business from its research activi-
ties.

Causes of entrepreneurial science


One vision of the university of the future is as a generator of spin-off enterprises,
creating income and employment by infusing a local regional or national
economy with new sources of growth such as a cluster of science-based firms. In
1980, Congress created the virtual equivalent of a second “land grant” in the
Bayh-Dole Act, turning over to the universities intangible intellectual property
arising from federally supported academic research. Faculty in basic research
areas, who were previously far from commercial applications, have moved closer
to practical uses and some have earned considerable monies from their inven-
tions. This is in contrast to employees of corporate labs who typically sign their
intellectual property rights away as a condition of employment. What has led to
the growth of the entrepreneurial university and the academic scientist as an
entrepreneur?
The attention to the pecuniary value of research findings has a series of prox-
imate and long-term causes. While short-term causes vary in different countries
and academic systems, the common long-term factors driving the emergence of

16
THE SECOND ACADEMIC REVOLUTION

entrepreneurial science have to do with the increasing significance of science to


economic development as well as changes in the internal structure of scientific
research itself. Several hypotheses have been offered to explain the emergence
of entrepreneurial science.

1. A convergence between basic and applied research that creates


commercial opportunities from basic research
Although insufficient as a full explanation of entrepreneurial science, recogni-
tion of a congruence between basic research and invention vitiates the
ideological separation of these spheres of activity. As a closer relationship has
emerged between basic research and industrial development the time gap
between the two processes has shortened, resulting in several new syntheses.
Previously, there was a long-term relationship in which basic understanding of
physical phenomena later resulted in practical devices utilizing earlier discov-
eries. For example, Marconi’s patent application of 1896 for a long range radio
transmitter was “the technological embodiment of Maxwell’s theory of the elec-
tromagnetic field, stated thirty years earlier.”14 Thus, a major scientific advance
in the understanding of a physical phenomenon was translated into a working
device. Different persons, with different professional outlooks and goals,
discovery and theoretical advance versus commercial and military use,
conducted each phase. More recently these processes have been collapsed into
each other, sometimes with the same individuals involved in each phase. For
example, the first successful insertion of foreign DNA into a host micro-
organism in 1973 was quickly followed from 1976 by the founding of small
entrepreneurial firms to make industrial applications of this new genetic tech-
nique in the production of new drugs and chemicals.15

2. Scientists suddenly awakened to the opportunities attendant upon the


application of recent scientific discoveries
Implicit in this explanation is the notion that there were scientific discoveries
in recent decades, for example molecular biology and nanotechnology, unique
in that they could be quickly developed as sources of profit. This explanation is
deficient in its assumption that previous scientific research did not have direct
commercial potential. Opportunities to translate research into industrial appli-
cations were always present, yet few academics took advantage of them.16 The
few who did were a distinct and unusual minority. In early nineteenth-century
Germany, several instances have been noted of ill-paid chemistry professors
initiating commercial ventures, and supervising production processes, to supple-
ment their incomes. Although the rewards for producing useful knowledge have
grown greater, the commercial potential has manifested since the founding of
modern science. What is clearly different, is the invention of more powerful
incentives such as the initial public offering (IPO).17

17
THE SECOND ACADEMIC REVOLUTION

3. An underlying congruence between scientific research and


entrepreneurship, especially in an academic system in which researchers are
responsible for obtaining resources to support their research
The academic world has long been involved in a relatively hidden process of
organizational development leading up to firm formation through the expansion
of group research. Science and entrepreneurship became ever more closely asso-
ciated as a consequence of scientists’ need to find support for their research,
before opportunities to commercialize their research became available.
Academic science is an entrepreneurial venture, similar to a start-up firm, as the
research group leader, who manages a collectivity of researchers at various
levels, displaces the individual scientist. Such scholars interact with a few
students separately, a model still commonplace in the humanities. The roles of
the scientist and the entrepreneur, defined respectively in 1820s England by
philosopher William Whewell as a synthesizer of knowledge claims and in
1830s France by the economist Jean Baptiste Say as an economic risk taker,
appear to be distinctly different types.18 Nevertheless, they have much in
common in their inner logic even apart from the intersection of science and
business. Both concepts emphasize the importance of individual ingenuity in
creating new formats, whether conceptual or organizational, to bring order to an
uncertain environment.

The origins of the entrepreneurial university


The idea of the university as an entrepreneur, a label of not so subtle disparage-
ment among some academics, is becoming a positive scholastic attribute.
Nevertheless, given the traditional individualistic orientation of entrepreneur-
ship, the organizational entrepreneur has only recently been recognized as a
viable concept. For example, the US Department of Agriculture, in creating an
agricultural innovation system from the late nineteenth century, has been iden-
tified as a collective entrepreneur.19 State and local governments in the USA
have also played an entrepreneurial role in fostering economic development
through public initiatives during the post-war era.20 Moving beyond capturing
each other’s businesses, these efforts focus on creating enterprises, often relying
on the human, social and intellectual capital resources of a local university.
Some universities have actively sought this new role; others have had it thrust
upon them. A few schools, such as MIT, were founded for this very purpose.
MIT drew for its development upon various streams of academic formats
invented in or imported to the USA during the early and mid-nineteenth
century, for the purpose of establishing a close relationship between the univer-
sity, technology and the economy, initially in agriculture and then in industry.
The contemporary entrepreneurial university is a synthesis of various academic
models, including the classical teaching college, the polytechnic engineering
school, the land grant university and the research university. As a science-
based, technological university with strong industrial ties MIT does not easily

18
THE SECOND ACADEMIC REVOLUTION

fit into the existing categories of academic institutions. Whereas the research
university primarily balances teaching and research, the entrepreneurial univer-
sity adds the task of economic development and maintains these three academic
missions in a creative tension with each other.
MIT also exemplifies a creative synthesis of academic research formats based
upon contrasting models of innovation. The research university exemplifies a
linear model of innovation, going from academic research to practical use,
traditionally through publication of research results that have been adapted for
product development by interested industrial scientists. The land grant univer-
sity, on the other hand, exemplifies a reverse linear model of innovation,
starting from societal needs, such as those represented by farmers’ wishes to
improve their agricultural practices, as the basis for formulating research
projects. MIT combined both of these formats, linear and reverse linear,
following a non-linear interactive model of innovation. The next chapter
discusses the growth of MIT as a distinctive type of science-based university in
sharp contrast to the ivory-tower mode. Founded in the mid-nineteenth
century, MIT was the first entrepreneurial university.

19
2
MIT
The founding of an entrepreneurial university

As early as the 1840s, William Barton Rogers, a professor of geology at the


University of Virginia, envisioned a school that would systematically infuse
industry with science-based technology. In its early years, MIT took the form
of a classical college with a specified common curriculum but largely filled it
with the content of a polytechnic education. Nevertheless, MIT was also
founded with the ideal of training its students in the liberal arts as well as
practical disciplines to enable them to become leaders in their professions, not
mere technicians. The informal objective was to ensure that MIT graduates
had broad preparation for industrial leadership and thus would become top
executives rather than end up working for Harvard graduates. Rogers’ vision
of a university that would train sophisticated industrial leaders and create
major innovations, rather than narrow inventions, inspired the early promi-
nence of liberal arts and science disciplines in the curriculum of an
engineering school.
MIT integrated various academic formats, including the classical teaching
college, the polytechnic engineering school, the land grant university and the
research university into a unique configuration. These academic paradigms
provided the inspiration for various aspects of MIT’s development as a techno-
logical university with a strong science base and a special version of the liberal
arts related to its purposes. During the nineteenth century, US academia
divided into separate streams of “pure science”- and “technology”-based institu-
tions, with distinct cultures and academic missions. There were also mixed
forms with technology schools included within universities in a lesser status,
such as the Sheffield School at Yale, but these were typically unstable, tempo-
rary coalitions. After rejecting an attempt made in the early twentieth century
to place science first, MIT subsequently developed a strong research base in
both science and technology. The losers in this struggle left MIT and moved
west to develop their academic concept, an implicit linear model going from
research in academic disciplines to eventual practical uses at the California
Institute of Technology. MIT combined the research university’s “linear model”
with the land grant university’s “reverse linear model” predicated upon deriving
research goals from societal needs.

20
THE FOUNDING OF MIT

MIT forged its distinctive identity by establishing close relationships with


industry, both with existing firms and with the new companies that arose from
the research and consulting activities of its professors. As the unitary curriculum
of the classical American college opened up, defenders of the traditional liberal
arts questioned whether science and engineering should be incorporated within
existing institutions of higher learning. Advocates of pure science, believing in
a gap between the discovery of laws of nature and their application and use,
stood for the establishment of basic research departments within the university
but without necessarily including the engineering disciplines on an equal status.
MIT’s educational design raised technological education to the first rank in
association with the arts and sciences. Nevertheless, it took several decades,
after MIT’s founding in 1862, to realize Rogers’ nascent entrepreneurial design.
From concept to funding took almost twenty years; it then took decades longer,
well into the twentieth century, to fully realize the original idea. MIT then
influenced the course of US academic development through transfer of the
entrepreneurial university model to Stanford.

The founding of MIT: a science-based institute of technology


MIT is a unique university, with strong engineering, science and humanities
specialties. The fact that MIT is strong in technology is to be expected, but the
Institute’s perhaps surprising broader strengths derive from the intentions of its
founder. Rogers’ concept for a new kind of science-based technological univer-
sity, linked to industry, was intended to be broader in purpose than existing
American engineering schools such as Rensselaer Polytechnic Institute and
West Point, with their respective specializations in the civilian and military
branches of civil engineering. In a carefully thought out charter document
written in 1846, Rogers wrote that:

there is no branch of practical industry, whether in the arts of


construction, manufactures or agriculture, which is not capable of
being better practiced, and even of being improved in its processes,
through the knowledge of its connections with physical truths and laws
and therefore we would add that there is no class of operatives to
whom the teaching of science may not become of direct and substan-
tial utility and material usefulness.1

Science and technology were seen as interrelated and mutually supportive


activities with a common purpose – rationalization of the production processes
of Boston’s industries and the creation of new industries from scientific discov-
eries.
Realizing that his objective could not be attained in rural Charlottesville,
Rogers left Virginia and moved to Boston where his brother Henry, who had
established himself in business, introduced him to potential supporters for his

21
THE FOUNDING OF MIT

project. Then, even more so than now, Boston held primacy as the USA’s indus-
trial, technological and educational hub. With a substrate of science-related
industry already in place in the region’s textile and metalworking industries, the
Boston area was a fertile ground for implanting the notion of a technological
university. During the middle years of the nineteenth century, Rogers recruited
from among the manufacturers, merchants and intelligentsia of the Boston
region. In time, with their assistance, he gained access to private and state funds
and a share of the federal government’s land grant to the Commonwealth of
Massachusetts.
Rogers found an especially receptive audience among the industrialists of the
region for his new academic concept. Lowell’s textile manufacturers, for
example, appreciated the usefulness of science to industry and had already hired
trained chemists to direct their dyeing and printing works. In a series of
meetings, he outlined a plan for a school of practical science that would offer
training in scientific principles and laws that could be utilized to guide engi-
neering and manufacturing practice. Rogers found support among Bostonian
industrialists because of his insight into the need to create a technical intelli-
gentsia and thereby raise the industrial growth of the region to a new level. He
discussed with them the application of the principles of science to industry by
developing and introducing new machinery and production processes into manu-
facturing enterprises. Rogers also stressed to them the importance of scientific
guidance of production processes. He was contemptuous of “blind experi-
menters” who cluttered up the patent office with useless devices by attempting to
make technical improvements without knowledge of physical laws.
Rogers believed that scientific training was required to produce inventions of
“real and permanent value” and that there was no industrial art that could not
be improved upon though a systematic understanding of natural laws. Rogers’
school would:

embrace full courses of instruction in all the principles of physical truth


having direct relation to the art of constructing machinery, the appli-
cation of motive power, manufactures, mechanical and chemical, the
art of engraving with electrotype and photography, mineral exploration
and mining, chemical analysis, engineering, locomotion and agricul-
ture.2

Utility was the primary but not the sole legitimating theme of applied science.
Beyond mere utility Rogers provided the applied sciences with a higher purpose
of their own, equal in worth to that of other forms of higher learning, but linked
to the subordinate class level of its practitioners. Such study was morally
uplifting,

leading the thoughts of the practical student into those wide and
elevated regions of reflection to which the study of Nature’s laws never

22
THE FOUNDING OF MIT

fails to conduct the mind … thus linking the daily details of his profes-
sion with the grander physical agencies around him.3

Rogers did not wish to debate the relative value of science and classical culture
but he did wish to establish the dignity and value of the practical professions
and the need for schools to serve them.4 Two types of instruction were required:
(1) the scientific basis of engineering; and (2) particular areas of technical
expertise. He expected that scientists, through their understanding of physical
laws, would provide the theoretical underpinning and unifying framework for
the diverse specialties of the engineers. This “applied science” focus distin-
guished MIT from more practically oriented engineering schools, at least in
intention. Nevertheless, there was always the danger that scientists and engi-
neers would each pursue narrow disciplinary goals at the expense of the broader,
interdisciplinary objective of the scientific basis of engineering.
The Boston area already had an academic institution, the Lowell Institute,
focused on enhancing technological competence and on raising the intellectual
level of the workforce. During the fifteen-year organizing period, MIT’s founders
worked out a division of labor with the Lowell Institute. The Lowell Institute
would continue to educate the general public on scientific and technical
matters through open lectures and extension classes on technical subjects for
workers while the new Massachusetts Institute of Technology would focus upon
degree programs. Sufficient private funds were raised to match a state grant and
a suitable building was constructed in the new Back Bay area of Boston.
MIT was founded with assistance from a 30 percent share of Massachusetts’
land grant. Federal lands were provided to each state under the Morill Act,
which supported the development of institutions of higher education and whose
purpose was to assist the development of agriculture, then the major US
industry. In Massachusetts, where industrial development had already occurred
to a considerable extent, the Act was read in such a way that the legislature
gave significant funds to a non-agriculturally based school. This result can be
credited to Rogers’ ideas and lobbying activities which found fertile soil in a
region that already had a strong technological and industrial base.

The confluence of academic streams


By the mid-nineteenth century, the two organizational formats of a research
institute and a teaching college were amalgamated, first in agriculture and then
in other industrial spheres. The combination of research and teaching focused
on practical outcomes but was also tied to fundamental investigation. Dual
functions, carried out in a single academic institution, were the basis for the
agricultural innovation system that has grown up since the early nineteenth
century. This model was then transmuted in some very interesting ways in its
translation from agriculture to industry. Change has also occurred through
synthesis with another model of higher learning, the research university that

23
THE FOUNDING OF MIT

was created as an independent and even opposing format to the land grant
system.
The development of the Massachusetts Institute of Technology can be seen
as an interplay between the academic model produced by the international
polytechnic movement and US collegiate and university formats, including the
“land grant” and research university formats. Teaching colleges based upon the
traditional unitary classical curriculum, such as Harvard and Columbia,
expanded into general purpose universities with graduate schools in the arts and
sciences and separate technical schools. New universities such as Johns Hopkins
and the University of Chicago, founded to further newly defined notions of
“pure” research, typically did not have technical departments. The “land grant”
universities, so-called after the federal law of 1862 that provided federal lands to
each state to sell in support of universities, were designed to further the agricul-
tural and mechanical arts. The US polytechnic movement, of which MIT was a
part, was influenced by the creation of a distinctive, autonomous set of tech-
nical universities in France and Germany, among other European countries.
Each of these academic models has its special purpose. For example, the
teaching college trained its students in a common body of classical knowledge,
qualifying its graduates for the learned professions. Harvard College, MIT’s
Cambridge neighbor founded in 1636, exemplifies the classical teaching college
in its origins. The second stream is the so-called “land grant” university, which
trained its students in agricultural science and related mechanical arts, the
nations’ major industry until the late nineteenth century. The land grant
schools typically had experiment stations and conducted research aimed at
improving the productivity of local agriculture. The third stream is the poly-
technic institute, a European import, focused on training students in the
engineering professions that arose in tandem with the industrial revolution.
The fourth stream is the research university, based on an ideal of investigation
as an end in itself, first in the humanities and then in the sciences. These
various academic streams were never entirely separate. Many research universi-
ties were built upon the foundations of classical colleges and some polytechnics
were affiliated with classical colleges or research universities, and are to this day.
Indeed, MIT was once offered such a status as an affiliate of Harvard, but
rejected it.

The origins of the land grant system


This concept for the economically involved, industrially related university was
based on a model that originated in agriculture. The first agricultural experi-
ment station was founded in the state of Connecticut in 1816, with
considerable popular support. At that time agriculture was not only the leading
US industry, but most people were involved in it. Among them were farmers
who believed that science could be used to transform agriculture and who
carried out experiments on individual test plots to improve their crops. Perhaps

24
THE FOUNDING OF MIT

the best known of these “scientific farmers” was President Jefferson who main-
tained test plots at his Monticello estate, where visitors today can examine his
experimental records. Scientific farmers very soon realized that they could not
produce good science individually. Research had to be done collectively and it
had to be done by professionals. Therefore, the scientific farmers lobbied
government to establish institutions to conduct agricultural research on their
behalf. And it was done. The Connecticut experiment was eventually repli-
cated in every state.
It was very soon realized that setting up a research institute by itself, an
experiment station, was only a partial solution. It was not very efficient to do
research in an isolated setting when the objective was to put that research into
practice. A further innovation, in order to transmit that research, was to
combine the experiment station with a college to train farmers’ children.
Schooled in scientific agriculture, the next generation completed the forward
loop between experimentation and utilization when they returned to carry on
the farm. Combining a research institute with a teaching college also completed
the reverse loop between problem generation and research as a new generation
of technically knowledgeable farmers was better able to pose problems to
researchers.
The final link in the agricultural innovation system was the the county
agent, who served as an intermediary mechanism for technology and knowledge
transfer between sophisticated users and researchers. Farmers and researchers
interacted directly at times, but were mainly in touch through these agents, who
moved back and forth between the farms and the academic research sites.
County agents also brought their own expertise to the table. They synthesized
the experience of the large numbers of farmers with whom they interacted,
making it available to farmers, researchers and fellow professionals.
Even before scientific research emerged as a general university practice,
special universities were founded to conduct research and training in agricul-
ture, the major US industry in the early nineteenth century. Based upon a vision
of “scientific agriculture,” schools such as the University of Connecticut used
the results of research to improve agricultural practice. In the mid-nineteenth
century this model was extended nationally. The Hatch Act of 1867 and the
Smith Lever Act of 1918 built up on the Morill Act foundation, providing
block research funds and then technology transfer and liason capabilities.
The land grant universities helped make US agriculture the world leader.
The agricultural experiment stations at the universities, jointly funded by the
federal and state governments, assisted farmers with new technology and advice.
The experimental stations also supported fundamental research. For example,
the genetics research of George Beadle and others in the 1930s led to hybrid
corn, vastly increasing agricultural production.5 The land grant movement
invented a university that was committed to the economic and social develop-
ment of its region. It created a university that took local needs and
circumstances into account in developing its research and training programs.

25
THE FOUNDING OF MIT

The land grant academic model inspired a significant element of the develop-
ment of MIT as a school committed to regional development, of the Boston
area in the mid-nineteenth century and New England in the mid-twentieth
century.

The rise of the polytechnic movement


In addition to the unique American “land grant” movement, a European import,
the polytechnic institute, provided another building block for MIT’s develop-
ment. Proponents of the polytechnic ideal set forth an integrated conception of
the relation of science to practice. In their view science and technology were
interrelated and mutually supportive activities with a common purpose – ratio-
nalization of the production processes of existing industries and the creation of
new industries from scientific discoveries. In a division of labor between scien-
tists and engineers the task of scientists was to develop new and potentially useful
physical laws and to assist engineers in using existing physical laws to systematize
the conduct of industrial activities. The task of engineers was to reorganize craft
practices into systematic bodies of knowledge, using relevant science.
The polytechnicians believed that a new class of academic institutions was
required to realize this goal. The engineering disciplines were to be the heart of
such institutions with the basic sciences playing a supporting role. The tradi-
tional liberal arts were tolerated insofar as an acquaintance with them supported
the claim to gentlemanly status of the new scientifically trained engineers and
gave them a common basis of culture with their managerial superiors who, if
college-trained, were typically educated in the traditional liberal arts.
MIT emphasized connections to industry rather than agriculture in contrast
to the typical land grant school. Perhaps the closest analogue is Georgia Tech,
founded as part of the “New South” movement after the Civil War to renovate
an agricultural, plantation-based economy along technological and industrial
lines. Similar attempts to establish a polytechnic university took place in other
industrial regions but none were on the scale of the Institute plan. For
example, a parallel Philadelphia initiative was underway under the leadership
of Charles E. Smith, President of the Philadelphia and Reading Railroad. In
much the same way as MIT’s founder William Barton Rogers, he perceived the
need for a new type of scientifically trained professional in industry and in
1852 devised a plan for a technical school to be attached to the University of
Pennsylvania.
The support of the local elite of a city with a growing industrial base was
sought to support the introduction of a new model of higher education in
which science would be used to systematize industrial processes and universities
would be utilized to train “a new technical, managerial class.”6 At the time the
need to train an ancillary class of technologists could be made only partially
compatible with the leading colleges whose purpose was to prepare a governing
elite.

26
THE FOUNDING OF MIT

There were deep status differences between classical education and the new
technical subjects. When technical courses were instituted at the universities
which grew out of the old classical colleges they were typically accorded inferior
status and awarded lower prestige degrees. Thus, the Sheffield Scientific School
at Yale and a similar department at Harvard, the Lowell Scientific School, were
ancillary and isolated foundations.7 The difficulty of gaining entrance for tech-
nical subjects into the older colleges and the desire of proponents of technical
education for equality with classical liberal education led to the attempt to
found new institutions. The marginalization of technical education at tradi-
tional colleges provided another impetus for creating an institution of higher
education committed to technology as its main purpose. The tension between
the liberal arts and technology was sufficiently strong that MIT later rejected a
merger with Harvard, even though it was in an extremely difficult financial
position.

The evolution of the classical college into the research


university
The split of academia into “pure” and “practical” strains formerly divided
higher education. In striking contrast to an earlier era, when MIT and its sister
schools struggled to gain legitimacy for their educational model, universities
that originated from other premises now model themselves on MIT. For
example, the British government recently committed many millions of pounds
to support a collaboration between Cambridge University and MIT, a relation-
ship clearly intended to infuse the older foundation with the relative
new-comer’s luster. Despite Cambridge being the site of considerable high-tech
firm formation activity in recent decades, the government's concern was that
this was simply a side effect of the concentration of quality research and an
attractive cultural and living environment, three very important impetuses to
high-tech regional growth. However, the expectation was that the introduction
of more formal measures could provide an additional increment of economic
development. The introduction of practical topics into the curriculum also
began in earnest during the early nineteenth century at colleges founded for
other purposes, most notably the reproduction of a religious leadership. The
eighteenth-century teaching college was based on a closed corpus of classical
knowledge that could be transmitted by a relatively few teachers, each of whom
was usually responsible for covering more than one discipline. This simple
format made it possible for hundreds of colleges to be founded in dispersed
settings as the frontier moved westwards. A multiplicity of colleges was also
encouraged by divisions among Protestant religious denominations each of
whom insisted on having their own local institution of higher education. Their
objective was to insure doctrinal purity in the teaching of religion, a mainstay
not only of the curriculum but also of daily college life through compulsory
chapel attendance.

27
THE FOUNDING OF MIT

New, more practical topics were gradually and imperceptibly inserted into
the curriculum in the form of a course in geology or chemistry offered by an
individual faculty member. Change also occurred directly through outspoken
leadership of the founder or president of a new university, espousing different
ideas of what should be taught. These academic entrepreneurs often wished to
legitimize new subjects through their new foundations as well as distinguish
their universities from the traditional format. Thus, agricultural coursework was
begun at rural Cornell and urban themes, such as commercial studies, were
introduced at New York University. New England, home to the first agricultural
experiment station in the USA, was also the location of the Massachusetts
Institute of Technology (MIT). The region was also home to teaching colleges
such as Harvard and Yale that soon experienced the first “academic revolution”
through the introduction of research. The academic revolution occurred most
intensively, however, in new institutions founded primarily for this purpose,
such as the University of Chicago, Clark University and Johns Hopkins.

The research university


The basic or “pure” research model was propounded most notably by Henry
Rowland, a physicist at Johns Hopkins University, in his Presidential address to
the American Association for the Advancement of Science (AAAS) in the
late nineteenth century. Rowland proposed a model of starting from curiosity-
driven science, going to applied research, and eventually to long-term benefits.
This became accepted as the institutional ideology of the major universities that
were being founded in the late nineteenth century by the holders of great indus-
trial fortunes. In some ways that ideology was a useful fiction, a way to protect
those universities from expected and feared intervention from their funders.
With rare exceptions, mostly concerning political issues related to the social
sciences, intervention in academic research programs did not occur. Most
actions were in the form of pre-emptive strikes within an academic institution.
For example, William Rainey Harper, President of the University of Chicago,
failed to reappoint an outspoken faculty member, economist Richard Ely.
Harper wished to forestall opposition and raise funds for his new university from
the Chicago business community, which was averse to Ely’s critique of capi-
talism. John D. Rockefeller, the university’s major funder, kept a low profile,
rarely even visiting the university. Indeed, he refused offers to have the univer-
sity named after himself, though he allowed this with other organizations, such
as the Rockefeller Medical Institute, that he helped found.8
Perhaps one reason for the lack of interference was the unfavorable reaction
that it would have brought from the press at the time. Had this occurred, much
of the goodwill obtained from a public with ambivalent feelings toward industri-
alists who had otherwise been called “malefactors of great wealth” might have
been lost. If the founders had not been able to resist placing their personal
stamp on the schools to which they had given their fortunes, and often their

28
THE FOUNDING OF MIT

names, there would likely have been an intense backlash. The concept of
academic autonomy was engrained, not only in the beliefs of faculty members,
but in public opinion, as well.

The development of research at MIT


The transformation of the Massachusetts Institute of Technology into a research
university paralleled the development of research laboratories in the industrial
corporations that it supplied with engineering graduates. Indeed, Institute
professors such as Willis Whitney helped found such laboratories. From the
winter of 1900, Whitney divided his time for several years between General
Electric and the Massachusetts Institute of Technology. He commuted by train
between the two sites, spending four days in Boston and three in Schenectady,
before leaving the university and joining the company full time. Whitney drew
upon his university connections to staff the new lab which, in succeeding years,
became a model for other US technology-based companies to start their own
corporate laboratories.9
But how was academic research to be supported? A report issued by the
Smithsonian Institution argued the case for academic science: “Pure scientific
research unlike industrial scientific research, cannot support itself by direct
pecuniary returns from its discoveries.”10 But from where, then, would the
money come to support professors’ research efforts? One idea was for the schools
to pay for it themselves, drawing upon tuition income and endowment funds to
support research laboratories. Another was for professors to turn over part of
their consulting income from industrial firms to support more basic investiga-
tions at the university. In this fashion, research efforts jointly supported by the
Massachusetts Institute of Technology and its own faculty members began to
emerge in chemistry in the early twentieth century. On the one hand there was
an impetus to basic research among several alumni, such as A.A. Noyes, who
had returned from graduate work in Germany to join the faculty.
In 1901, chemistry professor Alfred Noyes proposed that the Massachusetts
Institute of Technology establish a chemical research laboratory jointly
supported by the school and himself through $5,000 a year that he offered to
pay from his consulting income. The request was turned down but in 1902
Noyes successfully asked the Carnegie Institute of Washington for $5,900 to
support his work on the physical chemistry of solutions. When he next
approached his school, this time together with fellow chemistry professor, Willis
Whitney, the proposal was accepted. Both agreed to donate some of their
consulting income if the school’s executive committee would also contribute to
support a laboratory for physical chemistry.11
In 1903 the Research Laboratory of Physical Chemistry, oriented toward
pure research, was founded under his leadership. A few years later, W.H.
Walker, who had taught at MIT since 1894, organized The Research Laboratory
of Applied Chemistry, focused upon industrially relevant research. William

29
THE FOUNDING OF MIT

Walker was a principal of the Arthur D. Little Inc. consulting firm from 1900 to
1905. During those years, he divided his time between MIT and the company.
He returned to MIT full time, becoming Director of the Laboratory of Applied
Chemistry in 1908. Walker is the prototype of the contemporary
entrepreneurial scientist who moves back and forth between the academic and
business worlds.
The two laboratories represented different visions for the future of the
Institute, either as a science-based university with a graduate school oriented
toward basic research or a school of engineering and technology devoted to
preparing undergraduates for work in industry. In the longer term, the develop-
ment of the Massachusetts Institute of Technology encompassed both
alternatives. However, at the time, the two were in conflict and chemical engi-
neering was attracting majors at the expense of chemistry.12 Walker ensured the
continued predominance of applied work by winning a battle over the future
direction of MIT against Alfred Noyes, who wished to steer the school in the
direction of pure research.
Academic administrators, from the president to the head of the chemistry
department, attempted to reconcile the two approaches but were unsuccessful.
After World War I, Walker, the director of the applied laboratory, using a threat
of resignation, forced the president of the Institute to choose between them.
Noyes, the director of the theoretical laboratory, was placed in an untenable
position and resigned. He went to California where he played a leading role in
reorganizing the Throop Manual Training School into the California Institute
of Technology according to his ideas of emphasizing fundamental research.
With the departure of Noyes, the Massachusetts Institute of Technology
affirmed its founding mission of concentrating on technology and developing
relationships with industry.
The dispute between Walker and Noyes exemplified the conflicts between
proponents of alternative research visions that appeared in state- and federally
sponsored research efforts during the nineteenth century. Typically a scientist
with an inclination toward broad ranging systematic investigation would be
hired by government authorities interested in quick practical results. The
research produced by the agency would be deemed too abstruse and, as in the
case of Josiah Whitney, head of the California State Geological Survey, support
would be reduced and the agency subsequently closed, with the scientist
retreating to an academic position, in Whitney’s case, a Harvard professorship.
At MIT, despite an early commitment, close ties to industry were slow to
develop. In the next chapter, we turn to the emergence of industrial ties in the
late nineteenth century as part of MIT’s strategy to develop its research
strengths by bringing in to its faculty practicing consulting engineers to comple-
ment its primarily teaching faculty.

30
3
CONTROVERSY OVER
CONSULTATION

The groundwork for US professors assuming multiple roles as teacher, researcher


and entrepreneur was laid in the resolution of the controversy over consulting
at MIT in the late nineteenth and early twentieth centuries. The rules adopted
at MIT to resolve the particular controversy became a model for other universi-
ties and spread throughout US academia in the following decades. The
controversy over consultation had broader implications for the definition of the
professorial role. It is now taken for granted in the university that professors
should do research as well as teach. However, when research was introduced in
the mid- and late nineteenth century in the USA it was often controversial.
There were charges of conflicts of interest. If a professor was going to do
research would that not mean that they would be taking time away from their
students? Therefore those professors who believed that teaching was the only
appropriate role of the professor argued that research should not be allowed as a
professorial role. Today, such a position would be seen as heresy, but at that time
it was a matter of pointed debate.
This chapter focuses on the origins of the one-fifth or one-day-a-week rule
legitimizing professors’ consultation with firms. One indicator of the taken-for-
granted nature of the one-fifth rule governing consulting is that its origins have
largely been forgotten, even at MIT, where the rule was invented early in the
twentieth century. Two groups of faculty members, with different ideas about
higher education, came into conflict over whether it was appropriate to work for
industry. Faculty who had known MIT as a small teaching college in the late
nineteenth century opposed their new colleagues who were hired by the univer-
sity to develop research, from careers as consulting engineers, around the turn
of the century. The former group of professors believed that the academic enter-
prise should be internally focused on students and teaching, while the latter
group argued that an external focus on assisting industry was appropriate as well.

The significance of controversy


The development of a controversy is often a necessary prelude to negotiating a
compromise, with each side having its essential interests taken into account.

31
C O N T R O V E R S Y O V E R C O N S U LTAT I O N

Controversy thus plays a crucial role in the game of legitimation, the process
of gaining acceptance for new practices. Such a resolution is most likely to
occur when a dispute is brought into an arena where each side can engage the
other and consider its opponents point of view as well as what is essential to
its own position. The creation of a “consensus space” brings opposing views
into clear focus, and opponents into dialogue, even if heated, and then
perhaps negotiation and compromise. This process contrasts sharply to disputa-
tions in which opponents broadcast their views from a distance, reinforcing
their own positions, without the opportunity to take opposing views into
account.
A controversy is an indicator that significant positive social change may be
underway as well as a sign that an old order is breaking down. The life histories
of controversies are also revelatory of institutional dynamics as proponents and
opponents in an agonistic struggle make their best logical and emotional case
for support. Raising an issue to an explicit level through the expression of strong
differences can initiate discussion and negotiation, leading to the establishment
of a new norm. Controversy over the intersection of institutional spheres, such
as university and industry, can also be a signal of a shift in the balance of power
between and relative importance of the two spheres. On the one hand, when no
way can be found to regulate a potentially controversial activity, its future may
be impeded. On the other hand, the achievement of a resolution can provide
the guidelines for a new institutional regime.
The resolution of a controversy may allow an otherwise divisive practice to
become accepted. For example, during the 1970s a controversy arose in
Cambridge, Massachusetts over the potential dangers of allowing biotechnology
firms to locate themselves in the city. The resolution of a debate that played
itself out in the City Council set strict safety standards for biotechnology
research. In succeeding years, the existence of these standards made Cambridge
an attractive place to locate such firms, in addition to its pool of academic
research resources in the field.
Paradoxically, the existence of tough rules made Cambridge a preferred loca-
tion because companies could count on a secure regulatory environment. On
the other hand, when controversy is short circuited, the resulting reaction can
be explosive, placing the entire activity at risk. The Monsanto corporation
learned this lesson when its tactics of suppressing debate over genetically modi-
fied foods inthe USA backfired, creating a larger negative response than would
likely have occurred if it had engaged its opponents directly. The firm has since
changed course and invites discussion.

The MIT experience


Similar to the experience of other colleges, the introduction of research at MIT
created conflicts with the original mission of teaching. However, the industrial
context of MIT created special conflicts, whose pattern of resolution eventually

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C O N T R O V E R S Y O V E R C O N S U LTAT I O N

led to the creation of a new academic format. MIT’s path to the development of
both extensive research capabilities and strong relations with industry emerged
through an unexpected indirect route: implementation of a plan to strengthen
its educational programs. At the turn of the century many of MIT’s faculty were
its own graduates. To avoid becoming ingrown and to build up its engineering
departments MIT hired as faculty several leading engineers from industry to
develop the school’s research capabilities.
The consulting-engineer professors’ previous everyday work activities had
been research-based. When they became professors at MIT it was explicitly
arranged that they be allowed to operate off campus consulting firms. For
example, Dr Louis Duncan, formerly chief of the Third Avenue transit lines in
New York City and organizer of the engineering firm of Sprague, Duncan and
Hutchinson, was brought in to chair the Electrical Engineering department. He
maintained a considerable consulting practice while at MIT and returned to full
time consulting after leaving the Institute in 1904. His successor, Dugald
Jackson, long-time chair of the Electrical Engineering department, also main-
tained an extensive consulting practice.1
These industrially oriented engineers continued to pursue aspects of their
previous careers in tandem with their new task of teaching. This caused a
conflict with the traditional professors who were at MIT exclusively as teachers.
They criticized their new colleagues for going out of the university and
consulting, taking time away from their students. The consulting engineers
argued that through their consulting activities they brought back from the field
to the classroom knowledge that enhanced their teaching. They believed that
their courses would be enlivened by real-life examples. Rather than upholding a
right to interact with industry, the consulting professors attempted to legitimate
their consulting practices on the very principle on which they were being taken
to task, their commitment to teaching.
The controversy brought into broad relief an emerging dimension of
academia: its relationship with industry. Although this theme was a central
part of the foundation of MIT, it had only been realized in a very partial and
traditional manner, through the provision of trained graduates to industry.
Consultation, on the other hand, involves the professor in a more direct rela-
tionship with industry, rather than taking place at one remove through
students. Consultation includes individual advice, research projects or tests in
exchange for payment of a fee to the provider of the service rather than to
the university.

Academic consultation
Consultation is the traditional mechanism for academic–industry relations. It
has been suggested that “the first step in diagnosing the health of a
university–industry interface should always be a survey of consultancy arrange-
ments” since they are

33
C O N T R O V E R S Y O V E R C O N S U LTAT I O N

a foundation on which other forms of university–industry relations can


be based. Consultancy can be organized in different ways, either to
maintain a barrier between institutional spheres such as academia and
industry, while transferring information between them, or to create a
close relationship of mutual influence. Consultancy is a private version
of the public format of knowledge transfer through publication.2

It is an inexpensive, rapid means of transferring information effectively. It


provides a two-way communication channel and is often the precursor to more
intensive relationships.
Consultation divides the professorial status into an academic and a business
role. As academic, the professor is committed to the development of knowledge
that is freely available to all in open publications, as consultant the professor is a
business person selling knowledge to a buyer who has the right to keep it secret. In
practice, academic consultation involves striking a balance between these two
principles. Consultation can involve use of university facilities and application of
academic expertise to company problems. Through visits to enterprises and
discussions with industrial researchers, professors provide an independent
perspective to assist the development of company research programs. It has been
suggested that “The expansion and improvement of consultancy links should be
regarded as the necessary first step in the process of stimulating direct
university–industry links.”3 These links pre-date the MIT experience, which
represents a revival and reintegration of the practice into academia, from which it
had been largely excluded as a result of the emergence of an ideal of pure research.

The origins of academic consulting


Adumbration of academic-industry relations can be identified in the mid-
nineteenth century and even earlier, for example, consultation by the Sillimans
(father and son) in chemistry at Yale, and firm formation by Justus Liebig, the
renowned Professor of Chemistry at Giessen University in Germany. However,
these remained isolated instances that did not become accepted practices
locally or models for universities elsewhere. Academic consulting became
commonplace early in the nineteenth century, making expertise available to
government, industry and farmers. Soil testing for farmers was the first
widespread consultation activity, followed by the evaluation of mineral deposits
for prospective investors. Government also used consulting for an independent
evaluation of the viability of potential economic activities such as a sugar-
refining industry and companies for the identification of sources of technical
flaws, such as the cause of a steam explosion.4
From the mid- to late nineteenth century, at Yale, the Sillimans, father and
son, and at Columbia, Charles Frederick Chandler, maintained extensive
consulting practices. Silliman senior took pride in his first paid consultantship
as demonstrating evidence of his high level of professional accomplishment and

34
C O N T R O V E R S Y O V E R C O N S U LTAT I O N

did not view it merely as a pecuniary advantage of his professorship. As


chemists with a knowledge of geology, the Sillimans were much in demand to
test mineral deposits and assess their worth to prospective investors. On occa-
sion they received a financial interest in companies in exchange for their
assistance. Public lecture tours took them around the country and served to
introduce them to new opportunities for consultation.
However, Chandler’s younger colleagues at Columbia, influenced by the
emerging basic research academic model, viewed his extensive consulting activ-
ities negatively. They drew back from such extensive involvement with
practical matters in their own academic careers. Even Henry Rowland, the
leading proponent of pure research, had engaged in consultation earlier in his
career. Nevertheless, as the basic research ideal grew stronger, a new generation
of academic scientists focused almost exclusively on disciplinary concerns.
Growing expectations of strong boundaries between the university and industry
affected even universities such as MIT, premised on close collaboration with
industry.

The consulting professors at MIT


The MIT administration held an ambivalent attitude toward consultation. On
the one hand it was proud of the services its faculty rendered to industry and
used them as an argument against industrialists, in order to raise endowment
funds. On the other hand, during the 1920s, a perception arose that outside
work was interfering with the faculty’s campus responsibilities. Those who
viewed teaching as the major function of the faculty tended to support restric-
tions on consulting. They were worried that consultation drew faculty away
from MIT and that Institute resources were being inappropriately used for
private purposes.
The chair of the chemistry department, F.G. Keyes, exemplified the tradi-
tional internalist academic perspective. Keyes thought that:

Much of the abuse, if such a word is appropriate, that has arisen in


connection with outside work has its origin in the widely held belief
among the staff that the work was the affair of the individual exclu-
sively. The time seems ripe to modify this thesis for the Institute is an
educational institution and its product scientifically educated engi-
neers. To accomplish its objective MIT must have the entire time and
attention of the best talent procurable.5

The administration responded to these concerns by looking into the preva-


lence and effects of faculty consulting activities. A report commissioned from a
department chair critic reported that there were three classes of professors in
the chemistry department: faculty who did not engage in outside work and were
willing to subsist within their salaries; faculty who were also deeply interested in

35
C O N T R O V E R S Y O V E R C O N S U LTAT I O N

their Institute work but who felt the financial need to seek outside work; and,
finally, faculty, “who balance their scientific and teaching interests against their
desire for extra funds for a life on a more generous scale.”6 The latter two groups
engaged in three types of consultation: advice without use of MIT facilities or
absence from the Institute; research at the client’s site; and research at the
Institute involving the use of its equipment, facilities and space. It was not
unusual for a faculty member to hire an assistant in his department’s lab to carry
out work for firms. Although some faculty kept accounts and regularly made
payments for their use of Institute facilities and equipment in their consulting
practices a perception arose that Institute resources were sometimes being
misused.
These critics felt strongly that some regulation of consulting was necessary.
Although they found fault with the practice they did not propose to abolish
consulting. It was believed that many faculty consulted merely out of the neces-
sity to supplement inadequate academic incomes. The report proposed to
reduce, if not eliminate, consultation by lessening the financial need for faculty
to seek outside work. On the one hand, the author believed that if salaries were
raised the practice would decline. On the other hand he proposed to “tax” the
income from consultation in those cases where a professor was either called off
campus or was using Institute facilities. It was also proposed to institute charges
for use of laboratory space, especially when assistants were employed.

The effect of the depression


The depression of the 1930s brought an underlying tension between academic
and professional consulting engineers to the surface. The independent
consulting engineers denounced university professors’ consultation with
industry as unfair competition, arguing that universities, in effect, subsidized
their faculty members’ consulting practices. The independent consulting engi-
neers charged that professors worked out of laboratories provided by their
university and did not have to pay to maintain a laboratory or reimburse the
university for its private use, and inquired whether this business was carried out
in the name of the university.7 An MIT representative responded that there was
little or no solicitation except when the work was pioneering in nature and that
most routine requests were passed on to commercial laboratories. However,
some routine work was undertaken when the university was asked to act as a
referee on commercial tests.8
Nevertheless, the distinction between academic and professional consultant
was not clear cut. The A.D. Little Company, a consulting firm that had origi-
nated from MIT in 1886, exemplified the ambivalent relationship of the
independent consulting firm to its academic collaborator and competitor. The
firm was located adjacent to MIT and drew upon its faculty members, many of
whom, over the years, augmented their modest academic salaries by moon-
lighting as consultants for the company. A few received annual retainers from

36
C O N T R O V E R S Y O V E R C O N S U LTAT I O N

A.D. Little merely for agreeing not to consult for a competing firm. Often, in
reciprocity, they encouraged their most gifted students to consider employment
with the A.D. Little Company after graduation.9
There was a close, even symbiotic but nevertheless ambivalent relationship
between the university and the firm. On the one hand, the Little firm regarded
connections to MIT as an asset, frequently subcontracting to its professors.
Thus, “It might almost seem that instead of the Institute’s being a competitor of
the A.D. Little Company, the proximity of the Institute was one of its greatest
assets.”10 On the other hand, MIT’s consulting faculty members sometimes
provided unwanted competition, offering some of the same services at lower
rates. The special expertise of the faculty made them in demand both by the
consulting firms, for whom they acted as an intermediary between university
and industry, and by industry, for whom they acted directly in contracting for
the advisory services of the professorate.

Resolution of the controversy over consulting


Since the consulting engineers were among the most prestigious professors at
MIT, and their activities put into practice service to industry, a founding theme
of the Institute, it is not surprising that that they became the models for
younger professors in succeeding years. Among their successors was a young
faculty member in electrical engineering, Vannevar Bush.
During the 1920s Bush worked part-time in the R&D labs of local companies
as a consultant. He also passed along problems to his students to work on. As
some of the theoretical implications of company problems fed back into
academic research design on campus, Bush became a firm believer in the value of
the consulting relationship as a source of new issues for academic research.
Following his mentors, Bush also found an educational value in consultation: it
brought teaching alive by making available, to its practitioners, exciting “real
life” examples to insert in their lectures. On a more practical level, consultation
allowed an academic, with a practical bent, to enhance a relatively modest
salary.
Restrictions on consulting were eventually instituted in the early 1930s as
part of a plan to raise salaries but there were insufficient funds to fully imple-
ment it. For a few years faculty paid the university an overhead charge for use of
university space and equipment. This requirement was soon abandoned due to
“administrative difficulties”11 and faculty members’ objections to interference in
their affairs. MIT faculty were to be left to their own discretion on using MIT
resources subject to the guidance of their departmental chair. Such activities as
providing advice, testing materials in university laboratories and solving prob-
lems at company sites had become so much a part of the work of academic
engineering professors that it proved impossible to disentangle them from the
academic role. Prominent professors felt that their connection to the industrial
world through consultation was essential to their research and teaching.

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The academic decision-making process


Despite autocratic presidents in an earlier era and the more recent growth of
academic bureaucracy, the tradition of professorial governance survives even as
universities become more complex organizations. It plays an important role in
academic decision making in institutions where the faculty, correctly or incor-
rectly, perceives itself as the center of power. The tradition of academic
self-governance also forces administrators in lesser academic institutions, where
academics often see themselves as being under the thumb of the administration,
to take faculty views more seriously than they might otherwise have.
Academic committees, representing different points of view, play an impor-
tant role in arriving at an organizational consensus. This is the case even when
their decisions are not final and their advice is sometimes overruled.
Committee process provides a medium for integrating different views, taking
opposition concerns into account in the decision to go forward in one direc-
tion rather than another. Committees that are given a charge to formulate a
course of action become the basis for legitimating a decision to the entire
campus.
The committee established to resolve the controversy over consultation at
MIT met on and off for approximately twenty years. By the time the committee
came to a conclusion, the students of those consulting engineers, such as
Vannevar Bush, were then in positions of power at MIT. Several influential
teachers, including Vannevar Bush, successfully fought a rule charging for use of
university space and equipment for consultation on the grounds that they were
entitled to it as a part of their academic appointment. Bush had no intention of
keeping a rule which he felt was contrary to the development of collaborative
research with industry. After decades of debate, channeled into a committee
representing both sides, a regulation was devised that accepted consultation,
within limits.
Consultation was not fully accepted as a legitimate activity at MIT until the
early 1930s when the committee invented what has come to be known as the
one-fifth rule, that is, one day a week a professor might consult and earn what
he or she could through involvement in industry, no questions asked. For the
rest of the working week, their obligation was to the university. The resolution
was in between what the traditional professors wanted and what the consulting
engineers wished. It took several decades, however, to achieve this balance.
Despite concerns about unfair competition which came to a head during the
depression, and opposition to any activities which took professors away from
their students, consultation with industry became an entrenched practice at
MIT. Although consulting was officially limited to one day per week it was
never entirely clear if this requirement should be interpreted as one day out of
five or could be expanded to three out of seven. The professor who worked part
time for industry and could find work for his students while they pursued their
studies became the model MIT academic.

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Controversies as precursors of change


The “one-fifth rule” that was invented as a compromise to resolve the dispute
over consultation at MIT has become so much a taken-for-granted aspect of US
academia that its origins have largely been forgotten. It has been accepted as
normative at virtually every university in this country. The existence of this rule
legitimated a parallel activity that could otherwise have been defined as a
conflict of interest. The one-fifth rule ensured that the university–industry rela-
tions could proceed in a relatively uncontroversial way on this issue of
consulting because a well-defined stringent limiting rule was in place.
It is recognized virtually everywhere in the world that there is potentially
useful knowledge in the universities that could assist industry. However, in
countries where academic consulting is not regulated, in places which have not
had this controversy, and which have not had this issue debated, discussed and
resolved, there is often confusion about what is appropriate behavior. In
Portugal, for example, there is great interest among many policy makers and
academic administrators in having professors become more closely involved
with industry. The government says professors should go out of the university
and become active in dealing with industry. However, Portuguese academics are
not sure if this is something they really should do because a rule of how it
should be arranged and organized has not been settled upon. Therefore, even
though they are told to do it, professors are concerned that if they become
involved with firms, it might be viewed negatively. They are constrained from
action because there is no accepted pattern of conduct.
Although it may seem counter-intuitive, a controversy is very important to
the eventual legitimization of a contested practice. Usually in the academic
world, an issue becomes raised as a conflict of interest issue. A conflict of
interest is an indicator that change is about to take place. There are, of course,
different possible resolutions of a conflict of interest. The activity can be
defined as deviant and not allowed to take place any more. Or the new activity
can become the only thing that is done. What has happened in the academic
world, however, is that each time there has been this conflict over the role of
the university, the university has tended to take on this new role. The new role
exists in coordination and in continued low-level conflict with the old role.
There is still a conflict between research and teaching in the university, and
over the exact weight that should be placed on each. Nevertheless, it has been
found more productive to have these two activities, research and teaching, take
place together.
Predictably, it will also be found more productive to have the new economic
role of the university take place within the university in relation to research
and teaching, without moving technology transfer outside. The overall thesis is
that the university is becoming a much more important institution in society,
not a less important one. It is becoming an institution on a par with industry
and government, not something off to the side that we respect because it has
some intelligent people seeking after knowledge and training students, but more

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importantly, because as we become a knowledge-based society, the institution


which has the ability to create and transfer that knowledge, and form it into
new firms, becomes the most important institution. That is the second
academic revolution, which began early in the twentieth century and is
ongoing. The founding idea of MIT in the middle of the nineteenth century
was to create a university which would infuse industry, not only with new tech-
nology, but also with ideas from basic research. It was not the founding of an
engineering school, but rather the founding of a much broader idea which took
many decades to realize.
By incorporating consultation practices into the faculty role, industrial rela-
tions became a part of the educational program of the Massachusetts Institute of
Technology and the basis of its strategy for faculty development. The Institute
had developed many of its strongest academic programs through its close ties
with industry, including the “unit production” model in chemical engineering
and the placement of students in industry for a semester in their junior year.
The teachers in the electrical engineering department who had been recruited
from industry, maintaining their consulting practices and industrial connections
while developing their academic careers, became the model for future genera-
tions of professors.

University–industry relations
In the early twentieth century, controversies over the introduction of research,
consultation and patenting would define MIT as a special type of academic
institution, the entrepreneurial university. An entrepreneur, whether individual
or organizational, takes new roles and develops new relationships, often trans-
forming traditional practices during the process. Consultation became
transmuted into the first step toward firm formation when it was introduced
into the academic system.
Controversies over the appropriate role of the university in relation to
industry, and the compromises negotiated to resolve these disputes, defined
practices that could be accepted by both proponents and opponents of tech-
nology transfer. The resolution of a series of such conflicts at MIT, in the early
twentieth century, first over consulting and then over the patenting of research
and firm formation, created a regulatory framework for university–industry rela-
tions. Although the limits of academic involvement in technology transfer are
still an issue and new conflicts periodically reappear, the issue of whether or not
academia should interact with industry was resolved in these early disputes.
This premise is widely accepted even by critics who typically question the
manner and extent of academic involvement with industry but not the legiti-
macy of the practice itself.
Two distinct modes of university–industry relations can be identified:
informal and formal. The informal typically occurs through contacts between
professors and their former students and may lead to consulting and joint

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research projects with a company, typically one with a well established R&D
laboratory. These informal relations are more prevalent in Europe and Japan
where formal mechanisms have only recently been established. Informal rela-
tions may be viewed as an underground economy that takes place “submersso,”
in Italian parlance, and they are not counted or identified typically as part of
the official academic work process.
In contrast to the tunnels are the bridges, the formal structures (liaison and
technology transfer offices) through which formal introductions are made in
seminars for potential industrial partners, disclosure statements of inventions
are collected, patents licensed and contracts negotiated. These outcomes are
enumerated, with perhaps the most important difference being that the finan-
cial results are typically shared with the university. Either mode, formal or
informal, can precede the other; there is no necessary order. Nevertheless, the
fullest regime of academic–industry relations is one in which both modes are
present, the bridges (the formal organizations) and the tunnels (the informal
ties through which social and intellectual capital moves from graduating
students into firms and back again into the university).
Government–university relations and university–industry relations are
modeled on each other. University–government relations inthe USA were built
on the base of the formal mode of university–industry relations. It was MIT’s
office, established in the 1920s to formalize its faculty members’ informal ties to
industry and channel them through an administrative structure that could
collect negotiated payments, that was called upon to deal with government
contracts during World War II, and it became the model for other university
offices for grants and contracts during the post-war era. This mechanism was
then turned back into dealing with university–industry relations when that
topic became salient again. This story, beginning with the establishment of
MIT’s office in the 1920s, is the topic of the next chapter.

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4
THE TRAFFIC AMONG MIT,
INDUSTRY AND THE MILITARY

University–industry relations, developed early in the twentieth century,


provided a format for the establishment of government–university relations
during World War II. During the war, the federal government negotiated a
format for supporting research at MIT that became a model for wartime
contracts with other universities. Individual research projects rather than
broad-scale institutional funding, as in the agricultural research model, became
the format for post-war federal funding of academic R&D. MIT used an indus-
trial contract format left behind from a post-World War I effort to formalize its
relations with industry to interact with government in wartime.
Apart from agriculture, where a government–university R&D system focused
on entire schools and broad research programs had been put in place by the
“land grant” system during the nineteenth century, there was little federal
funding of university research before World War II. During the depths of the
depression, most academic scientists had rejected MIT President Karl
Compton’s proposals for such support, viewing it as illegitimate. In a manner
redolent of apprehensions currently expressed about corporate support, universi-
ties feared that government funding would inevitably be accompanied by
control over research. When leading academic scientists, such as Compton of
MIT and President Conant of Harvard, took the lead in convincing the federal
government to support advanced R&D to meet wartime needs, the traditionally
distant government–university relationship was transformed.
During World War II MIT transformed itself into an R&D laboratory for
radar and other militarily useful devices, performing more military R&D than
any other US university. Dissatisfied with the military’s use of academic science
during World War I, a group of leading scientists and engineers, including
Compton and Bush from MIT, wanted to establish an agency, under the control
of scientists, which would liaise with the military from an independent posi-
tion. This framework for equality in relationships between academic science
and the military drew upon a series of innovations that MIT had developed
since its founding for interaction with industry. The current system originated
in a scheme to resolve an internal financial crisis at MIT during the post-World
War I era.

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An industrial solution to MIT’s financial crisis


Loss of state funding that had originated with the founding of MIT placed the
school in dire financial straits. A Massachusetts constitutional convention
announced that the state could only support institutions under state control.
Despite arguments by MIT that it was closely connected to the state through
receipt of its charter and a land grant, the subsidy was cut off. The financial
crisis deepened when a Court dissolved an agreement with Harvard whereby
the Institute trained Harvard students in engineering in exchange for income
from a bequest to Harvard.
MIT decided to increase its links to industry to make up for the ending of
state funding by putting its relationship to industry on a business footing,
exchanging services for funds. A policy of direct cooperation with industry arose
out of MIT’s financial needs and the feeling that the war had demonstrated the
value of applying science to industrial processes. Yet “while the gap between
educational institutions and the industrial interests of the country cannot be
said to have been completely bridged in all instances, it was materially
narrowed.”1 Thrown into financial crisis, the Institute faced a choice between
accepting an offer of a merger with Harvard, becoming that university’s engi-
neering school, or finding an alternative source of support.
The Polytechnic ideal had taken root at MIT. The strength of the wish to
remain independent can be seen in the negative reaction of MIT faculty and
alumni to various proposals from 1870 to 1920 by Harvard University to make
the Institute into its engineering school. At one point a consortium of busi-
nessmen, including Andrew Carnegie, purchased the parcel of land adjacent to
Soldiers Field where the Harvard Business School was later located, as an
inducement for MIT to realign itself under the aegis of Harvard.
These efforts were resisted by MIT faculty and alumni who felt that Harvard’s
orientation to the traditional liberal arts would inevitably lead to giving engi-
neering subjects a second class status. The strong belief that MIT had its own
distinctive mission and purpose was expressed during one of these negotiations by
a speaker at the 1904 alumni reunion, quoting Nehemiah, Engineer of Jerusalem,
from the Bible: “I am doing a great work and will not come down.”2 This feeling
of equality of purpose led to a fundraising effort to ensure MIT’s independence.
To refinance itself MIT looked beyond the Boston financial community to its
alumni, many of whom were by this time strategically located in high positions
in national corporations such as Eastman Kodak and Dupont. The founder of
Kodak, George Eastman, was so favorably impressed with the contribution of
MIT alumni to his firm that he became an important (and for a time) anony-
mous donor to the Institute. Eastman provided half of the eight million that
had been judged as necessary to put the Institute on a firm financial footing.
Donations from alumni brought in an additional part of the required amount.
To complete the sum a scheme was organized to formalize MIT’s largely
informal relations with companies. Individual consulting arrangements with
professors were to be replaced with contracts between the university and the

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firm in which faculty consultation would be part of a larger package of assis-


tance. The “plan” provided that participating industrial firms paid an annual fee
which allowed them special privileges in using the results of the research done
by teachers at the Institute. This aspect of the plan did not turn out to be very
significant since teachers whose research was of interest to firms were already
being retained as consultants. Some firms felt that they were being unfairly
required to pay a fee to the Institute for the same knowledge that they had
already contracted for with an individual teacher.
Companies that contracted with MIT were entitled to lists of undergraduates
available for employment and conferences with staff on problems pertaining to
the business of the company. Advice was to be given to companies on where tech-
nical help could be obtained and “if that can best be done at MIT a member of its
staff shall undertake such services for a fee to be mutually agreed upon by both
parties.”3 Although there were objections that “the plan called upon industrial
corporations to pay for services that they had hitherto obtained gratuitously,” it was
soon found that “men who had refused to give as individuals saw to it that corpora-
tions in which they held responsible positions made substantial contributions.”4
In addition to its practical elements, the Plan also came with a covering
framework to establish a more coordinated relationship between university and
industry, not only regularizing existing relationships but establishing a new
common ground between the two institutional spheres. The Technology Plan
was based upon the premise that improvements in the efficiency of American
industry required importation of scientific methods from the university. The
necessity for this scientification of business was demonstrated by the World War
industrial experience that exposed the inefficiency of trial and error methods.
A triadic outline of research areas was formulated including what would now
be called undirected basic research, mission-oriented research and product
development R&D. A proponent of the Plan held that closer university–
industry relations, including making the problems of industry the basic material
of some university research, “does not mean that the search for knowledge will
not continue to subtend a large arc of the activities of the Institute.”5 However,
when there was a spectrum of possibilities in addressing a research problem, an
industrially relevant case should be chosen.
Nevertheless, there were limits. Professors should “not be withdrawn into
purely industrial work by reason of the greater financial reward offered by the
great corporations or the acute pleasure which many red blooded men feel in
being professionally connected with great technical developments.”6 Solving
problems for industry would be balanced with independent scientific investiga-
tion, in part, by creating a middle ground of research in which both goals would
be simultaneously carried out. However, it was often difficult to get companies
to see the need for such strategic research and company payments did not carry
enough overheads to finance many staff-initiated investigations.
Financial support for MIT from the Technology Plan declined steadily after
an initial first year highpoint (see Table 1). The sharpest drop was between

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Table 1 Technology plan receipts


Year Amount (US$)
1919–20 424,090
1920–1 157,007
1921–2 138,616
1922–3 170,646
1923–4 136,426
1924–5 25,350
1925–6 38,312
1926–7 27,621
Source: Leroy Foster. 1984. “Sponsored Research at MIT,” unpublished manuscript, MIT
Archives, p. 86.

1923–4 and 1924–5. When the initial five year commitment made in
1919–1920 came up for renewal many companies dropped out. Thus, the
depression of the 1930s cannot be viewed as the primary cause of MIT’s loss of
financial support from industry.7 Support had already declined in part due to
overselling of the plan. Apparently some companies had viewed their member-
ship in the plan as a special contribution to MIT to meet the matching funds
requirement of George Eastman’s large gift.
Others were dissatisfied with the research services provided and thought they
were being double-charged in being asked to pay for research over and above
the retainer fee they had contributed upon joining the plan. The greatest satis-
faction expressed with the Plan was for the assistance received in recruiting
MIT graduates for corporate employment. By 1939, it was accepted that the
Technology Plan was a failure.
Although the “plan” soon fell into disuse, one of its consequences was the
office that had been established to negotiate contracts between the institute
and private firms for the conduct of research. Although industrial firms did not
use this office very much, it did make enough contracts during the 1930s to
justify its existence. At the outset of World War II, it served to arrange the
contracts which the Massachusetts Institute of Technology made for research to
be performed for the federal government.
The volume of the activity undertaken on behalf of the government far
exceeded the scale of the contracts it had previously made with private firms.
What had begun at MIT as a way to deal with contracts with industry, was
turned into an arrangement to deal with government. Other universities that
were also doing research for the federal government soon formed similar offices
to deal with the government. The closeness of these arrangements was in
striking contrast to the relative distance between the universities and the mili-
tary during World War I.

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University–military relations: World War I


During World War I, the military directly utilized the educational capabilities of
the universities, but not, to any great extent, the research capabilities. Thus,
World War I had relatively little effect on MIT other than the use of its facili-
ties as an officer training school. Although President MacLaurin had expected
MIT to be called upon as an institution to conduct military research, a strategy
of organizing research on campus was not adopted.
Instead the military continued its policy of conducting its research in-house
at its own establishments. However, some professors were invited to join these
laboratories for the emergency and, at some facilities newly established to deal
with new military technological problems such as tracking enemy submarines,
academic scientists were a major part of the research staff. These scientists
worked under military control and in accordance with research guidelines estab-
lished by the military.
Some scientists found these strictures to be confining and even counter-
productive. For example, at the submarine research center in New London, the
Navy told scientists that their detection devices must be designed so that they
would work on steel-hulled boats. This requirement created a difficult design
problem. Later, it was found that using more easily available wooden-hulled
boats would be sufficient.
Meeting the initial requirement caused considerable delay in readying the
detection technology for use. The scientists involved had no say in setting the
criteria for operational use of the technology they were developing and thus no
ability to design around possible limitations of the technology. Only military
considerations were taken into account in setting the criteria and in this case
not consulting with the scientists allowed an irrelevant criteria to be established
that delayed the use of new submarine detection equipment.8

Transformation of the academic role in World War II


At the onset of World War II, leading academics including the President of
Harvard, James Conant, and Vannevar Bush, former Vice President and Dean
of Engineering at MIT and then Head of the Carnegie Institute of Washington,
advocated a different course. They convinced the government that academic
science could be used to develop technology for the military and successfully
lobbied the executive branch of the federal government to found an agency to
support research on military problems.
Scientists were low in the organizational scheme of things in World War I.
Their lack of input into policy decisions made them determined not to repeat
the same experience in the event of another war. To make the best use of
science in wartime, they believed that scientists should have an input into
research policy. Bush and Conant thought that this goal could best be accom-
plished by scientists controlling their own research organization.

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Their goal was not to establish a government research institute but to use
federal resources to support research at universities. Universities were not the
obvious choice for locating such research. At the time, industrial research
groups at major corporations had greater R&D capabilities. Academics had to
be drawn together from campuses across the country to establish large-scale
research centers at a relatively few universities: MIT, Johns Hopkins, Berkeley,
Chicago and Columbia. This resulted in a research build-up at these universities
in electronics, nuclear physics and other scientific and engineering areas rele-
vant to solving military problems.
Although the armed forces were satisfied that they could meet their own
requirements for technological innovation, the government intervened to
improve the technical base of military research by connecting it to the univer-
sities. The Office of Scientific Research and Development (OSRD) was placed
under the direction of academics rather than government officials or industri-
alists.
Large-scale laboratories that could be turned most quickly to military use
were mostly within industry. But industrial scientists and engineers had not
taken the lead in approaching the government. Industrial scientists such as
Frank Jewett, the head of Bell Labs, took part, but in a secondary role
supporting the lead taken by academics such as Bush and Conant. Since the
research leaders who took the lead in this initiative were from the universities,
they were placed in control of the agency established to carry out their plan and
thus had the responsibility to dispense the funds allocated for the task. At that
time, with very few exceptions, no university had large research centers with
the ability to carry on research and development of weapon systems.

The World War II model of university–government relations


During World War II, universities were chosen to manage many research
projects rather than other institutions such as industrial research laboratories or
non-profit institutes. At the time, industrial research laboratories at General
Electric, At&T and Dupont Corporations managed research programs on a
much larger scale than virtually any university research program, with the
possible exception of Lawrence’s cyclotron lab at Berkeley.
Nevertheless, academic scientists had taken the lead in proposing a new
federal agency to undertake research for the military immediately prior to World
War II. Although leading industrial scientists were involved in the committee
work leading up to the establishment of the Office of Scientific Research and
Development (OSRD), academic scientists and administrators such as James
Conant, the chemist and President of Harvard University, and Vannevar Bush,
former Vice President of MIT and Director of the Carnegie Institute of
Washington, had taken the initiative.
Academic scientists preferred to remain in universities and former university
professors and administrators such as Vannevar Bush occupied decision-making

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positions in the government, as agency heads and leading officials. Given their
background and current positions of leadership; it is not surprising that major
wartime research contracts were given to universities, even though these
academics excused themselves from decisions affecting their present and former
institutions. Laboratories that prior to the war were the extensions of a single
professor were enormously expanded by drawing together academic scientists
and engineers from around the country to research sites at a few selected
schools.
Several major universities, including MIT, Johns Hopkins, the University of
Chicago and the University of California, received contracts to administer
government laboratories during the war. Such undertakings permanently altered
the scale of these universities. During the post-war era, the Argonne budget, for
example, was approximately equal to that of the rest of the operations of the
University of Chicago.
The proximity of universities to wartime projects which employed many
academic scientists habituated university administrators to collaborative
research, and to the joint work on scientific projects which were to be used in
technology in the shortest possible time. The academic leaders of OSRD had to
draw together researchers from universities across the country to a few sites to
establish these capabilities.
MIT became one of the main centers of wartime research due to its technical
capacity, initiative and administrative experience. The Institute’s technical
capabilites made it a likely candidate for high priority projects as it was the
“only institution at which the work could be done with the speed which the
armed forces desired.”9 The so-called Rad Lab at MIT and a few other laborato-
ries were established at half a dozen universities. This resulted in a
concentration of research in a few institutions, against the ideologies of both
government and universities. The American academic system is highly decen-
tralized with a multiplicity of institutions competing for funds of all kinds.
Under conditions of military necessity, a few academic leaders were able to
persuade their fellow academics to accept a concentrated system. Academics
also agreed to accept federal research funds which they had refused during the
1930s even though the universities were starved of funds. During the depression
efforts to persuade academics to ask the federal government for funds were
defeated. It was against the ideologies of both government and the academy.
Again it was an overriding purpose, the exigencies of war, that changed their
actions.
In formulating their plan for OSRD they used MIT’s industrial relations
policy as the basis for their government–university relations arrangements. For
example, MIT’s patent policy in which the Institute assumed control of patent
rights became the model for OSRD’s policy. “From this precedent it was only a
small step to the concept that the Chairman of NDRC (and later the Director
of OSRD) convert to the government all patent rights of the private research
he sponsored.”10 Bush also drew upon his consulting experience in deciding to

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use the cost-reimbursement contract, guaranteeing that expenses would be paid,


to prevent uncertainty from impeding innovation.11

The MIT contract model


A post-war MIT educational planning document, the Lewis Report, recognized
that government contracts had come to MIT, in part, because it was unique
among American universities in the pre-war era in having an administrative
office experienced in dealing with contracts.12 Even before US entry into the
conflict, MIT’s administration had decided to commit the Institute’s resources
to defense research and, using its own funds, began work on projects before
contracts were finalized or funds received. Well aware of the relevance of tech-
nology to modern warfare the administration had already sent a questionnaire
to MIT graduates and compiled a database of their skills.
MIT was unique among American universities in the pre-war era in having a
special office to administer research contracts: the Division of Industrial
Cooperation (DIC). With twenty years experience in dealing with industry
behind it, MIT was able to immediately take on government research contracts.
On a Saturday morning in late October of 1940, the president of MIT, Karl
Compton, walked over to the DIC office and informed its Assistant Director,
Leroy Foster, that “MIT was about to undertake a contract in connection with
the country’s defense program which would be by far the largest research
contract that we had ever had or even contemplated at the Institute.”13
At that time the division’s staff consisted of a director, assistant director,
bookkeeper, secretary and a few persons handling alumni and student place-
ment.14 In fiscal year 1940, the division was administering slightly less than
$100,000 worth of contracts, of which less than $10,000 were with the govern-
ment. By 30 September of the next year, MIT had research contracts in excess
of $10 million, almost entirely with the federal government.
While MIT had an administrative structure in place to handle research
contracts, a new type of contract format had to be negotiated with the govern-
ment. When the OSRD was established in 1940, “there was no method of
giving a workable cost contract for research work.”15 On the one hand the
government was concerned that public funds be accounted for in a much more
stringent manner than those of industry. While MIT did not want to make
money on defense contracts, neither did it wish to subsidize them.
Through negotiations with the government MIT established a new mecha-
nism for supporting research at universities using the industrial contracts that
had evolved from the Technology Plan as a starting point. The government
took academic conditions into account, including only items that reflected “the
increased costs of doing business due to the presence of the [military] research in
the university.”16 “It was impossible to collect these excess costs [e.g. wear on
facilities and administrative costs] in an educational accounting set up. You
don’t have monthly profit and loss statements.”17 So OSRD made an executive

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T R A F F I C A M O N G M I T, I N D U S T R Y A N D T H E M I L I TA R Y

decision on overhead rates, setting them at 50 percent of salaries and wages for
education institutions. The contract format that was worked out (providing for
overheads to the university and a simple voucher procedure for accounting for
expenses) satisfied both sides.
This financial instrument became the primary channel for the flow of funds
from government to academia. It “set the pattern for the subsequent major
contracts of the OSRD and had a very profound influence on all subsequent
governmental contracts with private institutions, extending even now into
peacetime.”18 The research grant and the contemporary university contracts
and grants office, acting as an intermediary between government and academia,
evolved from this wartime experience.
The pre-war feelings of many academics and scientists about the illegitimacy
of government funding of research dissipated during this period. The wartime
experience legitimated government funding of academic research and the
research capacities of US universities that had been built up during the war
were maintained thereafter largely with federal funds.

The growth of research teams


Although group research with significant division of labor was not unknown
before the war, especially in industry, it was an unusual experience for most
academic scientists. During the conflict many academic scientists who had
previously worked individually or through occasional collaborations became
members of large research organizations. There was some pre-war precedent for
such collaborations. At MIT, engineer Vannevar Bush had worked with mathe-
matician Norbert Wiener on a mechanical analog computer, the differential
analyzer. On a somewhat larger scale, Lawrence had established an interdisci-
plinary team for his cyclotron project during the 1930s that he carried forward
into wartime research on the Manhattan project. Bush had also translated
industrial research projects into academic work and vice versa as a professor
cum industrial consultant.
Nevertheless, the integration of these various elements of collaborative
interdisciplinary research and development was something new. The first large-
scale interdisciplinary and multifunction R&D organization set up at a
university was the Radiation Laboratory (Rad Lab), established at MIT under
OSRD contracts in 1940 to improve radar technology. The Rad Lab integrated
research, development and production functions in a single organization.
British scientists had earlier learned the value of working closely with the mili-
tary personnel who would actually use the radar equipment they devised,
gaining first-hand knowledge of operational problems that they could take back
to the laboratory and work up into improvements.19
At MIT equipment received from the British was duplicated and placed on
rooftops to be tested. “Most of the knowledge was gained by building something
as quickly as possible and trying it out. Theoretical knowledge was generated

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pari passu to be plowed back into the work at a later date.”20 Improvements
were made and the apparatus was tested again.
A highly decentralized and flexible organization speeded the conduct of
research. For example, parts and components were left in bins that personnel
could draw from at will without paperwork and the bins were refilled as neces-
sary. Even as the laboratory grew, “procurement and production was so
completely decentralized that … many of the Groups were, in effect, well nigh
independent business concerns whose activities were coordinated through the
steering committee.”21
Its historian concluded that “At its maturity the RadLab resembled a big
business concern, but it was without the visible concomitants of a big
business.”22 In its internal organization the Rad Lab “reversed the established
industrial order, for … the scientists were in control and the business office was
subordinate.”23 Scientists and engineers set the policy direction and adminis-
tratators were available as their subordinates to help implement decisions.
Originally, the Rad Lab was to turn a working model of a piece of equipment
over to a company for manufacture. Instead the Lab soon became a manufac-
turer, producing $25 million of equipment by the end of the war. The Research
Corporation of New York was brought in to administer a “model shop,” the
Research Construction Corporation (RCC), building upon the relationship
established in the mid-1930s when the Corporation took on the task of
patenting, building prototypes and marketing the inventions of MIT professors.
RCC at first produced small numbers of developmental devices, and then
larger numbers on a crash basis until production lines could be set up by
industry. Working closely together with the Labs development engineers RCC
was able to predict what systems would be requested by the armed forces and
provide units months before production equipment was available. The Lab also
sent representatives to work with companies to translate prototypes into
production line products.
The role of Rad Lab in development and production as well as research came
under attack from some industrial organizations who believed that “the Lab was
encroaching upon the legitimate sphere of industrial enterprise and was not
moreover properly constituted to be an engineering organization.”24 They wished
to limit the size of the Lab and keep it confined to “fundamental research.”
However, the Microwave policy committee of OSRD decided that the combina-
tion of research, development and manufacturing functions within a single
university-based organization was conducive to innovation and recommended
further expansion, leaving only quantity production to industry. The model for a
university-originated spin-off firm had met the test of wartime exigency.

The impact of World War II on MIT


The conduct of military research during World War II, integrating theorists and
engineers from diverse disciplines to accomplish common tasks, transformed the

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organizational structure and educational policy of MIT during the post-war era.
This traffic among university, industry and the military reshaped the role and
function of the university and as a consequence academic institutions became a
major institutional sector of American society.
The wartime experience of teachers and administrators led to a fundamental
change in organizational structure and educational philosophy at MIT.
Interdisciplinary research centers, some of them continuations of war time labs,
became as important to the life of the Institute as traditional academic depart-
ments, and interdisciplinary cross-fertilization was institutionalized as a
fundamental value.
Wartime research greatly expanded the Institute and the technical base of
the Boston region. The number of researchers on campus grew significantly and
some who had been drawn from universities around the country stayed at MIT
after the war. The Rad Lab, which was expected to consist of 50 persons at its
inception in 1940 ended the war with 3,897 personnel, 1,189 of whom were
scientists and engineers.
Although the Rad Lab as an operating entity was rapidly disbanded at the
close of the war, its theoretical division became The Research Laboratory for
Electronics (RLE). RLE included faculty and students with a departmental base
as well as researchers solely associated with the research center.

Table 2 Size of MIT


Students Staff Departments
Pre-war (1939) 3,100 680 17
Wartime (August 1945) 6,200 1,165 18
Post-war (1947) 5,172 1,244 20
Sources: J. Burchard. 1948. MIT in World War II. New York: Tech Press/Wiley; MIT Presidents’
Reports, MIT Archives.

The post-war era


After the war universities’ administrations attempted to keep the war time labo-
ratories in place. Robert Hutchins, the Chancellor of the University of
Chicago, went so far as to obtain a special act of Congress to subsidize the
continued operation of the atomic research facilities at Chicago, the so-called
“Metallurgical Laboratories.” Chicago thereby hoped to retain as many as
possible of the first-rate scientists who had come to the university on wartime
assignments.
The Office of Naval Research, and other military funding sources, as well as
the National Institutes of Health expanded research programs. Soon the
National Science Foundation provided more regularized sources of funding for
large-scale research projects.

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The growth of government funds for research in the post-war era, and their
spread from the physical to the health-related sciences and then to the social
sciences, provided the opportunity for an increasing number of professors to
expand their research. This took place first by supporting graduate students and
then by adding post-doctorates, technicians, secretaries and research associates
to their staffs.
Some faculty were dissatisfied with the conditions set by their universities for
administering research projects, such as the amount of “overhead” retained by
the institution. They could complain to each other at the faculty club or
attempt to overcome such restraints by establishing an independent institute
adjacent to the university, using the university’s library and faculty club as ancil-
lary resources.
The institute or research unit, whether formally inside or nominally outside
of the university, provided employment for graduate students and underem-
ployed academics. A generation of academics learned salesmanship and
grantsmanship skills, bringing in the steady stream of contracts and grants
necessary to maintain their research operations.

Government–university relations
The onset of World War II led to the creation of a new set of ties between the
federal government and MIT, and universities more generally. The impact of a
negative experience in World War I military research, under the aegis of the
military, shaped the course of this emerging relationship. Past experience led
MIT academics to formulate an independent status with respect to the military,
sanctioned by the federal government and modeled upon some of MIT’s mecha-
nisms for relating to industry that had been developed just after World War I.
Although MIT’s charter as a “land grant” school was based on the presump-
tion of a close relationship to government and industry, ironically it was the
revocation of this status that led MIT to consider establishing a closer, more
formal set of relationships with industry.
As MIT became involved in military research, it did so from a standpoint of
having shaped the development of a contractual relationship with government
in which universities retained their independent status even as huge amounts of
funds flowed into campus to support research projects.
Actual contracts for research, negotiated and signed by representatives of the
federal government and the university, became the model for a symbolic
contract between government and academia that took form during the post-war
era. MIT’s industry and government connections might only have been of
parochial interest were it not for the fact that other universities later followed
the Institute in establishing their own external relations offices.
Their World War II experience fundamentally altered the scale and scope of
many scientists’ expectations for collaborative research projects. The experience
of running large organizations, acting as advisors at the highest levels, and

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working in teams with responsibility for research, development and implemen-


tation, gave many scientists a new vision of what they could accomplish both in
and beyond the laboratory. The experience of combining theoretical elucida-
tion with development and production, supported by virtually unlimited
funding, gave them a taste of power and status.
Scientists’ participation in interdisciplinary research attuned them to the
practical implications of their work and left many with engineering skills. Their
interaction with military officers, industrial managers and political leaders
created new networks. All of these experiences combined laid the groundwork
for the movement of many scientists out of the laboratory and into positions of
organizational responsibility in government, academia and business during the
post-war era.
The relationship between the federal government and the research univer-
sity was also transformed. The request for support was placed on a competitive
basis to be decided by evaluation of scientific quality rather than meeting local
economic needs, as in the land grant model. Government funded academic
research thus took the form of a bi-coastal concentration with a few mid-
western peaks.
Academics who matured during the post-war era came to see government–
university relations as a permanent part of the landscape. This new mode of
university–government relations was tied to the training of graduate students
through research grants to individual professors. It went beyond the land grant
pattern of start-up funding followed by continuing support for research insti-
tutes tied to specific practical purposes.
The close connection between research and utilization that was forged
during the war was transmuted into longer-term expectations of utility in the
post-war period, based on the “Endless Frontier” thesis. Nevertheless, Cold War
competition ensured military funding of technological development, as well.
The Institute’s distinctive pattern of collaboration with industry had, under
pressure of wartime exigencies, evolved into sponsored research from the federal
government. The following chapter examines how patenting practices, as
outlined in the US Constitution, to ensure rewards to inventors, on the one
hand, and societal technological and economic advance, on the other, were
integrated into the university.

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5
KNOWLEDGE AS PROPERTY
The debate over patenting academic science

A patent is a compromise that balances private and public interests. Obtaining


a patent is conditional on publicizing proprietary knowledge in exchange for a
governmentally enforced right to prevent its unauthorized appropriation.
Because secrecy is the intellectual property protection alternative to patenting,
the patent system serves an important public interest – access to knowledge – by
providing databases for discoveries and publishing them on the Internet.
The private right conferred by a patent to exclude others from utilizing an
invention except through agreement with the originator/owner, usually for
monetary consideration, further serves the public interest through the capital-
ization of knowledge. By allowing an inventor a temporary monopoly, patenting
encourages investment in technological innovations and contributes to
economic development because it reduces the risk that others will take free
advantage; conversely, lack of such assurance discourages initial investment.
Those outcomes have been illustrated in recent years by biotechnology firms,
which have been able to obtain long-term investments in part due to their
secure patent rights, and by software firms (where patenting is not the norm),
which have had to rely on short-term capital.
Once inventions were emerging regularly from academic research, the ques-
tion arose of how they were to be dealt with. Should inventions be treated in
the same way as discoveries in pure science, and be made freely available only
through publication? Was there a necessary distinction between discovery and
invention? Should universities treat practically applicable discoveries made
under their auspices as sources of financial benefit to themselves? Must the
university address unintended negative consequences of not assuming responsi-
bility for the commercialization of inventions made on campus? These questions
arose in the early twentieth century and some are still being debated today.
MIT’s experience, along with that of the University of Wisconsin and the
Research Corporation, played a key role in defining the relationship between
patents, professors, universities and firms. This chapter focuses on the debate
over the university taking patents and commercializing research.

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The origins of patents and their role in economic development


There is nothing new about the patent system fostering knowledge capitaliza-
tion; indeed it has been documented that patents originated as industrial
policy.1 Patents originated in early Renaissance Europe from governmental
practices extending ownership of tracts of land to individuals, granting monop-
olies for the manufacture of certain goods to guilds, and enabling miners to
protect their operations from disruption by competitors. The right to protect a
discovery of natural substances was expanded into a right to protect inventions
of machines, processes and products.
Exclusive use rights were granted to promote the economic growth of a
locality. Craft knowledge as a form of intangible property was recognized in
municipal regulation of the Venetian glass industry as early as the thirteenth
century. By the fifteenth century, cities regularly granted limited monopolies to
develop newly introduced crafts or new inventions. Physicians were similarly
allowed monopoly rights over new drugs on the condition that ingredients of
high quality were used in their manufacture. Rather than serving solely as
rewards for individual discoveries, these monopolies were granted in the expecta-
tion that they would contribute to economic and social life. Thus, even in their
earliest form, patents recognized, and indeed articulated, a balance between indi-
vidual and communal interests in a new technology’s introduction into use.
Technology and the legal framework to promote its growth developed hand
in hand. In 1474 the Venetian Senate expanded individual grants of exclusive
use rights and monopoly into a general patent law, creating by public authority
a limited private monopoly in new inventions. The granting of patents to
promote economic growth based on new technology soon spread. Mechanisms
for the local protection of the rights of inventors grew into tactics used in the
economic competition between cities as they competed to attract skilled crafts
persons who could train local talent and build new industries. Later, the princi-
ples of patent law accompanied the transition from the city-state to the
nation-state. Following these precedents and their model in English common
law, the US Constitution established the limited right to patent protection for
the sake of social progress: “The Congress shall have the power to … promote
the progress of science and useful arts by securing for limited times to authors
and inventors the exclusive rights to their respective writings and discoveries.”2

Science, patents and the flow of knowledge


The scientific discoveries of the late nineteenth century that gave rise to the
major industrial sectors generated an exponential increase in patenting activity.
However, scientists employed by firms in these industries were soon subject to
employment contracts that assigned patent rights from their discoveries to their
employer. The establishment of corporate laboratories contravened some of the
original purpose of the patent system that was intended to guarantee inventors
the fruits of their labor. During the legislative debate over the passage of the

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Bayh-Dole Act, which requires universities to share proceeds from innovations


with inventors – faculty, staff and students – lobbyists for large firms opposed
the bill, fearing that it might set a precedent for their employees to claim a
share of the intellectual property that they themselves had generated.
Moreover, the patent system assumes that an individual, or small group of
persons, can be identified as the inventor. When a succession of scientists, both
collaborators and competitors, work to develop scientific principles into a
viable technology, invention as a discrete event and the notion of the indi-
vidual inventor become problematic.
In the debate over whether technological advance is promoted or impeded by
the patent system, opponents hold that patents restrict access to the pool of
knowledge that is the basis of future innovation and that just as scientific knowl-
edge advances through the free flow of information so also does its application as
technological innovation. Since the alternative to patent protection is secrecy,
however, proponents can readily counter that patenting serves as a spur to inno-
vation. Patents are an information system, a disclosure process, since the
invention and its means of achievement become publicly available upon issuance.
The tension between patenting science and following the ethic of research,
which abjures secrecy, may be less than commonly believed. Patent procedures
allow sufficient time after the announcement of a discovery, typically one year,
to allow for timely publication. Nevertheless, an overlay of competition for
intellectual property rights, onto competition for scientific priority, increases an
existing tension. Both patent publication and scientific journal article alike may
disclose sufficient information for replication, though it is also possible to give
just enough information to satisfy the patent examiner or editor yet leave out
some specific details. In this regard, both space limitations and strategic omis-
sions are useful for maintaining the lead in scientific competition.
By its nature any particular intellectual property is transient; it is always in
principle and practice replaceable by new knowledge. Thus, property in knowl-
edge with potential economic value must be exploited promptly, and constantly
renewed and updated, in order to secure maximum profit. Thus, marketing and
licensing are essential to patents; they promote the use of knowledge under the
constraint of cognitive obsolescence.
Patents are a “co-opetitive” knowledge format (i.e., one that combines coop-
eration with competition), which integrates free access and privatization. Since
patents publicize as well as protect intellectual property they do not pose a
threat to dissemination of scientific research findings. Rather, it is the failure to
patent that inhibits the broadest dissemination of useful knowledge by
excluding it from the patent database.

Academic patenting
How do universities factor into the debate over patenting’s effect on the flow of
knowledge? In some respects they provide a microcosm illustrating the issue in

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sharp relief; recent trends in academia, however, add new dimensions to the
question of private intellectual property protection versus free public access.
Most universities patent their intellectual property only when they can be
reasonably sure of finding a market for it. However, every technology transfer
officer is on the lookout for a “big fish” and is keenly aware of the transient and
inherently obsolescent nature of invention. Indeed, the impetus to establishing
an intellectual property regime has often been the cautionary story of “the one
that got away,” either because the inventor was unaware of its potential or
because the university had not yet established a technology transfer office.
But is the task worth the effort? Some observers predict an impending
“shake-out” of university patent offices, left unable to meet their costs.3 This
prediction is partly based on a misplaced analogy with the rise and relative
decline of the Research Corporation as a major actor on the university intellec-
tual property scene. The shift of the Research Corporation from a focus on
patenting to a focus on venture capital was spurred by the decentralization of
patent offices across the academic research system.4
There is a shift in focus underway, from an emphasis on licensing to one on
incubation, venture capital and firm-formation, reflected in the development of
university accelerators. Sometimes, the only asset a start-up has to support its
ability to raise capital is its protected intellectual property. Without an exclu-
sive license, the start-up process as an engine of innovation and economic
growth will be inhibited.
Some large corporations increasingly view the rise of academic patenting and
licensing to start-ups rather than to major companies as a threat. Likewise,
many such firms currently oppose exclusive licenses, joining with the “ivory
tower” critics of university patenting. Unlike those critics, however, these
companies’ real concern is that if a university grants an exclusive license to a
start-up, then they might have to pay more for innovative university-originated
technology.
Since a patent is the prerequisite force behind the exclusive license as an
incentive to economic growth, we come full circle back to issue of private
versus public knowledge, hopefully exposed above as an inherently false
dichotomy. With academic patenting, however, public and private interests are
even more intensely intertwined, and, given the academic–industry conflicts
over exclusive licenses, one might even say inverted, since the “private” interest
here protecting its intellectual property is the university, pre-eminent among
institutions serving the public interest, whether land grant or Ivy League, while
the entities clamoring for freer access are corporations, the very paradigm of
private interest.
Until quite recently relatively few universities maintained offices for taking
out and licensing patents. A 1940 survey of sixteen universities reported 380
patents taken out of which 114 were in active use. The study also found that:
“Only five educational institutions report income from patents.”5 In 1999 a
survey of 190 US universities and related institutions reported that 3,661 US

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patents were taken out and over 3,900 license and option agreements were
made from these and earlier patents.6 It has been estimated that in 1992 the
volume of industrial sales based upon academic patents totaled $7.4 billion.7 In
1999 it was reported that $40.9 billion of economic activity was attributable to
academic licensing.8 What is the basis for this remarkable transformation of
academic knowledge and technology into commercial profit and economic
development?

Realization of the commercial value of research


Given its industrial mission and academic focus, there was a strong awareness of
the potential commercial value of research at MIT well before the 1920s. There
was concern expressed that outsiders could tap into research results and patent
them on their own behalf. Until the early 1930s, the Massachusetts Institute of
Technology followed a laissez-faire policy with respect to patents. Sometimes
members of the academic staff assigned the rights to take out patents to the
Institute; other times they retained the rights themselves. Given its positive
orientation to the potentially commercializable results of results, MIT began to
explore an institutional role in protection of intellectual property earlier than
most universities.
Thus, intellectual property considerations as well as disciplinary contribu-
tions were taken into account in faculty hiring. In 1931, when Robert J. Van de
Graaff was appointed to the department of physics from the same department at
Princeton University, MIT’s administrators were well aware of the potential
commercial implications of his research on high voltage. MIT viewed the
purchase of his electrostatic research equipment from Princeton not only as a
contribution to the continuity of his research but also as a way of restricting the
participation of Princeton University in future patent rights. Nevertheless, since
the decision to file an application for the patent was left to the inventor, the
Institute had no institutional claim upon intellectual property created by
members of its academic staff.
This is still the case today in many European countries and Japan where
ownership of intellectual property arising from academic research resides with
the professor. Nevertheless, actually taking out a patent, especially across
national boundaries, can be an expensive proposition. As efforts to commer-
cialize academic research get underway in Europe and Japan, offers to pay for
the taking out of a patent, in exchange for part of the rights, have resulted in a
division between the university and the individual professor. Under these
conditions, individual negotiations are soon superseded by precedent as the
basis for a division of proceeds between the individual, the research unit or
department and the university.
As precedent takes hold a one-third rule is elaborated internationally. This
division occurs along much the same lines as in the USA where ownership of
the intellectual property rights deriving from federally funded research have

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resided by law with the university since 1980. One of the conditions of the law
is that the inventor must also receive a significant share of the proceeds. The
relatively autonomous position of the professor in the university, in comparison
to the scientist as an employee of a corporation, is the fundamental basis for this
shared intellectual property regime. Whether accelerated by law, or developed
more slowly through precedent, the outcome is basically the same; so are the
issues that must be resolved.

The debate over academic patenting at MIT


Should publication of research results take place as rapidly as possible or should
publication be delayed until patents are taken out? Should universities try to
earn income from the discoveries of their academic staff to help support the
institution? Will universities endanger their public support if they take a pecu-
niary interest in inventions rather than remaining institutions committed to the
disinterested pursuit of knowledge?9 These issues, still current, were central to a
debate at MIT, early in the century, over relations with industry and whether
the university was becoming a business itself. Prior to the World War II, few
academic scientists and engineers thought of it as part of their task to generate
commercially profitable results and to file a patent. This was thought to be a
task for their counterparts in industry. Many academic scientists and engineers
still hold to a traditional view of the academic role even as a significant number
of their colleagues have become interested in patenting their research and
capturing financial rewards from it.
As with consulting, a controversy over patenting at MIT resulted in a
compromise that became an influential model. MIT wished to avoid conflict
with private firms over patent rights. The Institute wished to enter into
business-like relations with industry but it by no means wished to leave behind
its tradition of open publication and of disinterested research. MIT was
unwilling to press private firms, or its own staff, too hard in order to establish
the general principle of ownership of patents by the university. After more than
a decade of discussion the decision was taken in the early 1930s to utilize the
patent system to structure relations with industry and to earn profits from the
knowledge created on campus. This transition has been repeated in the
academic world many times since and is currently underway on various
campuses. Typically, the issues discussed, the model followed and the practices
instituted replicate the dynamic in the controversy over consultation.
MIT’s goal, in becoming involved with the patent system, was to reconcile a
new academic mission of capitalizing knowledge generated on campus with
existing academic missions. Even an industrially oriented academic institution
did not find patenting free of problems. The Institute was aware of the negative
reaction to the University of Wisconsin’s policy in dealing with patents. An
MIT report found that: “One educational Institution, which has derived a very
considerable income from one group of patents, has been severely criticized in

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scientific circles for its patent policy due to its method in handling the subject
rather than to the mere fact that income is derived.”10 MIT attempted to recon-
cile its 1861 charter, which gave it a special responsibility to assist private
industry, with traditional academic goals of education, research and dissemina-
tion of knowledge.
The MIT administration wanted to gain money from licensing the rights to
industrial firms to use the significant inventions of its academic staff. MIT
concluded that the problems of the University of Wisconsin did not result from
its interest in making money from patents but rather from its attempt to exer-
cise power over industry that the control of patents had made possible. By
narrowly construing its interest in patent management, the Institute believed
that it could avoid the pitfalls that Wisconsin had fallen into by using its
patents to further the interests of a local industry at the expense of a
competitor. MIT also wished to find a formula to engage in patenting that
would satisfy both proponents and opponents of the commercialization of
research.
For this purpose, President Compton appointed a sub-committee in late 1931
to formulate a patent policy for MIT. The committee included both proponents
and opponents of academic patenting. Compton charged the committee:

1 To ensure that ambiguity in regard to questions of title shall be clarified


within a reasonable period.
2 To ensure that the Institute is placed in a position to profit from its own
developments in any case in which it may choose to do so, and thereby
ensure a prompt realization to the public of the benefits of any such devel-
opments.
3 To sustain the interest and enthusiasm of the friends of the Institute where
ever they may be placed.11

The charge itself presumed acceptance of an academic patent right.


Nevertheless, interest in patenting was modified by a desire not to offend by
exercising this right.
Karl Compton’s favorable disposition towards patents on academic
achievements in research was part of his larger aspiration for a role for the
university in economic development. Compton’s objectives were twofold. He
wanted to develop MIT into a scientific technological university, with great
academic distinction.12 However, this academic objective was only a first and
necessary basis for his ultimate goal. Compton and his associates in the MIT
administration sought academic distinction, of a high and special kind
combining fundamental inquiry with practical utility. Nevertheless, investiga-
tion was not an end in itself for these academic visionaries. They also wished
to establish a direct role for the university in the creation of science-based
industry through the founding of high-tech firms, as these enterprises have
since been labeled.

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The debate over patents at MIT


In the debate over patent policy during the 1930s, the proponents of the
assumption of an entrepreneurial role by MIT in its relations with industry
clashed with those who wanted the Institute to adhere to the traditions of
financially disinterested research. The MIT administration’s program to
promote an economic role for the Institute met with internal resistance. The
Institute’s announcement of its intention to acquire patents on the discoveries
made by its academic staff led some of the latter to ask whether, even if patents
could profitably be licensed, that would not impugn academic claims to objec-
tivity and disinterestedness.
The issue at MIT was not directly over whether the Institute should be
closely involved with industry. That issue was settled in its charter which
mandated a close connection. The debate at MIT was over whether the taking
out of patents by MIT would promote or detract from the Institute’s relations
with industry. Would taking out patents make MIT a competitor with industry
rather than a collaborator? Would the university become a business itself rather
than an entity based on different and distinct principles from business, even as
it attempted to assist industry?
The issue of the necessity for functional differentiation between university
and industry, or whether the two institutional spheres should overlap in their
functions, is a fundamental issue of university–industry relations. On the one
hand, proponents of differentiation argue that the university can best fulfill its
industrial role as a producer of knowledge, leaving the utilization of such knowl-
edge to industry. On the other hand, proponents of integration hold that a gap
opens up between the creation of knowledge and its use if the university does
not engage in steps to see that knowledge is transferred.
There is a misconception inherent in this debate if it is assumed that the
university by taking on some of the appurtenances of a business becomes wholly
transformed into one. This is the “one bite of the apple” thesis. The alternative
possibility is that the university takes on some of the aspects of a business while
retaining essential traditional academic functions such as student intake and
training. In this model, assuming a movement from both sides, the roles of
university and business shade into and overlap each other.
The relative merits of two strategies: mutual interdependence versus “taking
the role of the other” were strongly debated. Two faculty members, John
Bunker and Vannevar Bush exemplified the contrasting positions on academic
patenting at MIT: Bush, through establishing a model of behavior as an
entrepreneurial scientist; Bunker, through his critique of this emergent model.
An opponent of academic patenting, John Bunker, a professor of engineering
at the Institute and member of the committee on patents, argued that the
most important reason for the avoidance of seeking to take out patents was
that it would disturb the relations between the university and private industry.
Bunker said:

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I have talked with a representative of the largest Chemical manufacturing


House in the U.S. and his reaction is one of surprise that MIT should even
consider placing itself in a situation that he described as “equivocal”.
The vice-president of a testing laboratory headed by a tech alumnus
stated with some heat: “If Tech is going into competition with
Industry, perhaps Industry will not be interested to continue its finan-
cial support.” The head of research of a chemical house explained to
me that he regarded Tech as a scientific Institution free from the onus
(I think he meant odium) that attaches to other educational institu-
tions which are regarded as making a business of exploiting patents.13

Beyond the issue of desirability was the question of feasibility. Could


academics undertake the tasks and practices commonplace in industrial labora-
tories that were necessary to establish patent rights? Bunker took the view that:
“To the average professor, patents are distasteful. The average professor probably
does not fully comprehend what is involved when a patent is taken: nor does he
understand the value of systematic records, of dates etc.”14 Bunker held
patenting to be more appropriate to a bureaucratic research institution such as
existed in the laboratories of large industrial corporations rather than to the
university, where research was a more informal, individual activity.
Nevertheless, the transformation of academic research from an individual to a
group activity was already well underway. There was the attendant necessity to
keep records for a variety of purposes, both fiscal and experimental. The academic
scale-up was not to the level of a corporate lab but rather to that of a small group.
Nevertheless, the tradition of academic research as a series of faculty student
dyads was already shifting to a more complex model in which lateral ties among a
group of students were becoming as important as the teacher/student relationship.
Bunker’s skepticism of the ability of academic scientists to do research which
was practically applicable was augmented by his conviction that academics were
ill-equipped to protect their intellectual property. Patenting was a difficult topic:
“the subject is essentially new to many of our colleagues.”15 He also cautioned
against the danger of obtaining income from patents; he thought that “the tax
exempt status of the Institute” might be jeopardized by the taking of patents.
The argument that professors could not adapt themselves to the require-
ments of the patent system was undermined by the fact that MIT faculty
members were already taking out patents on their own behalf. Indeed, the
patenting activities of teachers were among the reasons for the organization of
the patent committee. Moreover, even in the early twentieth century, the
research activities of the staff at the Institute were well administered and
detailed administrative records were kept.
Bunker also questioned the need for formulation of a patent policy for the
Institute on the grounds that it was unlikely that a large enough number of
patents would be taken to justify the expenditure of time and money that would
be required. He held that:

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The members of the staff who can exercise ingenuity in investigation


and at the same time keep a weather eye on the practical application
and obtain gainful patents can not be many. I wonder if it is worth
while to run the risk of creating a disturbance by promulgating a formal
policy applying to all, for the sake of assuring hypothetical gain from a
few.16

Bunker summed up his objections in a memorandum to his colleague Dean


Vannevar Bush, chairman of the patent committee of the Institute in a series of
rueful parenthetical observations to an article in a national magazine that was
highly critical of academic patenting.17

Perhaps the laboratory is pressed with economic necessity (how did he


know about my situation? J.B. [John Bunker]) – but is that a warrant
for changing its charter? Possibly it can support itself handsomely (cf
Chem Engineering at MIT formerly, J.B.) and independently – but can
it survive the shiftings of bases and readjustments of outlook which
commercialization entails? (Here he puts his finger on the potential
sore. J.B.) One of its greatest glories is its intellectual integrity and
independence – but can this reputation (n.b. “reputation” JB) continue
unsullied in the clash of competitive mass campaigns of patented
commodities, infringement suits and other contentions of the market-
place in which financial interest of the research institution is on one
side of the dispute?18

There is no record of a written response from Dean Bush. He could have


pointed out that the MIT charter was significantly different from that of an
ordinary university. It had a unique obligation as a “land grant” institution to
assist industry to improve its technology even as other land grant colleges were
contributing to the scientific basis of agricultural practice. Not too many years
earlier, despite being in severe financial straits, the Institute had rejected over-
tures for it to become the engineering college of Harvard on the grounds that
such association would divert it from its special purpose.
It is likely significant for the outcome of the debate over patenting that Bush
not only rose to a high place in the MIT administration but was also a distin-
guished researcher. His colleague in the MIT administration, President
Compton, wrote of him:

No picture of the Institute would be complete without tribute to the


dynamic genius and able leadership of its Vice President and dean of
the School of Engineering, Vannevar Bush. He introduced operational
calculus into modern electrical engineering, has invented various
devices now in commercial and domestic use, and is the originator of a
series of highly useful machines for performing difficult engineering

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computations … most important of all, no man comes to Dean Bush


with a problem who does not leave with a keen criticism and a
constructive suggestion.19

Bush continually extrapolated theoretical and practical implications from any


technology that he came across: in his service on the Institute’s patent
committee he occasionally recommended improvements or extensions of partic-
ular inventions which came before it. During a discussion of the significance of
a new method of making replicas of ruled gratings, Bush suggested as an exten-
sion that “precise scales might be made in a similar way.”20 This incident, in
which a new idea arose out of the workings of a patent management scheme,
adumbrated current efforts to revive national patent systems as information
resources to stimulate, as well as register, inventive activity.21
The next chapter discusses the resolution of the controversy at MIT, which
provided a framework for academic patenting during the pre-war era.

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6
THE REGULATION OF
ACADEMIC PATENTING

Much of the division on academic patenting arises from differing conceptions of


the role of the university in society. If the university is seen as having an
explicit economic and social role, the transfer of technology and utility of
patenting becomes an issue of means, how best to organize this activity in rela-
tion to the other missions of the university. If the role of the university is
believed to be limited to the production and dissemination of knowledge, then
the issue of patenting research becomes a matter of principle and is fought on
the ground of whether the university should play an explicit economic and
social role in society and whether such a mission adds to or detracts from its
other missions.1 Nevertheless, irrespective of ideological positions the research
mission of the university inevitably brings with it the potential for technology
development, with economic and social implications that must be taken into
account. Even if a university wishes to maintain a hands-off position, it may be
forced to become involved in issues of patent management.
Such was the case at the University of Toronto Medical School, where as the
result of Frederick Banting and Charles Best’s discovery of insulin in 1921–2, a
classic shift in stance toward academic patenting occurred.2 Large profits, public
health and the reputation of the university were at stake. The Toronto case also
raised a series of issues between university administrators and teachers and busi-
ness firms; these issues included the distribution of the money earned and the
propriety of ceding of patent rights to a single firm. Putting contrary policy
aside, the University of Toronto decided to acquire a patent on insulin, a much
demanded drug in extremely short supply. University administrators believed
that by licensing the university’s patent to a single reputable pharmaceutical
firm, the Eli Lilly Company, quality control could be assured and revenue
gained to support future research. The ethical rules, to which the university was
committed, precluded personal gain from the patent. The university’s alliance
with the Lilly firm enabled its researchers to translate findings into clinical
practice quickly, ensuring credit for their discovery against other claimants.3
The University of Wisconsin, on the other hand, learned to its displeasure
the consequences of not properly protecting the inventions produced by its
faculty members. When Professor Babcock invented a device for testing the

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quality of milk, several unscrupulous manufacturers marketed faulty equipment


to farmers under the auspices of the Babcock invention. Without patent protec-
tion, the university had no means of protecting itself and the public from the
makers of these devices. While the University of Toronto patented to protect
the quality of insulin production, the University of Wisconsin suffered the
downside of not having control over an invention made on campus. In 1925 the
University of Wisconsin set up a patent management organization, The
Wisconsin Alumni Research Foundation, to directly manage the intellectual
property rights generated on campus for the financial benefit of the university
and the economic benefit of the state, as well as to ensure quality control. MIT
initially took a position in-between Toronto and Wisconsin. While MIT was
interested in profiting from discoveries, it preferred to have a non-MIT organi-
zation, the Research Corporation, act as an intermediary with industry.

MIT’s patent policy


In a series of disputes over the propriety of academic–industry relations in the
early twentieth century, proponents of close industrial ties deferred somewhat to
their colleagues with traditional academic values. Opponents of more intense
industrial ties had greater effect on Institute policy than their political strength
within MIT might justify. In addition to their own views on academic propriety,
they were concerned that the public might view MIT in an unfavorable light if
its industrial ties were too strong. In this context, industrial relations were regu-
lated, rather than prohibited as at some universities, or allowed to remain
unfettered as might have been expected at MIT. Issues of consulting and
patenting were debated and resolved, allowing the activity to proceed in such a
way that it would be carried out with due regard for traditional academic sensi-
bilities. As with consulting, the controversy over patenting resulted in a
compromise.
MIT attempted to shape a patent policy that would allow it to reap financial
benefits while maintaining due regard for concerns that academic life would be
adversely affected. Despite Professor Bunker’s objections, patenting by the
Institute was accepted in a policy adopted by the faculty in April 1932.4 The
benefits to be obtained from the commercial application of the results of
research were strongly appreciated at MIT. Nevertheless, there were fears that
relations with private industrial firms could become excessively demanding so
that attention was diverted from teaching and research. Apprehension about
possible conflicts of interest arose earlier and more pressingly than it had done
at other universities, since it was expected that the type and scale of research
done at the Institute was more likely to result in significant discoveries and
inventions even when the research was done without practical intention.
The next task of the committee on patents was to clarify ambiguities with
regard to title to inventions made by members of the academic staff. In the
deliberations of the committee, two alternatives were recognized: the university

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could claim ownership of all intellectual property or it could claim none, except
when it was necessary to patent medical discoveries in order to exercise quality
control over their production. The committee on patents made its decisions
bearing in mind the concerns of the interested parties and constituencies
including teachers who supported the taking of patents and those who opposed
it, companies that wished to deal directly with the individual academic who
made discoveries, and the general public, who, it was believed, might consider
the taking of patents to be a departure from the tradition of a higher educa-
tional institution. The committee decided that while it intended to proceed
with the taking of patents, they would only be undertaken in instances where it
seemed likely that there was a discovery or invention of substantial promise to
be pursued. For inventions judged to be minor, it would be left up to the
inventor to decide whether or not to patent. The inventor would receive a 7
percent share of the gross returns from the invention. In setting this figure,
considerations of fairness to the inventor were balanced against anxiety that
inventions might be stressed at the expense of research.
In all of its arrangements for disposition of intellectual property, there would
be an effort made to avoid distracting the staff from research by undue emphasis
on invention:

Since the objectives of the inventor are not completely compatible


with orderly progress in academic research, it is highly desirable that
our own investigators not become unduly ‘patent conscious.’ The
Patent committee realizes that the use of this letter may encourage
undue attention to patentable invention, but we believe that the
hazard involved is the lesser evil, and if the letter should prevent
misunderstanding, its use may enable us to avoid the greater evil of
being required to straighten out disputed equities after invention has
arisen from participation of a student in staff research.

Thus, while invention was favorably viewed, “such participation [in its
rewards] should be arranged so that staff should not be stimulated to
invention.”5 To prevent the prospect of financial gains becoming a primary
reason for conducting research, it was hoped that invention could be given
equal status with other legitimate academic activities such as as research and
teaching. Special accomplishments would be recognized, in the same manner as
in all properly academic activities, by granting of promotion and rises in salary.
A set of principles and procedures were established to regulate the taking of
patents on the results of academic research. An academic committee was
created to recommend the appropriate division of rights when the respective
rights of individuals and the Institute were unclear. The Institute was deter-
mined to make studious efforts to resolve disputes over conflicting claims to
patent rights without resorting to litigation. Rights to grant licenses on patents
were not to be accumulated by the Insitute as an end in itself; if commercial use

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could not be arranged within two years, the rights to the patents would be
assigned to the inventor. The procedures for seeking patents would be organized
so as “to proceed with such promptitude that no undue restrictions of freedom
of publication will be necessary.”6 This principle demonstrated an early aware-
ness that academic and intellectual property needs could be reconciled through
the development of administrative procedures to speed up the filing of applica-
tions for patents and thereby reduce the urgency of delay in publication.
MIT’s new patent policy was a compromise between the financial interests of
the faculty and the Institute, giving due recognition to the contributions of
each. The committee formulated a policy whereby the Institute laid claim to
patent rights when it had supported the research financially. Where the
Institute contributed nothing substantial, any patent that was obtained became
the property of the individual. Students were treated differently; they were
allowed to retain all rights to inventions. When a project was jointly financed
with an external sponsor, rights to benefits from the patent would be split
between the sponsor, the Institute and the academic discoverer or inventor.7
The Institute would not attempt the exploitation of commercial patents on its
own. It would turn over its rights to others to exploit in exchange for reasonable
financial returns.

The management of patents


A patent committee system was set up to receive information from staff
members about inventions. To carry out the policies expeditiously, responsibility
was divided between two committees, the committee on patents and the
committee on management of patents, to handle the different stages of the
commercial exploitation of academic knowledge. The committee on patents
would deal with questions of determining inventorship, allocate equities among
the qualified parties, render an opinion on the originality of a discovery or the
scientific novelty of an invention, and set the rate at which inventors would
share in the financial returns. These duties primarily drew upon the engineering
and scientific expertise of the academic staff. A committee for the management
of patents was also established to unify policy on the business management of
all patents taken by the Institute. This committee advised the administration
on the adequacy of patent provisions in research contracts undertaken by
teachers and research groups. The committee was responsible for advising the
administration on the administrative and legal implications of patent matters
and for reviewing issues of patent policy which might affect the relations of the
Institute with the public.
The first committtee was largely composed of members of the academic staff; the
second commitee consisted of academics and administrators.8 A typical discussion
within a committee would be about the question of whether a piece of research fell
within or outside the terms of reference of the committee. For example, the
committee found that Harold Edgerton, professor of electrical engineering,

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has a rather informal arrangement concerning his stroboscopic work


which has worked out excellently. Institute facilities are indeed used in
connection with the commercial relationships on this affair. On the other
hand the equipment developed and used by reason of commercial
contacts has proved to be of great service in research work throughout the
Institute. The relationship, while informal, has been mutually beneficial.9

In this instance academic and commercial work were inextricably intertwined,


and the committee concluded that the result was, on balance, favorable to the
purposes of the Institute.10 Within a decade the scope of Professor Edgerton’s
external activities had expanded to such a scale that when the Atomic Energy
Commission offered him contracts to monitor the early post-war tests of the
atomic bomb in the Pacific ocean, the Institute encouraged him to form a firm
to deal with the matter.
An informal pre-war consulting partnership with two of his former students
evolved into Edgerton, Grier and Germeshausen (EGG), a diversified elec-
tronics firm that is now among the five hundred largest companies in the
United States. Remaining at the Institute, Edgerton maintained a similar
informal relationship with EGG, bringing back equipment from the firm for use
in his academic laboratory.11 In the mid-1970s, EGG donated funds to the
Institute for an academic building in recognition of Edgerton’s contribution to
the firm. This corporate philanthropy derived from academic research that had
been successfully commercialized.
Vannevar Bush’s inventive activities became the subject of his own
committee’s deliberations more than once. At a meeting in 1935 President
Compton took over the chair from Bush, on an occasion in which the topic was a
lubricant for railways invented by Bush. It was reported that the invention was
made partly with funds from the United Water Cooler Service Company and that
no Institute funds were used. Since that was the case, the committee decided to
turn all rights over to Bush. Bush, in turn, offered all of the rights to the Institute.
The committee accepted his offer with the provision that: “encouragement of a
cooperative attitude on the part of the staff in respect to patent rights, and in the
general development of its patent policy, would be best served if Dean Bush
should retain a substantial equity in the invention.”12 Bush accepted the principle
but refused to take more than a one-quarter share in the returns on his invention.

Academic intellectual property


The emergence of the new patent policy at the Massachussetts Institute of
Technology opened a discussion regarding the proper function of the universi-
ties. Decisions to take out patents on some of the inventions of its academic
staff did not end the debate. Such decisions led to discussion of what the
university should do with the intellectual property it was accumulating. By
taking control of the inventions by its teachers, the Institute was compelled to

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participate more directly in the management of patents. The patent system


made the holders of patents responsible for the promotion of their use. The
discovery of an appropriate role for the Institute in the commercial application
of the results of research became an important topic of discussion.
During the mid-1930s, Vannevar Bush, by this time vice-president of the
Massachussetts Institute of Technology, explored the idea of establishing an
office to handle the patenting and licensing of discoveries and inventions made
at the Institute. An assistant to the president and a young patent attorney were
to be put in charge. According to Bush this arrangement would allow the func-
tions of the patent committee to “be considerably reduced, much to its relief.”13
Bush’s proposal for the commercial exploitation of the Institute’s patents met
with resistance from some of the same members of the academic staff who ques-
tioned the desirability of a policy for the Institute to deal with patents.
Concern was expressed that such an intimate participation in private business
such as was suggested in the proposal for the Institute to manage its own patents
would jeopardize the status of the Institute as an educational institution. In
response to a statement that the proposal would not endanger the Institute’s
status as an institution enjoying exemption from taxes and legally able to receive
gifts which would be free of taxation, a critic of the plan responded skeptically to
the statement that “We do not think such a corporation would endanger the tax
exempt status of any other property … I would submit that we can’t afford to
merely think; we ought to be sure.”14 This teacher viewed the proposal as a trans-
parent ruse under which the university would establish a business. To me, the
setting up of an ostensibly non-Tech corporation in which the entire funding and
ownership of stock is by MIT is an obvious legal evasion of tax liability.15 It was
also asked whether the game was worth the candle: could patents be expected to
bring in significant income? “[W]hy place ourselves in any kind of jeopardy, espe-
cially when the stake is not large on the return side of the proposition?”16
Critics also suggested that instead of managing its patents itself, the Institute
should engage an external firm for that activity in order to shield the university
from charges of impropriety. “I don’t fully understand why we can’t continue to
do business with Research Corporation and continue to keep our skirts clear.
The personal grief involved in patents is not justification for taking a course
that the Institute status or reputation be placed in jeopardy.” Finally, there was
the spectre of the University of Wisconsin model which Bush’s plan clearly
emulated. “Public opinion is pretty important as shown by the Wisconsin
Foundation situation and its University and the bad light of professional public
opinion.”17
Difficulties in gaining acceptance for the sale of the right to use intellectual
property as a proper activity of a university can be seen in the discussion of
arrangements to separate MIT from the conduct of sales. To answer objections
that it endangered the Institute’s not-for-profit status, Bush and Caroll L.
Wilson, another administrator at the Institute, discussed setting up a body regis-
tered as a corporation in Massachussetts, or possibly Delaware, “without

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attempting to make it tax exempt.” To avoid negative appearances, “the name


should suggest patent management and should not suggest the Institute.”18
Nevertheless, even proponents of this scheme were concerned about possibly
negative repercussions of the Institute being associated with an arrangement for
the management of patents. A question scrawled in the margin of the letter
asked about the liability of the Institute in the event of a lawsuit against the
nominally independent organization.
Throughout the discussions the goal was to balance the acquisition of
income against a possible taint of impropriety through the taking out of
patents for financial reasons. On the one hand, there was the desire to extend
research programs so that they would be closer to the point of industrial appli-
cation. It was pointed out that: “universities have recently studied all possible
sources of income.”19 One member of the academic staff cautioned that:
“Patents are dangerous. It is well to remember this and be frequently
reminded.”20 The limited acceptance of patents for academic discoveries and
inventions in the 1930s did not include the direct sale of patent rights. Bush’s
proposal failed largely because it was feared that the Institute might endanger
its academic reputation and its tax-free status by realizing financial gain from
the sale of the results of its research. Instead, a substitute proposal was
accepted in which an outside organization was retained to patent and market
MIT inventions.

The Research Corporation


In 1936, the patent committee of the Institute put forward the view that:

There is recognized to be danger in deriving any income whatever from


inventions, first because of possible influence upon our tax exempt
status, and second because of possible criticism of our methods leading
to ill will among those upon whom we must depend for support. The
first difficulty seems to be avoided if the actual handling of our affairs is
delegated to some other organization.21

In June 1937, the Massachussetts Institute of Technology announced that it had


concluded an agreement with the Research Corporation of New York, “whereby
this organization will handle all legal and commercial aspects of inventions
assigned to Institute Inventors.”22 As a result of this agreement the Research
Corporation opened a branch office in Boston headed by a graduate of the
Institute to deal with inventions emerging from research at MIT. Given the
quality of the Institute’s activities, it was expected that “important inventions”
would be forthcoming.
The Research Corporation had itself been founded in 1912 to exploit
commercially an academic discovery and return its proceeds to support new
research. Utilizing a discovery of the British physicist Oliver Lodge, Frederick

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G. Cottrell, a professor of physical chemistry at the University of California,


invented the electrostatic precipitator – a device for control of smoke and other
emissions. After futile attempts to persuade existing institutions to undertake
commercial development of the precipitator, Cottrell organized the Research
Corporation with the support of leading industrialists who served as members of
the Board of Directors of the Corporation. After the precipitator was success-
fully developed and marketed, the Research Corporation placed it under a
special firm, Research-Cottrell. The sale of Research-Cottrell stock provided an
endowment for the Research Corporation to employ a staff and devote itself to
the twin tasks of supporting research in the physical sciences and promoting the
transfer of the results of research which had profit-making potential from
universities to industry. From 1927, when the first grant was made, to 1948,
$1.25 million from the earnings from patents was distributed to fifty-two univer-
sities to support research.23 The agreement with the Research Corporation was
the culmination of five years of discussion following the establishment of a
patent policy by the Massachusetts Institute of Technology.24
Once the initial decision had been taken to declare an interest in the intel-
lectual property generated at the Institute, the question became how to carry
out responsibilities of putting inventions to profitable use. The committee
thought that the application for, and the licensing of, patents would have to be
done judiciously and would have to consider the criticisms which would be
made of it. Whatever procedure was followed, the committee was well aware of
the antipathy of private businessmen to the charges that would be made for a
previously free good. The Institute planned to forestall litigation by fixing
royalty rates at very reasonable levels. It believed that academic and business
criticism could be stilled by restraint in the granting of exclusive licenses. It was
believed that these policies could place the Institute “in a position to profit
from its own developments,”25 without injurious controversies as long as only a
modest level of income was sought. The arrangement of having an intermediate
organization would, it was hoped, provide a buffer between the academic world
and world of private business.

Expansion of academic patents


The external support of research created new problems for patent policy. For
one thing it greatly increased the number of patentable discoveries and inven-
tions. It increased disproportionately discoveries and inventions which seemed
to be ready for commerical exploitation.
The expansion of research at the Massachusetts Institute of Technology
during World War II speeded up the rate of invention. The patent management
committee of the Institute noted that:

Before the war, a majority of our patents arose from normal Institute
research and research contracts were a minor part of the picture.

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Under these conditions the Patent Committee of the Faculty could


and did handle all patent matters since they had to do mainly with
questions of inventorship and conception and equity on the part of
MIT staff members making inventions. Under war conditions, by far
the greater part of our patent business has to do with government and
industrial contracts which involve questions of business and legal
arrangements and of policy affecting the Institute. Only incidentally
do these contracts involve matters of staff equities.26

Research organization expanded in scale at the Radiation Laboratory and


other wartime research projects. Under peacetime conditions of small-scale,
largely internally supported research, patents were sought largely because of the
interest of the discoverer or inventor or of the Institute. The change in the scale
of applications for patents was explained thus: “The large number of research
contracts at present in effect at the Institute, most of which involve patent
agreements, has created the need for a special administrative organization for
patent management at the insitute and for handling the details of contractural
arrangements involving patents.”27 Whereas, previously patents were an issue
internal to the university, they now introduced the government as a factor. And
private industrial firms entered more tangibly into the problem.
The Institute lacked the administrative capacity to deal with this increased
volume and with the more complex pattern of relationships. “MIT has no orga-
nizational setup for handling the business of patent prosecution, licensing, and
carrying out a contract with the inventor for inventor participation.”28
Research activity at the Institute had been transformed by the introduction of
large governmental contracts. The hitherto existing arrangements with the
Research Corporation became inappropriate to the new situation. Neverthelsss,
the arrrangement between Research and the Institute continued until the 1960s
when the two bodies came into direct conflict over a dispute regarding patent
rights with the International Business Machines Company .

The issue of exclusive licenses


The issue of granting rights to a single company for the use of a patent owned
by a university became very pressing after the end of World War II. The
Institute had played a leading role in founding the American Research and
Development Corporation (ARD), the first public venture capital firm.
President Compton declared: “My objective is to point out that a formula must
be found which recognizes the special position of educational institutions if any
satisfactory working arrangements are to become general between corporations
such as American Research and institutions such as MIT.”29 However, the
Institute soon found that its objectives in founding the venture capital firm
were in conflict with its previously stated principles on the management of
patents on academic discoveries.

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ARD wanted assurances that if it invested its capital in starting a new


company with patents owned by the Institute it would not be subject to imme-
diate competition. Its investment would be placed in jeopardy, if the Institute
licensed other firms to use the same discoveries or inventions. Although the
Institute was reluctant to grant exclusive rights, it decided to do so in order to
ensure the establishment of a firm which would use the Van de Graaff patents.
In an internal memorandum, MIT asked itself:

Can exclusive licenses be avoided? If not, can an escape clause be


found which will be acceptable? Has consideration been given to non
exclusive [licenses] for a period of time in which no other will be
given. What will be the effect of MIT buying into Trump Co. [High
Voltage Inc.].30

The Institute had originally licensed the patents to the General Electric
Company, but when a certain time had passed without any use having being
made of them, MIT resumed the rights. When ARD determined to make one of
its first investments in High Voltage Inc. and wished to license the rights exclu-
sively, the Institute was concerned about becoming too closely tied to a single
firm. The independence of the university and the public interest might be
compromised by too close an association with a private interest.

On the other hand, the responsible officers of the Institute have had
long contact and experience with the problem and realize the require-
ments for protection of venture capital and for the establishment of a
new industrial enterprise. Their sympathy with this particular enter-
prise and their understanding of the requirements of the situation can
be counted on.31

The Institute satisfied ARD and its conscience by offering an exclusive license
limited to ten years.
In addition to exclusive licenses for the existing patent rights, the founders of
High Voltage Inc. also wanted assurances that they would receive the rights to
future advances made by Institute inventors in the firm’s field of technology. MIT
assured ARD that High Voltage could have exclusive licenses for patents on
improvements. The Institute recognized that if academic patents were to be prof-
itably applied the concerns of industrial firms would have to be accommodated.
The statement “the limits on licenses given always being directed toward
protecting the Institute’s responsibilities as an eleemosynary instituition serving
the public, while at the same time recognizing the essential business requirements
for bringing an invention into use by the public”32 was in practice interpreted to
meet the latter requirement. To achieve its goal of regional economic develop-
ment, the Institute broke with academic tradition and accepted the patent
practices of private business firms which required exclusive licenses.

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Balancing patents with other relations to industry


MIT was forced to seek an appropriate balance between the traditional relation-
ships between universities and private industry, which combined philanthropic
support by the latter with training and occasional consultation by the former,
and the new relationship which entailed the sale to private firms of industrial
technology in the form of licenses to use patents. The issue came to a head
when the Research Corporation, as holder of MIT’s patent rights, and the
Institute became aware that they had different objectives. The Institute decided
that it was

not in a position to ask for the full value of the patent. … [With
respect to the Research Corporation] … our interests are not the same.
The price for which we would settle is therefore not the same, but we
must get a fair price. … We must establish a record of having done
everything possible to avoid litigation and to have gone ahead in a
serious way to do the right thing insofar as MIT–industry relations are
concerned.33

The Research Corporation’s only relationship to companies was through the


licensing of the use of patents; the Institute had a much more complex set of
relationships with private firms. The Institute and the Research Corporation
disagreed over how vigorously to press the International Business Machines
Corporation to pay for the patent rights for use of magnetic core memory in its
computers. The Institute held that Jay Forrester had made the invention on its
campus, but did not want to engage in a fight to the bitter end with
International Business Machines on the general grounds that it wished to main-
tain amicable relations with industry and on the particular grounds that, despite
the company’s unwillingness to pay for its use of patents, it was a significant
patron of computer research at the Institute. The Institute’s position was that:

IBM is indebted to us for a great deal apart from the Forrester patent,
but it is also a fact that IBM as a company has been generous in the
establishment of a computation center, in providing funds for a
building to house that center, and is currently funding our work in this
field at the rate of 1½ million a year. … [Moreover], there has been for
a long time a mutually profitable relationship between our faculty and
their engineers.34

The Research Corporation, on the other hand, took a purely business view of
the matter and was determined to pursue International Business Machines to
the full extent of the law.
For its part, International Business Machines viewed the Institute’s contribu-
tion to magnetic core memory as one among several components in the
invention which included contributions made by the Radio Corporation of

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America, an independent inventor and several of its own employees. Since


International Business Machines had purchased the Radio Corporation and the
independent inventor’s rights, it viewed itself as the major holder of patent
rights to magnetic core memory. In addition, there was “the further complica-
tion that Mr Watson [President, International Business Machines] believes …
that universities should not own patents.”35
The very arrangement which was supposed to protect the Insitute from
conflict with private firms was in fact exacerbating a dispute with one particular
firm. The Institute’s attorney advised that:

the initial concept of our relations with the R.C. [Research


Corporation] was that they should act as an insulator between MIT
and industry in patent matters. However, in this particular case, the
magnitude is so great and the difference of opinion between R.C. and
industry has reached such a point that MIT cannot ignore the prob-
lems and if RC’s actions are contrary to MIT’s interests we must
become concerned.36

Usually, the interests of the Institute and the Research Corporation were in
accord. However, “There are cases, such as this one, where interests become
opposed, and the situation may reach the point where the only remedy is the
one provided in the contract, namely, cancellation.”37 As a result of its irrecon-
cilable differences with the Research Corporation, the Institute severed its
relationship and took over the management of its patents itself. The claim
against IBM was settled for a relatively modest sum.
The dispute with IBM was complicated by the fact that the patent rights
claimed by the Institute arose from research paid for by the federal government.
The Institute realized that if the dispute had gone to court the underlying issue
would affect the entire US patent system, especially patent ownership resulting
from government sponsored research. Beyond transferring intellectual property
generated on campus, the role of the university in economic development has
taken a more fundamental step: the creation of new firms. The story of how this
strategy originated is the subject of the next chapter.

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ENTERPRISES F ROM SCIENCE
The origins of science-based regional economic
development

Boston’s post-war technology corridor, which is often assumed to have been a


spontaneous development, is the result of specific initiatives taken earlier in the
century. An innovative strategy for knowledge-based economic development
led to the creation of the Route 128 complex during the early post-war era. In
this new model, universities, traditionally knowledge producers and transmit-
ters, have also become factors of production. During the 1930s depression, MIT
President Karl Compton hypothesized that New England’s research-intensive
universities could substitute for the natural resources that the region largely
lacked. He extrapolated instances of firm formation by MIT professors into a
model of university-based economic development which built upon the
comparative advantage of New England, its concentration of research resources
in its colleges and universities
A strategy of assisting firm formation based upon academic research origi-
nated early in the twentieth century as part of a new thesis of science-based
regional economic development set forth in the 1930s by a group of MIT
administrators. Much of this model was derived from the activities of Vannevar
Bush, who had been involved in entrepreneurial activities during the 1920s. In
his own experience with technology transfer, Bush went well beyond capturing
ownership of intellectual property rights. He was a prototypical entrepreneurial
academic, combining in a very effective manner both intellectual and commer-
cial interests in the course of his career. Through his own experience with the
patents system as a young academic, Bush had learned that a patent merely
secured legal rights to intellectual property; it was no guarantee that anything
profitable would come of it.1 He determined that if existing firms were not
ready to take up an innovation that it was necessary to found a new one.
This chapter focuses upon how the New England Council, an association
representing academia, industry and government, provided a venue to analyze
regional weaknesses and strengths and to design measures to remedy deficits.
Instances of firm formation from academic research were generalized into a
model of regional economic development for New England. During the
1930s, a cooperative program linking university and industry was a significant
departure from traditional competitive modes of developing regional

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economies by attracting firms from elsewhere. This initiative was also a


response to the long-term economic decline of Massachusetts that pre-dated
the depression of the 1930s and the failure of traditional regional develop-
ment strategies.

New England’s regional economic dilemma


Although President Compton has been widely recognized for raising MIT to a
new level of intellectual distinction during the difficult times of the 1930s
depression, his efforts to apply science, and MIT’s experience, to problems of
economic and social development are less well known. The thesis of science-
and technology-based economic development represented a striking change in
regional strategy of response to economic decline. In New England, during the
early twentieth century, it took a long time to realize the need to find a new
basis for the region’s economy. From the early twentieth century, as economic
conditions worsened with the decline of New England’s traditional industrial
base, the problem was defined as the adverse conditions under which New
Englanders had to compete with other parts of the country due to higher trans-
portation and wage costs.
Attempted solutions were at first largely developed within a narrow frame-
work, focused on finding natural resources and reviving existing industries.
Committee work, review of old studies and commissioning of new ones, and
discussions with prospective partners were part of a process of transcending
received models. The struggle to break out of an outmoded conceptual frame-
work which had become an intellectual straightjacket made it possible to
develop an alternative model, based upon research, and then build new indus-
tries whose greatest resources were intellectual property and highly skilled
human capital. It is perhaps ironic that this new model was closely related to an
earlier one with similar characteristics. The paradigm shift, in this case, was a
paradigm return.
Only a few decades before, New England had been the strongest technolog-
ical economy in the United States. Its metalworking industry, in support of its
textile industry, had been a mid-century inspiration for MIT’s foundation. In
the late nineteenth century, New England’s machine tool industry provided the
basis for an emerging electrical industry, drawing inventor-entrepreneurs such as
Thomas Edison to Boston, for a time, to pursue their projects.2 Nevertheless,
there were already incipient signs of decline in the failure to take advantage of
opportunities to develop new industries.
The financial industry’s interest in applying his telegraphic devices to solve
their operational problems and the greater ease of obtaining investment capital
were among the reasons for Edison’s departure to New York. The failure to
retain an emerging industry based on a new technology was not noticed at the
time amidst the prosperity engendered by the textile and shoe industries that
had not yet moved closer to their sources of raw materials. Whether to focus on

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retaining an existing industry or to concentrate on building a new one is a


debate that continues to this day.
During this period the Boston business community was divided over whether
it should take a long-term view as opposed to protecting the immediate finan-
cial interests of existing firms. Prior to 1885, the main concern of the Boston
business community and similar groups around the country was the infrastruc-
ture for the conduct of business, and they promoted improved roads and port
facilities.3 In 1885 a group of twelve reform-minded businessmen successfully
sought the merger of existing business organizations (the Boston Commercial
Exchange and the Boston Produce Exchange) and provided the funds to orga-
nize the Boston Chamber of Commerce to involve business in projects for
community improvement, such as upgrading public education. Through this
leadership the business community accepted measures for social improvement
such as the minimum wage, which were contrary to the immediate financial
interests of some member firms. During this period, the business community was
amenable to use of government to solve social problems that could not be
solved through private actions.
However, as economic conditions worsened with the decline of New
England’s traditional industrial base of textiles and shoes, from the early twen-
tieth century onwards, there was a shift to concern with immediate profit
interests and to resisting government controls over business. It was believed
that the region’s economic decline had been caused by government regulation
and that the solution was to lower the cost of doing business by reducing taxes
and government expenditures.4 This approach failed in New England sooner
than in other parts of the country. Other regions, such as the south, were able to
pursue this course of action for a longer time until countries with still lower
costs began to siphon off their factories in the 1970s.

The New England Council


The New England Council currently serves as the Washington lobbying group
on behalf of the New England States: Massachusetts, New Hampshire,
Vermont, Connecticut and Rhode Island. At the start of the twenty-first
century these states encompass a mix of high-tech industries and older indus-
trial and rural economies. They include a mix of older and newer, urban and
rural, small town and suburban regions and resort areas, both coastal and moun-
tain. The region is also host to some of the most prestigious educational and
research institutions in the United States. This special feature of the region has
its origins in the founding of Harvard College in 1636 for the purpose of repro-
ducing a religious leadership for an isolated population.
The academic institutions of the region expanded in scale and scope, taking
on functions in agricultural training and research and then in technological and
industrially related research through the extension of old foundations and the
establishment of new ones such as MIT in 1864. The manufacturing industry

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that had grown up in the region in new industrial towns, such as Lowell,
Massachusetts, established for that purpose, was based on technology imported
from abroad and then developed locally. These developments made New
England the technology center of the United States in the early nineteenth
century.
However, leading industries such as textiles and shoes began to move closer
to sources of raw materials later in the century, creating an economic crisis
that called forth various responses. These responses can be broadly categorized
as efforts to revive existing industries or to develop new ones. The New
England Council, which in the course of several post-war moves lost most of
its archives and old files, and thus the memory of its original purpose, was at
the cusp of this debate from its founding in the mid-1920s. The Council was a
precursor of contemporary regional knowledge-based economic development
organizations, such as Joint Venture Silicon Valley and the Knowledge Circle
of Amsterdam, that bring interested parties together. These organizations
provide a venue for debate and brainstorming of new ideas as well as spon-
soring research on regional issues. They may also provide a forum for
negotiation of alliances among industry, government and universities to
sponsor new projects.
There was a need for a broader, more intensive effort in response to long-
term economic decline from the turn of the century. In 1925, a group of
business and political leaders, including elected officials from the six New
England states and representatives from major local industries and subsidiaries
of national corporations, organized the New England Council to “improve
economic conditions for New England.”5 In addition to pursuing traditional
strategies of improving the “business climate” for existing firms in the region or
persuading firms elsewhere to relocate, the Council supported the formulation
of alternative approaches, such as an emphasis on research.
The Council wanted to emphasize the positive attributes of the region in the
competition with other parts of the country to attract industry, and recognized
that New England’s concentration of academic and industrial research laborato-
ries was a special asset. A research committee formed in 1926 attempted to
persuade New England industrialists of the importance of research by holding
an annual “Research Day” conference, “where new products are displayed and
consulting experts are available.”6 The goal was to encourage small firms to
conduct research and development programs themselves or contract with
consulting firms and universities for assistance. This was the beginning of a
second stage in university–industry relations: the support of smaller regional
firms, following an initial strategy of solidifying ties with large national corpora-
tions. This eventually led to a third stage, implementation of an explicit
strategy of science-based economic development based on new firm formation
in 1946, two decades later.
Large corporations with their own research labs and scientists could easily
relate to their counterparts at MIT. Smaller firms lacking such facilities and

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personnel typically did not have an appropriate interlocutor to relate to MIT


nor a place to turn to at the Institute to meet their needs. But could this deficit
be remedied by addressing only the academic side of the equation? In 1930,
MIT proposed to organize a laboratory, modeled on the Mellon Institute in
Pittsburgh, with its own staff devoted to industrial research.7 The objective of
the new lab was to extend the benefits of a relationship with MIT, such as the
Technology Plan offered to large corporations, to small firms.
It was expected that firms without their own research facilities would be
interested in the new plan. The lab would operate on a cost plus basis,
“provided a group of industries or individuals will underwrite for ten years the
annual loss in revenue which would be sustained by the Institute”8 in the event
that the laboratory was not used enough to pay for itself. Nevertheless,
President Compton was wary about the project warning that:

the conditional conservatism of New England may make such a project


less successful here than elsewhere, but if that is the case, it would
appear to me to be the equivalent to saying that the industries in New
England are in danger of losing out in competition with those in the
rest of the country.9

Compton’s concerns were realistic but the problem with the proposal may have
had little to do with any special cultural features of New England, or the size of
the firm.
Rather, a firm would have to have its own technical capabilities, to be able
to interact with university professors, or even special laboratories designed to
deal with their problems. At the very least, a translation and interface mecha-
nism, such as the county agent system for farmers interacting with
university-based “experiment stations,” would be required to make the project
work. Nevertheless, the Council assured Compton that the proposal would be
supported, “for we are more convinced than ever of the increasing importance
and value of research to New England industries.”10 Although a modicum of
interest was expressed, the proposal was not enacted at the time. A sufficiently
developed analysis to support a regional strategy of science-based economic
development did not yet exist.

Diagnosing New England’s economic problems


Before appropriate organizational steps could be taken, a sufficiently analytical
framework had to be developed. Old ideas had to be found wanting and new
ones created and disseminated. Later in the decade, Compton participated in a
series of forums and committees, together with the leadership of the New
England business and political communities, to find a cure for the region’s
economic ills. At these meetings, Compton articulated the thesis that academic
research could be a driving force of New England’s economy. He analyzed the

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region’s strengths and weaknesses, recognizing that its economic problems


preceded the great depression.
New England had suffered a long-term decline due to the loss of much of its
industry, which began in the early twentieth century. New England lacked most
of the raw materials used by contemporary US manufacturing industry,
explaining some of their unwillingness to locate branch plants in the region.
Traditional tactics such as reducing taxes and wages to attract industry had
failed. Nevertheless, New England still retained significant strengths. The
region’s financial institutions controlled significant capital based on earlier
industrial and mercantile successes. New England had also developed a unique
concentration of universities and research institutes. From these elements,
Compton devised a strategy for science-based regional economic development.
In 1939, the New England Council organized a “New Products” committee,
responding to a suggestion by Compton, a member of the Council. The purpose
of the committee was to:

foster the development of new products for New England industries; to


determine whether there are resources in the area of whatever nature
that may be more profitably exploited; to mobilize the scientific
resources of New England, and especially to assist the smaller manufac-
turers to utilize our industrial research facilities.11

The charge still rested on the assumption of dealing with existing firms but
entered into uncharted territory with the notion of exploiting new resources.
The New Products Committee’s most important contribution was its diag-
nosis of the source of New England’s economic decline and its proposal for a
solution based on the special assets of the region: educational and research insti-
tutions. These human resources were seen as New England’s comparative
advantage over other regions, making up for its deficit in natural resources.
Compton ascribed New England’s industrial decline to unwillingness to put “a
sufficient portion of their earnings back into improvements of plants and of
techniques and into development of new and improved products.”12 Thus, in
New England the “original technologist-promotor gave place to financial
control more interested in receiving the year’s dividends.”13 The rigidification
of industrial enterprise was intensified as “much of New England capital took
the form of trust capital funds not properly available for use as venture
capital.”14 The implicit diagnosis was a decline of entrepreneurship and the
prescription for change was its renewal.
Chaired by Compton, the committee drew its membership from manufac-
turing, finance, public utilities, the research departments of firms and the
industrial cooperation departments of universities. Three of the eight members
from Massachusetts were academics. Richard Cross, an MIT graduate with a
business background, was appointed as secretary of the committee. The
committee’s thinking evolved through three stages, each new one more far-

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reaching than the previous, as flaws in a strategy were detected. The initial idea
was to assist existing firms by improving their access to academic research to
help them generate new products. Next it was planned to use academic experts
to identify raw materials for national corporations to process in new factories in
New England. Finally, a concept was developed to form new technical firms
from university-based research.

Prospects for industrial renewal


The committee initially focused upon reviving New England’s small industrial
firms. Tied to traditional products and production processes, these firms had
often lost business in their old product lines and were unable to start new lines
of business before their decline was too far advanced for measures to revive
them to take hold. According to the committee’s executive secretary:

the problem of the typical New England small manufacturing plant


goes deeper than that of assistance in diversifying its business through
the development of new products. In many cases production methods
and equipment are obsolete and hence expensive. Often there is little
idea of production costs.15

Unable to exercise much control over the production process, management may
be reluctant to reveal its difficulties or may not even realize it has any until its
“position has become so desperate that there is little hope of improvement
without first providing additional working capital.”16
Publicity about the committee led the head of one such company to write for
assistance. He outlined the condition and prospects of the firm:

The company was organized in 1878. Until very recently it had been a
family owned concern and even now a large majority of the stock is
family owned. The company originally manufactured articles of Bone,
such as Knife Handles, Buttons, Rings, Crochet Hooks, etc. and the
Bone Scrap went into Fertilizer. I believe that this Company was
offered the right to take on Bakelite by its inventor when it first came
out but like so many other Manufacturers, the management could not
grasp the significance of this new product. The following years bone for
manufacturing purposes became higher in price and soon moulded
products were coming into the market at lower prices than bone prod-
ucts.17

The firm’s old businesses had declined in the face of new technology. Forced
out of the bone business due to competition from plastics, management decided
to specialize in fertilizers, formerly a derivative product of the main business. A
new generation of management of this family firm soon found that the seasonal

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fertilizer business which operated for only six months of the year was inadequate
to support the firm’s overheads, and sought the advice of the New Products
Committee. The letter concluded that “we have a certain amount of capital
available for expansion. What we need is to find something to supplement this
business.”18 Neither the supplicant nor the respondent had a clue as to what
that new product might be at this point.
The inability of existing small business to meet technological change was
believed to be a general phenomenon. The secretary of the New Products
Committee responded that he was:

sure your case is typical of countless long established family-owned


New England concerns that have enjoyed a protracted period of pros-
perity under formerly existing industrial and social conditions. The
record of the neglected opportunities to adopt new products and
processes or to exploit new markets is a tragic one.19

Since the committee lacked the capability to offer assistance, Cross referred the
inquirer to several industrial consulting firms to aid in a search for “the new
product that may be adapted to your facilities.”20 Although availability of
capital was not an issue in this instance Cross remarked that too often, “by the
time a manufacturer recognizes the necessity for a new product his working
capital has been dissipated in supporting unprofitable operations.”21 From this
and similar instances, the committee concluded that the prospects for revival of
local small industrial firms were discouraging.

Attracting branch plants


If local small firms were an inadequate base for industrial renewal, the next
possibility to be considered was large national corporations. Could these manu-
facturing companies be convinced to locate some of their operations in New
England? The committee then explored the possibility of attracting branch
plants of these firms to New England. It was expected that they could utilize the
region’s natural resources, once they had been identified. A series of studies
were undertaken to implement this strategy. First, existing reports and data on
the economic resources of New England (geological, agricultural and forest,
power, labor and transportation) were reviewed.22 The focus was primarily on
the natural resources of the region and secondarily on the financial resources
that would be required to tap them, once they were identified.
Sub-committees were set up to determine the local availability of factors of
production, including sources of new industrial products, new product develop-
ment procedures and sources of venture capital and untapped mineral resources.
It was hoped that untapped resources could be found or new uses identified for
old resources “in the light of present industrial uses and modern recovery
methods.”23 As the sub-committees organized themselves, they drew upon the

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region’s industrial, financial and academic communities for their membership.


For example, the mineral resources committee was made up almost entirely of
geologists from New England universities. The “Sources of New Products”
committee was chaired by the President of the Arthur D. Little consulting firm
and included the director of MIT’s Division of Industrial Research and
Cooperation.
The “Development Procedures and Venture Capital” committee counted
among its members Dr Georges Doriot, a professor of Industrial Management at
the Harvard Business School. An additional sub-committee on the “Problems of
Company Management” was also contemplated but Compton was advised to
wait until he could consult with Ralph Flanders, head of the Jones and Lamson
Machine Tool Company in Vermont and a member of the New England
Council’s Industrial Committee. In the early post-war period, Doriot and
Flanders became key figures in the invention of the venture capital firm, a project
that resulted from these earlier exploratory efforts in regional development.
A case study of a failed effort to develop a new product locally identified the
lack of venture capital as the prime difficulty in locating a new plant in New
England. A Massachusetts firm conducting research on developing synthetic
textile fibers from casein, a milk product, “was not able in the beginning to
obtain the necessary financial support in New England and was obliged to look
further afield … [with the result that] … control of this particular industry has
passed out of the area … [to the National Dairy Products Company of New
York].”24 The raw materials were available nationally and therefore the company
that provided the capital to develop this invention decided to locate production
in an under-utilized plant elsewhere. The failure to obtain a source of capital tied
to the region allowed the location decision to be made on other grounds.
Would special local raw materials be sufficient to attract investment? In 1940
it was still hoped that national corporations would establish plants to process
raw materials such as hardwood pulp for manufacture of rayon to feed the local
textile industry. The mineral resources sub-committee reported that “certain
minerals, chiefly the nonmetallics, are today susceptible of profitable exploita-
tion.”25 Even expert opinion on natural resources found this too narrow a base
to build upon. Beginning to move beyond its starting assumption of identifying
natural resources for others to use, the sub-committee suggested that, if national
corporations would not or could not use these resources, the special assets that
New England would have to rely upon for its economic revival were its skilled
labor, a tradition of manufacturing and “those facilities for research and tech-
nical development which are the modern equivalent of Yankee inventive
genius.”26 Today, we would call this its human and intellectual capital.

The prospects for firm formation


By the conclusion of this study exercise, the New Products Committee had
revised its focus from assisting existing companies to establishing new enter-

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prises and from identification of natural resources to utilization of institutional


resources such as research facilities. Reports in hand, Compton appointed a
special committee to analyze the various sub-committee findings. This group
proposed that a privately financed quasi-public corporation or foundation be
established to “appraise opportunities for specific enterprises in the New
England area.” The organization would not undertake research and engineering
projects itself but would encourage the utilization of existing facilities. The
committee held that: “The availability of such outlets and facilities is not
exceeded in any other section of the country and constitutes a New England
asset of the first magnitude. The basic principle is to capitalize this New
England resource.”27
The foundation would study potential areas of expansion for New England’s
industries but its mission would not include providing venture capital or
managerial services for individual companies.28 Later cited in Vannevar Bush’s
1945 “Endless Frontier” report at the close of World War II as an example of
how research could be utilized to support industrial development, the
Foundation barely got off the ground. Its operating authority was given to a
President and a Board of seven trustees while the public character of the organi-
zation was symbolized by a group of founders “drawn from the fields of
education, engineering research, the sciences, industry and finance and repre-
sentatives of the six New England states.”29
The foundation was a precursor of what might now be called a regional
“High Tech Council,” an organization which provides a focal point to attract
attention to emerging industries and a meeting place for members of firms in
these industries to discuss common problems and network with each other.
Such organizations, often partly funded by government and membership fees,
provide a clearing house for information for potential investors, the media and
the public as well as a forum to develop new ideas and projects to promote the
new industries. The executive director of such an organization typically
becomes a public spokesperson for the new industry as well as a point of contact
between the new industry and old ones as well as with governments and educa-
tional institutions in the region.
Although only approximately half of the projected $100,000 minimum oper-
ating budget for the first two years was raised the New England Industrial
Foundation went into business on 1 January 1942.30 Wartime disrupted the
original plan and the foundation was redirected to “the search for strategic
minerals”31 and helping New England companies become involved in the war
effort. Foundation staff were retained by companies to attune them to “needs
and opportunities in emergency war production.”32 However, the foundation’s
finances soon gave out and it became inactive.33
Nevertheless, Compton looked forward to pursuing knowledge-based
regional economic development initiatives after the war. He viewed war orders
as a temporary stimulant to an economy that would require research inputs in
peacetime to maintain its momentum. Compton suggested that companies

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should prepare for peace by devoting 2 percent of their gross income to origi-
nate new products and processes for the time “when the government ceases to
order large quantities of armaments.”34
During World War II, Karl Compton refined his general ideas to build a new
economic base from the potentially commercializable research of academic
scientists and engineers into a plan to create a specific organizational mecha-
nism to solve the problems of economic loss that traditional strategies had failed
to resolve earlier in the century. The next chapter discusses the invention of the
venture capital firm in the early post-war era to make two key elements, money
and business expertise, more available to new technology firms.

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8
THE INVENTION OF THE
VENTURE CAPITAL FIRM
American Research and Development (ARD)

After years of discussions with the business and financial communities,


Compton and his colleagues were ready to translate the academic wealth
emanating from New England’s first industrial revolution into a new wave of
economic development. When World War II ended, President Compton
renewed the effort to promote the economic renewal of New England through
the founding of new technology-based firms. He had concluded that one
blockage to the creation of science-based industry was a lack of financing. New
England’s capital was concentrated in life insurance and investment trusts and
then invested in large companies in other parts of the country. Compton now
wanted to foster economic growth by establishing a vehicle to put local wealth
to work as venture capital to fund new companies in the New England region.
Previously, the technical and financial worlds had tended to operate sepa-
rately, coming together on opposite sides of the negotiation over the financing
of a technically based firm. Now financial, business and technical expertise
would be brought together in a common organization with sources of capital
that had often previously been excluded from investment in risky new ventures.
MIT’s role in the invention of the venture capital firm was not well-known at
the Institute even though some of the firm’s capital came from the school’s
endowment and several leading professors were advisors to the firm. Compton
largely played out his role quietly behind the scenes, devoting perhaps 5 percent
of his time to ARD. Nevertheless, Compton served on the board of directors of
at least one ARD-sponsored company and ARD board meetings were scheduled
to accommodate his availability.
The invention of the venture capital firm filled a gap in the process of trans-
lating academic research into firms with new products and jobs. The plan for a
firm oriented to the development of new technical companies included leader-
ship by an individual who bridged the business and academic communities and
had credibility in both. This program was enhanced by wartime experiences
involving responsibilities for management of research and development, shared
by many of the participants in this new venture. A regional pattern of science-
and technology-based economic growth was created that has become the
subject of world-wide emulation.

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Precursors to the venture capital firm


Just before the war Compton had concluded that although venture capital was
potentially available there was a need “for organization and technique to
appraise opportunities for specific enterprises.”1 In addition to the availability of
funds, the ability to analyze the commercial potential of a new technology in
order to reassure investors that they may “proceed with a reasonable degree of
knowledge and assurance” was required.2 A professional venture capital organi-
zation was needed to reduce the risk of investing in inherently risky new
ventures. Compton felt that relatively informal groups of friends’ or family funds
were inadequate for this task.
Nevertheless, some elements were identified in existing venture organiza-
tions. For example, “New Enterprises,” a membership group, provided an
intelligence service to identify potential investments for its individual
members.3 New Enterprises was basically a group of rich people who had formed
an investment club. Nevertheless, its research focus adumbrated an important
aspect of the venture capital firm. Additional elements were found in the
Massachusetts Investment Trust mutual fund, such as an advisory board
“comprised of distinguished leaders in the Boston financial community,” and a
research department devoted to the analysis of investments.4 The wealthy
family groups (Rockefeller, Whitney, Trask) were another model, especially
when the families formalized their venture capital activities after the war, estab-
lishing firms with professional staffs.5
Securities laws had originally been designed to prevent insider collusion but
they also precluded spreading the risk of investing in new ventures among
several different sources of capital. Before an investment could be made by
insurance companies, the regulations in several key states had to be changed
and a waiver granted by the Securities and Exchange Commission. For example,
ARD’s founders persuaded the Connecticut legislature to amend its statutes to
allow life insurance companies to invest up to 5 percent of their assets in more
risky enterprises. Four other states also changed their rules to allow investment
of a small percentage of investment company funds in new ventures. Finally the
Securities and Exchange Commission established a new precedent by deter-
mining that it was proper for investment companies to join together with
institutional and individual investors to jointly invest in new companies as
ARD had contemplated.

The founding of American Research and Development


(ARD)
ARD was formed out of a coalition between two academic institutions, Harvard
Business School and MIT, bringing in administrators, teachers and graduates of
both schools as its personnel and advisors. The Business School provided gradu-
ates with managerial expertise who could advise, evaluate and, when necessary,

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replace the firm founders that ARD financed. New company presidents were
typically people with a technical, not a business background. MIT provided
people with a technical background who could seek out the technologies on
which new companies would be built. MIT also provided much of the tech-
nology, many of the potential firm founders, and the expertise to evaluate the
technical feasibility of proposals. Harvard Business School contributed organiza-
tional and financial expertise and credibility in the business world.
The project also had the support of Boston’s financial community, concerned
with the future of the region in the post-war era.6 Compton persuaded the
members of an elite New England business, political and educational network to
take on the task of organizing a venture capital firm. The group included Merrill
Griswold, head of the Massachusetts Investment Trust and a leader of the
Boston financial community, Donald David, Dean of the Harvard Business
School, and Ralph Flanders, President of the Jones and Laughlin Machine Tool
Company in Vermont, who had also served as head of the Federal Reserve Bank
in Boston, to form the American Research and Development Corporation
(ARD) to supply risk capital to new technical companies. Dean David had
introduced his friend Ralph Flanders to Griswold, who he said was “worried
about the same thing [lack of risk capital for new enterprises].”7 The issue was
not simply lack of funds but rather lack of funds and expertise that could be
dedicated to founding new enterprises.
The founders had a variety of motives, some genuinely believing in the
practicality of the project while others saw it largely as a public relations
device. Flanders viewed the venture capital firm as a model for future economic
growth, arguing that: “The post-war prosperity of America depends in large
measure on finding financial support for that comparatively small percentage of
new ideas and developments which give promise of expanded production and
employment and an increased standard of living for the American people.”8
Griswold initially viewed the business prospects of ARD skeptically and mainly
saw it as good publicity for the Boston financial community, but later, through
service on its Board, developed a personal interest in the formation of tech-
nical firms.9
The founding of ARD was widely publicized in the business press and noted
in general media such as Time Magazine.

The sponsors of American research got together because they felt that
standard investment companies and individuals were too thoroughly
hobbled by Government restrictions and taxes to put up the risk
capital industry needs. What was needed, they decided, was an organi-
zation that could combine a pool of venture capital with the
know-how to put the money into the right investments.10

An optimistic Californian observer noted that “While it may be several


years before its investments, as such, show a profitable return, the company’s

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eventual success, both from a humanitarian and a financial standpoint is


more or less a foregone certainty.”11 The early internal view was not quite so
sanguine.
Although the original plan to raise $5 million for American Research and
Development’s initial capitalization was not fulfilled, the firm was begun after
$3 million had been raised.12 A purchase by the Morgan Guaranty Trust
department helped legitimate American Research and Development to other
financial houses and investors in New York. Financing was aided by a post-
war shift of trust funds, pension funds and institutional endowments from
preferred stocks and bonds into common stocks.13 Lehman Brothers and
Harriman, Ripley were among the firms that supported the distribution of
ARD stock to investors but they were limited in what they could do for ARD
by a relative lack of investor interest.14 The 1947 Treasurer’s report noted
MIT’s investment in ARD. Compton also persuaded his colleagues at other
technologically oriented universities such as the Rice Institute in Houston to
invest in ARD.
Flanders and Griswold took responsibility for the organizing phase of
Compton’s “pro bono publico” business.15 After a brief period under Flanders,
General Georges Doriot (a professor of industrial management at the Harvard
Business School who had just completed a term of wartime service in the
research and development branch of the US Army’s Quartermaster Corps and
had been a member of the pre-war New Products Committee) was made
President of ARD. Doriot had come from France to Harvard after World War
I, initially as a student, and then remaining as a professor. He had run a
Pennsylvanian steel company, Mckeesport Plate, for a time during the 1930s
and had also served on various boards of directors. In his wartime service in
the research branch of the Quartermaster Corps he had attained the rank of
Brigadier General and henceforth was known in public life as General
Doriot.
General Doriot’s interest in creating high-tech start-up firms was relatively
unusual for a Harvard Business School professor in the early post-war era.
Harvard Business School, through the consulting activities of its faculty and
the placement of its graduates, was connected primarily to large corporations
at the time. Doriot’s course on “manufacturing” at Harvard Business School
involved his students in carrying out studies of the potential of new industrial
areas and was as much aimed at encouraging the development of
entrepreneurial character as transmitting any specific analytical skills. For
Doriot, heading up a venture capital firm translated what had been classroom
exercises into actual businesses. Like some of the professors who were assisted
in forming firms by ARD and other venture capital firms, Doriot maintained
his professorship at Harvard and ran the venture capital firm at the same
time, often keeping evening office hours and holding Saturday staff
meetings.16

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Legitimizing the venture capital concept


The triad of Harvard Business School, MIT and the financial community legit-
imized the concept of venture capital to state governments and federal
regulators. The financial community and its legal representatives provided the
bulk of the funds as well as legitimacy in the business world, and also used their
political connections to gain necessary changes in regulation and law to make
the concept feasible. An observer commented: “Had not the investment
bankers associated with this new company been willing to do a great deal more
than ordinarily is expected of them, the new venture might well have died
aborning.”17 They gained legal approval for financial institutions required by
law to invest their funds conservatively to participate in the financing of a firm
designed to act as an intermediary to transfer these funds to one of the riskiest
of all business propositions: the start-up of a new firm.
Legal barriers designed to protect the assets of small investors precluded large
financial institutions from investing any of their funds in a new firm based on
a novel concept. The thesis was that by distributing the funds among a number
of new firms the financial risk would be reduced to an acceptable level, even if
only a few of these ventures were eventually successful. The original venture
capital concept included: a mechanism for amassing capital from a variety of
sources through the sale of equity (stock) in the firm; a technical advisory board
to provide leads and assess proposals; and a staff with the expertise to offer busi-
ness advice and take the necessary organizational steps to assist in the formation
of a firm.

Creating a role for venture capital


Beyond the question of financing ARD, there was the issue of its mode of oper-
ation and the development of a format for the creation of new firms that could
successfully balance business and technical criteria. As its president defined the
issue: “The Company is not a form of bank. It is a builder of new enterprises.
Money, skill, knowledge and men are the tools it will use in a program requiring
careful planning and long-range thinking.”18 Extensive publicity resulted in
hundreds of proposals to ARD from independent inventors but innovative
devices by themselves were not sufficient to attract serious interest. To create
companies with innovative technologies that were competently run, technical
people had to be given business advice and business people found to run the
companies.
ARD’s objective was to identify a technically superior product with commer-
cial potential and find people who could bring it into production and to market.
The guidelines for making an investment were as follows:

• Research and development carried on to date indicate that the enterprise


will be commercially practicable.

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• Satisfactory profit potentialities exist.


• The competitive position is initially protected through patents of special-
ized knowledge and techniques.19

The internal structure of ARD was designed to achieve these objectives


through a small staff, supported by technical and business advisors. In addition
to President Compton, the technical advisory board included two leading MIT
professors, Gilliland from chemical engineering and Hunsaker from aeronautics.
Both were well-connected to and respected by the projected source of tech-
nology, the faculty and students of the school. The board of directors of ARD,
consisting of members with financial and legal expertise and experience in a
range of technically based businesses including chemicals and machine tools, as
well as having final authority on investments also functioned as a business advi-
sory group on the viability of projected firms.
In taking equity in a company in exchange for its investment ARD expected
a long-term relationship.

When we do invest in a growth company, after careful investigation,


we usually have representation on the company’s board and arrange for
one of our men to spend time counseling the firm’s management. And
after a company is on its financial feet, we begin to think of recovering
at least part of our investment so these funds can be re-invested in a
new growth situation.20

This relationship included the willingness to take a longer-term perspective on


return from investment than the conventional three years, placing members of
the firm on the board of the company invested in and intervening in the affairs
of a company when necessary.
ARD orchestrated changes in leadership when it felt that a firm was beyond
a founder’s ability to manage and a “head man was needed right away.”21 The
company president, an individual with a technical background, was unhappy
with his growing responsibilities as manager. “He has been in my office many
times explaining to me that the company was too big for him, that he did not
like it and wanted to quit. He has stated that he was much happier when the
company had only twelve or fifteen men.”22 More typically, technically oriented
CEOs refuse to recognize that personnel and commercial dealings have gotten
beyond their abilities and interests.
When ARD believed that a company it had invested in had been naive in its
dealings with another company, General Doriot wrote to its president:

I would suggest that you call a Board Meeting of High Voltage when-
ever Dr. Compton can be there. … You have wasted a good deal of
time. You have trained A.D. Little to be “the world’s greatest experts
on the use of high voltage,” you have given them many of your ideas,

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techniques and secrets so that they can get good fees peddling your
information. I think we should quit.23

An informed observer commented on the ongoing relationship between the


head of ARD and the company:

The General keeps popping in and out throughout the company’s early
history. He let Robinson run the company, but he is there one day
telling Robinson that his sales organization is inadequate. He is there a
few years later urging Robinson to take advantage of the Common
Market and put up a manufacturing plant in Europe.24

The role of the venture capitalist was gradually defined.

It was thrashing around. Nobody had ever done that kind of work they
were doing. [They were] seeking a sense of direction, trying to decide
what kind of things to do and how to do them. In the post war hustle
and bustle, there were so many men and women who had felt bottled
up for the past 5–6–7 years. We had been in militarily oriented jobs
and been given duties and responsibilities that in truth were beyond
our normal capacities, our normal talents, just because somebody had
to do it and you did the best you could. There was a great pent-up
demand to … get going. “Let’s reshape the world; let’s change its ills
and shortcomings”. So American Research and Development had a
very high tone and intent and integrity over and beyond making
money.25

Interaction between ARD staff and advisors was mainly through informal
discussions rather than formal meetings of the advisory board. However, the
advisors occasionally participated in the quarterly board of directors meetings
where funding decisions were made. A variety of approaches were used to build
up a network of contacts and to learn about emerging technical areas. To obtain
leads to people with ideas that could be turned into companies, staff members
attended electronics trade shows, scanned trade journals and kept in touch with
ARD’s advisors at MIT. To emphasize the importance of visiting universities
General Doriot once ceremoniously handed out Massachusetts Transit
Authority tokens at the close of a staff meeting.
ARD “very aggressively worked MIT.”26 A staff member typically dropped by
the office of a faculty member who was an ARD advisor and in the course of a
conversation, “These gentlemen would alert us, tip us off, help us. ‘There is a
young graduate student down the hall working on something. We think it is
interesting; you have to decide if it has commercial possibilities.’ ”27 Since
MIT’s role in the founding of ARD was largely an administrative initiative that
did not create controversy, most faculty and graduate students were not aware of

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the existence of ARD or of the Institute’s role in the founding of the firm.
Therefore ARD staff members often introduced themselves to professors and
students by mentioning such connections and President Compton’s founding
and continuing advisory role.
ARD’s role in the formation of new firms based on research at MIT is exem-
plified by the High Voltage Corporation and Digital Equipment Corporation.
High Voltage shows the gradual progression of an academic research project
toward commercialization while the formation of Digital Equipment illustrates
the creation of networks between the university and the emerging venture
capital world.

The High Voltage Engineering Corporation


In the course of twenty years the development of the Van de Graaff generator
utilized virtually all the patterns of university–industry relations from assign-
ment of patent rights to an existing firm to formation of a new firm. Van de
Graaff’s interest in high voltage was stimulated during employment in the
summer of 1921 on the maintenance gang of the Alabama Power Company.
This experience gave him a practical appreciation of the engineering difficulties
encountered in working with high voltage. In 1926–7 it occurred to him that
“the generation of high voltage in a vacuum would afford a means of acceler-
ating ions and electrons to enormous energies and that these high speed
particles would afford a powerful means for the investigation of the atomic
nucleus and other fundamental problems.”28
At Oxford University in the 1920s, in the course of doctoral research on
another topic, Van de Graaff outlined methods of beginning this project but did
not actually initiate it until 1929 when he received a National Research
Council fellowship to Princeton University. The fellowship was officially
awarded to carry forward his PhD research but upon arrival at Princeton Van de
Graaff persuaded his sponsor Compton to allow him to drop this line of work
and pursue the application of electrostatics to nuclear research. When Compton
became President of MIT he encouraged the appointment of Van de Graaff.
The commercial potential of Van de Graaff’s research was viewed as suffi-
ciently promising for MIT to draft a document to specify the rights of the
different parties involved in the research. The parties listed were MIT (Van de
Graaff’s current base) the National Research Council (which had provided
fellowship support), Princeton University (which had provided an initial
research site and equipment), the Research Corporation (which had provided
funding for the construction of apparatus) and Van de Graaff (the inventor and
leader of the research team).
MIT would control disposition of patent rights and take responsibility for
development up to the point of manufacture while the various parties would
hold different shares in the potential commercial outcomes of the research.
Princeton’s share, for example, was proposed to be quite limited as it had

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already been reimbursed for the cost of research equipment moved to MIT. The
agreement also protected scholarly access to aspects of the research involving
fundamental science and attempted to balance concerns for broad utilization of
the medical treatment and power transmission applications of the research with
the attainment of reasonable profits.
During World War II several high voltage generators were built at MIT with
support from the Office of Scientific Research and Development (OSRD). At
the suggestion of OSRD, the Westinghouse Corporation was licensed to
produce generators but had “apparently done nothing” with the patents by
1946. In March 1946 Van de Graaff and his associate Professor Trump went to
see John Bunker, the Acting Chairman of MIT’s Patent Management
Committee and proposed that Westinghouse’s license be cancelled and that a
new company “would perhaps be in order.”29 Compton recommended that
ARD back the formation of a firm and in December 1946 the High Voltage
Engineering Corporation was formed to manufacture and sell electrostatic
generators for use in cancer treatment, industrial metal inspection and nuclear
physics research. The high voltage generators built at MIT during World War II
served as prototypes for the company’s product line. Dr Dennis Robinson, a
dielectric and radar expert with administrative experience as coordinator of the
Anglo-American program at the Radiation Laboratory, became president of the
company. ARD staff provided High Voltage with financial and business advice
and by 1955 it was a reasonably successful company.

The Digital Equipment Corporation


The formation of the Digital Equipment Corporation was also based on
government-funded research at MIT. Project Whirlwind originated at MIT
during World War II to build a simulated flight training device to assist in the
training of pilots and make it a less labor intensive task, since skilled pilots
who had performed in combat were in short supply. The construction of the
simulator was based on the development of electronic devices that were essen-
tially computers. When the war ended before the project was completed, the
Naval Office of Scientific Research and Development temporarily continued to
fund the project but its fate was in doubt. The requirements of the Air Force
for a means of coordinating the tracking of aircraft across a network of radar
stations for the Distant Early Warning line in the early 1950s gave a new life
and purpose to the Whirlwind project. The technology in the process of devel-
opment was redesigned from a special purpose computation device to drive
flight simulators into a general purpose computer to calculate, store and
retrieve continually changing information about a multitude of aircraft flights
occurring simultaneously. The Air Force took over responsibility for the project
from the Navy, expanding its funding and scope.30
In the early 1950s ARD focused on computers as an area of possible commer-
cialization. The few existing small companies such as Eckert-Mauchly in

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Philadelphia were visited but no deals were made. After a discussion of this
foray at an American Research and Development board meeting, Horace Ford
(treasurer of American Research and Development and former treasurer of
MIT) took staff member William Congleton aside and told him that at a recent
meeting of the board of MIT’s Lincoln Laboratory, of which he was a member,
he had heard about some interesting work on computers. He was a “number
plumber” himself and didn’t know anything about computers but suggested that
Congleton contact Professor Jay Forrester, an assistant director of the project.
Forrester suggested that Congleton talk to two graduate students, Kenneth
Olsen and Harlan Anderson, who were working at Lincoln Laboratory. As
members of a team that had lost a competition to design an airborne military
computer to another group at the lab they still believed that they had come up
with the best design. There had been desultory lunch conversations about going
into business but no concrete steps had been taken.
After a series of conversations with ARD staff members in which “They
would tell us about computers and we would tell them about the problems of
starting a business … it began to shape up into a little program to see if we
could commercialize this computer concept.”31 However, since a market
survey suggested that commercialization of computers was premature a
cautious approach was taken. Digital Equipment Corporation would begin by
making circuit boards and sell them to research labs and industrial organiza-
tions that weren’t yet ready for a computer but wanted to take a first step
and experiment. ARD committed $300,000: $100,000 as equity capital and
$200,000 to be available as loans if the company was proceeding satisfacto-
rily. Within a relatively few years Digital Equipment had become so successful
as a maker of mini-computers, and American Research and Development’s
modest investment worth so much ($400 million), that a moderate success or
failure on any other project had virtually no impact on ARD’s financial
status.
ARD’s investment in Digital Equipment was distributed to the venture capital
firm’s shareholders so that American Research could function again in a mean-
ingful way. The huge value of the Digital Equipment stock in ARD’s portfolio
meant that the relatively modest profits and losses on most new ventures would
have virtually no effect on the venture capital firm’s worth. Thus the payout to
early investors. Ironically, MIT was not among those who gained financially from
the success of Digital Equipment or ARD, having sold its stock in the early years
of the firm before any increase in value had accrued. The administration’s
interest in the venture firm did not postdate the Compton era, despite the signif-
icance of this intiative which resulted in the foundation of the contemporary
venture capital industry. MIT returned for a time to a laissez-faire institutional
posture with respect to industry, with increasing numbers of its faculty individu-
ally participating in the formation of new firms assisted by ARD and other firms
descended from it in the emerging venture capital industry but MIT did not take
a new administrative initiative in technology transfer until the 1970s.

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The beginnings of the venture capital industry


During the initial decade observers often viewed ARD’s prospects as dim but
the firm’s investment record began to look respectable fifteen years after it had
been formed, even apart from the remarkable success of Digital Equipment. By
the early 1960s, ARD was the oldest and largest publicly owned venture capital
firm and an observer noted that: “For this reason, its record is conspicuously and
frequently quoted.”32 By 1961, 3,300 prospects had been investigated and sixty-
six invested in (about 2 percent of those worthy of initial study). Of the
sixty-six, twenty-nine had been sold for a gain of $3 million on twenty, with
losses of $850,000 on the other nine. The thirty-seven remaining firms in the
portfolio had expanded investments totalling $11.1 million to a value of $30
million. ARD had invested in eighty-four companies in total by 1961. The
forty-two still held comprised ARD’s then current assets of nearly $39 million.33
Goverment policy expanded the nascent venture capital industry during the
1950s, capitalizing firms through its small business development programs. The
example of ARD and other venture capital firms encouraged Congress to autho-
rize an additional venture capital instrument, the Small Business Investment
Corporation through the Small Business Investment Act of 1958. The purpose
of the Small Business Investment Corporation was to provide loans to new
companies that banks would not normally lend to. The public purpose justifying
the establishment of this government agency is the creation of jobs. Despite a
high failure rate such small companies have been recognized as the greatest
source of US employment growth.
Almost twenty-five years after its founding it was reported that ARD had
done so well “that it is beginning to spawn some imitators, both in the United
States and Europe.”34 “The inspiration for most European venturers has been
American Research and Development.”35 A series of venture capital firms were
founded modeled on ARD, for example, the Value Line Development
Corporation and Diebold Technology Ventures. Among the firms founded by
ARD alumni were Greylock (Elfers) and Palmer Associates (Congleton). By
1979 there were 250 venture capital firms,36 including those that were direct
spin-offs and others that had been stimulated by ARD’s example.37 In 1997, this
source listed more than 1,000 venture capital firms in the USA and abroad.

The trajectory of venture capital


The nature and definition of the venture capital firm has changed significantly
since the success of ARD and perhaps because of the great potential for finan-
cial rewards generated by this mechanism for financing new businesses. Since
ARD’s founding, partnerships have become the norm in the venture capital
industry. This organizational form, in contrast to a corporation, allows members
of firm to have direct control over earnings. Acceptance of the partnership
model reflects a perception that the venture capital firm is a less risky business
proposition than originally conceived. On the other hand, most contemporary

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firms in the industry concentrate on financing the middle and later stages of
new company development. It has been estimated that fewer than twenty firms
are in the business of funding the early stages of development of new technical
companies.38
The shift from corporate ownership and the increase in size of venture
capital funds both had significant effects in changing the structure of the
venture capital industry from the early days of ARD and its immediate
offspring, who focused upon what would now be called “seed” capital invest-
ment in high-tech firms, with considerable involvement in the management of
these firms, to the present era in which most venture capital investment is made
at the later stages of firm formation and often to non-technically oriented firms.
Indeed, it is sometimes seen as a misrepresentation to refer to venture capital
as relevant to the initial stages of firm formation, so strongly has the approach
of the industry changed; so has its very definition. The larger blocks of funds
involved drive investments downstream since it takes virtually the same due
diligence and investment of effort to seek out an early stage candidate as a later
stage one. Moreover, since the employees are making their bets with income
tied closely to the firm’s returns, this may have a conservatizing influence on
selection of investment in contrast to the early situation when investment deci-
sions were virtually de-coupled from personal economic interest, short of failure
of the firm.
In the course of the late 1990s e-commerce bubble, intense competition for
investments led venture capital firms to search at the earliest stages of firm
formation again. Some formed incubator facilities to create firms themselves
rather than waiting for business plans to be presented to them. Many of these
firms, however, were e-commerce ventures that duplicated similar business
models. Many were also variations on existing firms in what was soon realized to
be an already crowded market. Nor were most of these firms based on techno-
logical innovation. As the private venture capital industry engaged in triage,
shutting down some firms and putting more capital into others in a rescue
effort, an alternative venture capital industry emerged in its wake.
Almost as a reprise of the original founding of ARD, universities and other
investors have been establishing “seed” venture capital funds to build new busi-
nesses from technologies developed on campus. A number of schools, including
Northwestern University, New York University, the University of California at
Los Angeles and Columbia University, have established such funds. In addition,
several new venture firms, with names such as StartEmUp, University Angels
and ITU Ventures, have been set up that explicitly target next-generation,
university-originated technologies as the basis for firm-formation.39
It can be expected that universities will increasingly use a small part of their
endowments to capitalize such funds, much as MIT and Rice funded ARD in
the 1940s. This time the investment vehicles will likely be maintained as part
of a continuing effort to capitalize intellectual property and move to realize the
vision of a self-generating academic enterprise. It can also be predicted that this

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trend will be broad-based as both research-intensive universities and less


research-intensive universities and regions with ambitions to build knowledge-
based industry foster these developments.
In the 1930s Karl Compton and his colleagues at MIT recognized that New
England possessed research activities to a greater degree than the rest of the
nation and sought to capitalize on this regional resource. If existing companies,
whether national or local, were not interested in or capable of commercializing
emerging technologies, then new companies would have to be formed. Through
their role in the formation of ARD, MIT and the Harvard Business School, the
Boston financial community helped create the venture capital industry. The
next chapter will examine how this model for science-based regional economic
development, based upon university–industry connections, was transferred from
MIT to Stanford.

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STANFO RD AND SILICON
VALLEY
Enhancement of the MIT model

Stanford University and Silicon Valley developed as a virtual joint venture.


The metamorphosis of the region and the university was a cooperative and
collaborative effort in which the evolution of the Valley was inextricably inter-
twined with the transformation of the university. Stanford played a significant
role in creating the vision and implementing the strategy that produced the
world’s leading complex of high-technology firms. The rise of these firms in turn
fed back into the growth of the university by providing it with a pathway for its
students, a market for its technologies and partners for building new research
collaborations. By assisting the economic development of its region, Stanford
transformed itself into a leading research university.
Ultimately, Stanford’s initiatives provided the base for the development of a
high-tech region in northern California, a model for liberal arts/research
universities interested in transforming themselves along similar lines and an
interactive concept of innovation, transcending previous linear and reverse
linear modes. This academic/industrial development project began in the early
twentieth century and had made sufficient strides during the depression such
that Stanford University was the source of technology firms even before World
War II. The development of firms from academic research became the basis of a
so-called “science push” linear model of innovation, starting from investigation
and resulting in practical uses. This was in contrast to a “market pull” reverse
linear model, exemplified by Thomas Alva Edison’s solutions to communica-
tions problems for New York City’s financial industry.
Stanford’s goal became the creation of an industrial support structure for
academic research. A technological industrial infrastructure was also neces-
sary if graduates were to be retained in the area. Accordingly, Stanford
appropriated the MIT entrepreneurial university model and adapted it to the
contexts of a liberal arts academic setting and a developing region. Stanford
then expanded upon both the entrepreneurial model and the “ivory tower”
model of basic research-oriented universities by giving equal weight to the
liberal arts and sciences, the engineering school and the medical school.
Most universities were built upon one or two of these legs whereas Stanford
had three.

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The origins of Silicon Valley


Not too many years ago, the area now known as Silicon Valley was a “greenfield
site” of fruit and nut orchards. San Francisco anchored the emerging technolog-
ical complex to the north, with Stanford University affixed at its southern edge.
By the mid-1970s, the growing complex of San Francisco Bay-area technology
firms, venture capitalists, entrepreneurial scientists and engineers, had been
dubbed “Silicon Valley.”
Silicon Valley had its origins in a university development strategy even as
that university achieved its distinction based upon a unique approach to
regional development. Stanford looked to MIT as a model for its industrial
development strategy although there were clear differences between the two
schools and their situations. MIT had been built upon an existing base of tech-
nological industry in the Boston area, which provided support for its founding
and development. Stanford, on the other hand, was located on a pristine site
surrounded by thousands of acres of scrub ranchland where valley turned to
hills, and consequently had to take a proactive role in creating industry to
support its growth, unlike early MIT, where the school’s original purpose had
been to enhance the technological capacity of local industry by infusing it with
new ideas.
Founded in the late nineteenth century by a railroad tycoon in memory of a
deceased son, Leland Stanford Jr University soon acquired more of a reputation
as a party school for children of the rich than as a center of intellect. Pre-war
Stanford held elite social status but was not yet considered a leading university;
however, the groundwork was being laid for its eventual transformation into
one of the top research schools in the country.
When Stanford was founded, San Francisco was a shipping, trading and
financial center, with few technological and industrial attributes. Shortly there-
after, however, the beginnings of an electrical industry appeared, much of it
developed by Stanford graduates, who installed and maintained technology
imported from the eastern United States and soon supplemented it with their
own inventions and products. Firms such as Heintz and Kaufmann and Federal
originated the contemporary “western electronics industry.”1 By the 1930s, the
regional electronics industry was flourishing, led by local electric firms, along
with electronics programs at Stanford. Industry and university grew in tandem.
How did industrial and academic development strategies converge? Northern
California was originally dependent on the east for its electrical equipment and
other modern technologies, and even after the engineering school at Stanford
had trained engineers who could configure and operate these technologies, the
region still lacked its own technological industries. The founders of the
Stanford Engineering School held that they could never have a leading school
unless it was associated with local industry that had the capability for techno-
logical innovation, not merely replication of imported technology. Since that
industry did not exist, it would have to be created. The available base on which
it could be built was the Engineering School itself. The Stanford strategy of

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academic-based industrial development thus preceded Frederick Terman, whose


name is synonymous with Stanford’s emergence as an engine of regional
economic development, and who accordingly is often referred to as “the father
of Silicon Valley.”

Stanford’s academic development strategy


Frederick Terman had been a student of Stanford’s engineering faculty
members, who played a key role in creating regional business from technologies
innovated in their labs. After receiving his bachelor’s and master’s degrees from
Stanford, he obtained a PhD in electrical engineering from MIT. He returned to
Stanford in 1925 and joined the engineering faculty. He soon became head of
the electrical engineering department, with the ambition of making it a leader
in the field. Like Vannevar Bush, his mentor and PhD advisor at MIT, Frederick
Terman never became president of his university. Nevertheless, he was more
influential than most presidents in shaping a new academic model. Also like
Bush, Terman was active as a consultant to industry and participated, through
his students, in forming new firms from technology developed at the university.
Terman’s academic development strategy in the 1930s had three key
elements: (1) making close connections between science and engineering
departments; (2) linking academic departments and local science-based firms;
and (3) concentrating resources on a few key research areas with both theoret-
ical and practical potential. Terman included in the training of electrical
engineering students visits to area firms such as HK, Eitel-McCullough, and
Litton Engineering, where they learned about the commercial potential of elec-
tronic devices. Under Terman’s guidance, engineering students also became
multidisciplinary, joining with other departments to work on research projects.
Thus, the flow of electrical engineering students went in both directions –
toward industry and toward basic research disciplines, notably physics.
An important part of Terman’s strategy was to create an industrial context
around the department, making it possible for graduates to remain in the region.
In 1939 he encouraged his students William Hewlett and David Packard to
form a firm based on their invention of a resistance-tuned oscillator. In a
precursor of the center mode of cooperative investigation, the six members of
the physics department banded together to conduct a joint research project to
build a 3-million-volt x-ray tube to explore atomic and nuclear phenomena.
The Stanford electronics researchers, competing with the Berkeley cyclotron,
sought to accelerate particles at a low cost and with a relatively simple device.
The financial exigencies of the depression meant that professors often had to
undertake the mechanical and design tasks of building equipment, which gave
them a familiarity with practical engineering problems that they might not
have obtained under more affluent conditions.
As department chair and later as Stanford University’s Engineering Dean
and then provost, Terman focused on a few key fields. He argued that by devel-

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oping a coherent strategy and by concentrating new resources on a few selected


fields an emerging university could move past heretofore more distinguished
universities. The son of Lewis Terman, the noted psychologist and long-term
faculty member at Stanford, Frederick Terman is said to have been influenced
by his father’s psychological research on gifted children. This background may
have led him to focus on a few areas of distinction, or as Terman liked to call
them “steeples of excellence,” rather than to try to upgrade academic quality
across the board.
Concentration of resources is contrary to traditional academic practice,
which favors equality in distribution of resources in theory, if not always in
practice. Terman believed that research should take first prominence in the
hiring decision. He also held that several faculty members could be hired in the
same research field, contrary to the usual departmental practice of spreading
faculty across the discipline. Terman based this strategy on the assumption that
a faculty member could teach more broadly than their research area. Thus, gaps
in the curriculum that had to be filled for educational purposes did not neces-
sarily have to influence the hiring decision. Since most schools hired on a case
by case basis, keeping a variety of departmental and disciplinary needs in mind,
a school with a single-minded determination to develop excellence in a few
research fields could create a critical mass within an academic generation and
become a world leader.
Concentrating on a relatively few existing and emerging fields, sometimes
labeled towers or centers of excellence, is currently becoming a widespread
strategy. Schools such as Ohio State University, that realize they cannot afford
to support all disciplines equally and still attain distinction, have recently taken
up Terman’s academic development strategy. The other part of Terman’s
strategy, developing a collaborative relationship with technology firms
emanating from the university, is also becoming more widespread. The State
University of New York at Stony Brook, for example, was instrumental in
creating a local biotechnology industry from on-campus research, which then
fed back into the academic environment. A related strategy, exemplified by the
Centennial Campus of North Carolina State University, is to bring existing
companies with technological capabilities within the academic orbit as poten-
tial collaborators. At Stanford, university–industry collaboration also helped
create a tradition of inter-firm collaboration, formal and informal, that became
the hallmark of Silicon Valley.

University–industry relations: a seamless web


The Silicon Valley model of individual technologists and firms interacting and
networking with each other developed early on. A “technology pool” was
created that firms and academic researchers could both draw upon. In essence,
universities operated within a seamless web to further their overall regional
development objectives, initiating a series of firms while raising the level of

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academic research. Industry and academia mutually inspired each other.


Although “Not a few men in the semi-conductor industry see the academic
reputation of Berkeley and Stanford as a product of industrial progress and not
vice versa,”2 Terman viewed the relationship as reciprocal.
The university served as a neutral ground, creating links among firms. Those
cooperative arrangements foreshadowed contemporary efforts to share pre-
competitive research among a related group of firms and to have early reports
cross freely between a university researcher and a firm, typically one that had
emerged from academic research. Stanford professors and their former students,
located in nearby start-up firms, made a series of electronics inventions in the
late 1930s that took the local electronics industry to a new level. Professors
collaborated with former students who had formed firms nearby the university.
For example, in 1939 the Varian brothers, who had formed Halcyon, and Prof.
W.W. Hansen invented the Klystron tube, a new type of amplifier and oscillator
of electrons.3 Hansen had previously invented another electronics device, the
rhumbatron in 1936. In the pre-war era, both the electrical engineering depart-
ment and local electronics firms lacked critical mass. To encourage the
development of the university and industry, several companies released their
patents on electronics devices for use with related intellectual property held by
Stanford.
The inventors turned over their patent rights to the university. Even Litton,
a close associate of the early Stanford electronics researchers but located in
industry, assigned his patent for the generation of high frequency oscillations in
multigrid tubes to Stanford. The rights to all of these electronics devices went
into a common pool controlled by Stanford. Stanford’s repository of intellectual
property was made available to all firms in the pool, allowing each company a
broader base for product development. This arrangement placed the objective
of building the electronics industry for the region ahead of the individual
competitive advantage. In payment for its intermediary services, the university
received licensing income, which it used to enhance its academic programs.
The electronics inventions made at Stanford, and the firms that emanated
from the university, fed both into wartime radar research and post-war basic
research in physics. The Varian brothers gave up their early firm and moved back
to the university to be able to work more closely with faculty members in devel-
oping the military implications of these discoveries. Stanford academics and firm
founders shared a common perception of the dual implications of these discov-
eries during the 1930s, a conclusion that academics at MIT’s Rad Lab drew during
the war. After the war, the brothers revived their firm, under their own name,
providing equipment for university research instruments as well as to industry.

Market pull: the New York model


The linear model of practical implications drawn from academic research has its
complement in a reverse linear model, moving in the opposite direction.

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Silicon Alley, like Silicon Valley, is a metaphor for high-tech entrepreneurship.


Generally speaking, the New York model developed from a business concept in
which new firms are created to use technology for solving the problems of
existing businesses. This market pull perspective is exemplified in the saying
“Wall Street loves a firm that has good management,” and it represents an alter-
native to the technology push model pioneered on Route 128 and Silicon
Valley.
The New York model originated in the late nineteenth century, with
Thomas Alva Edison’s innovations in telegraphy meeting the needs of the
financial industry for secure communications. He then expanded upon this
approach of enhancing existing businesses and industries by utilizing technology
to meet broader needs, such as for improved lighting. He then envisioned future
needs and inventions to satisfy them, in the process creating new communica-
tions industries. Edison systematically looked at needs in society and then
invented products to meet those needs. He was able to find the financing in
New York to accomplish his goals.4
At that time, New York City became one of the three leading world high-
tech centers, along with Berlin and Paris. With the movement of technology
firms from the city by the mid-twentieth century, however, and the failure to
develop a leading technological university, New York lost its status as a center
of high technology. Nevertheless, in recent years the New York model of
starting from business concepts and the financial industry has been revived in
the form of Silicon Alley. Newspaper editors have come up with new business
ideas based around the Internet, and software firms have enhanced the produc-
tivity of traditional New York industries, including some of the same ones that
Edison serviced, such as finance, and the now-traditional media industries,
many of which grew out of his inventions.

Technology push
A technology push model was meanwhile developed in Boston and Northern
California in contrast to New York’s market pull approach. Despite some differ-
ences, Silicon Valley and Route 128 share a common origin that can be
discerned in the work of MIT’s Vannevar Bush and Stanford’s Frederick
Terman, who had been, respectively, teacher and student at MIT. In their
conception, innovations can reach the market through university research
assisted by venture capital. Moreover, Vannevar Bush’s participation in the
founding of the Raytheon Corporation in the 1920s had become an inspiration
to his fellow MIT administrators who envisioned a “research row” along
Memorial Drive during the 1930s.
The model of science-based economic development from academia through
the mechanism of the venture capital firm was transplanted from MIT to
Stanford in the early post-war period as a result of Terman having been around
MIT during the war. As director of the Radar Counter-Measures Lab at

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Harvard, he had the opportunity to observe MIT’s mode of operation at close


hand. One sign of Terman’s early intention is a letter he wrote in 1943 to
Stanford’s treasurer proposing an even more intensive replication of the MIT
model for Northern California. Terman advised the treasurer that the way MIT
operated in connection with industry is what had to be done at Stanford as soon
as the war was over – form research centers, establish firms and make this a
central thrust if Stanford was to become a major university.

The effect of World War II


The electronics devices developed at pre-war Stanford had long-term implica-
tions for the development of the university as a center of electronics research
and of the region as a center for the electronics industry. The devices had theo-
retical as well as practical implications as they were utilized both for
development of radar systems and for building devices to study the behavior of
electrons. The immediate military applications were realized elsewhere since
Stanford was not chosen as a site for a major laboratory. Immediately after the
war, Terman brought back to Stanford the expanded collaborative research
models that he had observed at MIT.
Terman viewed the years after the war as critical for Stanford, determining
whether it would become the Harvard of the west or persist on a level of
national influence comparable to that of Dartmouth, “a well thought of institu-
tion having about 2 per cent as much influence on national life as Harvard.”5
Terman believed that “Stanford can be a dominating factor in the West, but it
will take many years of continuous good planning to achieve this.”6 He argued
that older universities gave too much prominence to the pure sciences “and this
has prevented the applied science groups from having a free hand to develop in
their own way.”7
Terman advocated concentration of resources, long-term planning, balancing
regional interests and attention to student demands. He proposed that Stanford
concentrate its resources in selected fields according to two criteria: whether a
field was of interest to large numbers of students or was relevant to regionally
significant industries such as oil. Since electronic engineering and radio attract
the best students, he believed that Stanford should be strong in these fields,
even though an industrial base was largely lacking. Student interest in a cutting
edge field thus became part of a strategy for creating future industrial growth.
Expanding upon pre-war practices, Terman proposed a twenty-year develop-
ment program, linking the physical sciences with electrical engineering. A
small strategically chosen number of engineering fields would be developed in
coordination with relevant related fields in the physical sciences, as was done at
MIT during the 1930s. He argued that:

By determining the proper fields on which to concentrate, and then


really laying it on those selected spots we can go places without

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needing large amounts of extra money. With twenty years, a suitable


administrative basis, and reasonable backing from the President, it
would be a pushover to do something really big.8

In Terman’s view, universities typically lacked the ability to plan: “Their


detailed administrative operations such as new appointments, allocation of
funds for new equipment. etc., are decided largely on the basis of this year’s and
next year’s needs.”9 If Stanford could allocate resources strategically, as part of a
long-term program, it could move ahead of its competitors.
When Terman returned to Stanford after the war he began a program of
organizing centers modeled on MIT’s Rad Lab. The obvious first choice for
center development was the pre-war electronics research pioneered by Stanford
but largely pursued elsewhere, including at the Rad Lab, during the war.
Stanford University had not been selected as one of the sites for major govern-
ment military research laboratories during the war, as had such schools as MIT,
Chicago and Johns Hopkins. After the war, MIT retained the basic research
component of the Radiation Laboratory for radar. Stanford established a similar
center based on several of its faculty who had returned to campus from other
schools’ wartime laboratories.
Informal arrangements at pre-war Stanford, bringing together scientists and
engineers, academics and business firms, to accomplish a research goal, became
formally organized after the war through the establishment of research centers.
The Microwave Lab began as a division of the physics department in 1945. The
new center built upon Stanford’s pre-war work in electronics but instead of
sparsely funded projects, federal research funds supported permanent research
positions. Depression-era professors, who could formerly be found painting their
own laboratory floors, were now released from all but essential teaching duties
in the post-war period in order to concentrate on the development of centers.10
Industrial research practices were introduced to extend basic research into
applied areas, while maintaining advanced investigation. To extend the reach of
a limited number of faculty, some of their duties were assigned to others. For
example, key faculty were assigned full-time assistants to help manage their
research teams. As funding allowed, faculty were relieved of committee respon-
sibilities to enable them to further expand their research programs. Adding
more support staff also expanded research capacity. Mechanics, tube-makers,
and radio technicians were hired to translate ideas into physical devices more
rapidly. In a further imitation of industrial research practice, notebooks were
maintained by researchers on a daily basis and regularly countersigned by
colleagues.
Faculty members were soon transformed into virtually full-time research
team leaders, functioning in much the same fashion as industrial research
managers. The centers modified old academic roles such as that of the teacher,
transforming faculty members into virtually full-time research team leaders, and
brought industrial roles such as the full-time researcher into the university. In

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the center, the professor functioned more as an industrial research manager


organizing a group of subordinate researchers to achieve a common end than as
an academic advisor guiding a series of graduate students on an individual basis.
Despite his initial belief that financing would not be a problem if develop-
ment was limited to a relatively few carefully selected fields, considerable
financial support was required to realize this vision. Terman initiated a three-
pronged financial strategy that included: conducting defense-related research
for agencies such as the Office of Naval Research; offering industry preferred
access to research results; and developing some of the university’s land as an
industrial park and shopping center to service the area surrounding the univer-
sity. As rental and lease receipts came in from the university’s real estate
ventures, Terman calculated the additional number of professors that he could
afford to hire from the shopping center’s net income of $750,000, which at the
time was equivalent to 12.5 percent of faculty costs in 1965–6, not counting the
medical school.11
The financial base for Stanford’s post-war ascendance also included the
attainment of $6 million in federal-sponsored research in electronics in 1976, in
contrast to a pre-war funding level in the thousands. Within just a few years of
establishing the goal of building up Stanford’s engineering and science depart-
ments to have a critical mass of technologists to interact with industry, Terman
felt confident enough of progress to claim that: “Stanford is now the most
important center of electronics among American universities. Although we
cannot match MIT in size, we concede nothing to them in quality and in
productiveness in proportion to money expended by sponsoring agencies.”12
Attempting to be competitive with MIT, Terman clearly viewed it as Stanford’s
model. Terman had earlier spoken of making Stanford the Harvard of the west
in its national reputation. He had actually helped make it the MIT of the west
in its institutional purpose.
New firm formation from academic research projects became a defining char-
acteristic of both regions and their universities. Perhaps the process of firm
formation has become more routinized at Stanford, where it has been integrated
into the curriculum of the business school. However, in recent years Harvard
Business School has not been far behind in developing a broader focus on
entrepreneurship. The Cambridge area has the largest concentration of biotech-
nology activity in the United States, demonstrating that the region’s early
success with high-tech innovation in minicomputers was not a one-off
phenomenon. The biotech firms in the Boston area and the San Francisco Bay
area have a common quasi-academic mode of operation. Advertisements for
post-doctoral fellows come from firms in both regions.
Conceived well before World War II in both regions, the same strategy for
science-based economic development that was initially realized in Boston after
the war, was then expanded upon in Silicon Valley. The vision that Bush and
others at MIT were working from goes back to the ideas of William Barton
Rogers, the founder of MIT. MIT’s character as an academic institution,

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however, was cemented during the 1930s with President Compton’s recruitment
of basic researchers, particularly a subset of physicists who had an interest not
only in scientific research but also in the utilization of results, and concrete
applications. Thus, when Van de Graaff, the inventor of the electrostatic gener-
ator, was recruited from Princeton, MIT also arranged to have his patent rights
transferred MIT. His research became the basis of one of the early firms, High
Voltage, funded by ARD in the early post-war period.

A divergent model?
Annalee Saxenian has emphasized discontinuities of organizational style
between the two leading high-tech regions.13 She has noted significant differ-
ences between highly networked technical persons in Silicon Valley firms and
more isolated individuals in Route 128 companies. Saxenian has also suggested
differences between the two coasts in the level of formality or informality in
clothing styles – suits and ties in New York but open-necked shirts in California
– and in interpersonal relations, structured in the east, more gregarious in the
west. But even that is changing. In the multimedia industry in New York today,
the so-called Silicon Alley, located in the East Village and elsewhere in lower
Manhattan, there is a fairly informal scene in which many people look like they
just came off the casting call of Rent.
Of broader significance is the issue of whether the two regions represent
unique historical instances or essentially replicable phenomena. The issue is
structure versus network, vertical organization versus lack of hierarchy, and
openness versus secretive operation. Tracy Kidder’s volume about Data General
is a story of a freewheeling alternative development group in an old-line mini-
computer firm.14 Saxenian’s depiction of Route 128 fits the later years of
ossification at Digital Equipment Corporation and the recent past at Hewlett
Packard in Palo Alto, a hierarchical “buttoned-down” operation before its
recent renascence. As another observer noted, “Resource allocation (a focus on
traditional bureaucratic procedures rather than unconventional ways of
unleashing new ideas) is just as likely to hobble creativity in large and vibrant
Silicon Valley companies as it is in boring old industrial age companies.”15
Moreover, high-tech firm concentration in connection with physical artifacts
such as the Science Park at Stanford or the ring road around Boston are after-
the-fact superficial characteristics, rather than an underlying cause of high-tech
economic development.

High-tech regions: born or made?


If Silicon Valley and Route 128 arose from unique circumstances and cannot be
duplicated, policy measures are fruitless. The question is, which policy measures
are appropriate for individual regional circumstances? Merely to take a mecha-
nism that has been highly successful in one area and assume that it is the way to

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recreate the phenomenon elsewhere may not work. Nevertheless, a typical


response is to mimic an existing format without undertaking an analysis of the
local strengths and weaknesses of conditions for innovation. Thus, the response
in many regions has been, after a visit to the Stanford Research Park, to build a
science park first, as a set of buildings, and to expect the firms to magically
appear, rather than to create an infrastructure for firm formation. This is the
equivalent of performing Melanesian Cargo Cult rituals, ceremonies conducted
after World War II in expectation of a cornucopia of goods to be off-loaded by
US forces in the South Pacific just as they were during the war.
A more appropriate approach is to make an analysis of the strengths and gaps
in a region and then design new networks and organizations to bridge those
gaps. That is what was done in New England in the early post-war period when
the venture capital firm was initiated in response to an analysis of that region’s
problems and opportunities during the 1930s depression. In the New York
region at present, the missing links are a major technological university, the
relative lack of networks among universities, industry and government, and the
leadership required to bring the institutional spheres central to technological
innovation and regional development together around common projects. Of
course, there can be a confluence of the two models.
An interactive innovation model can be abstracted from different starting
points, bringing the technology push and market pull approaches together. Such
a model could then be used as a template to identify regional gaps. By the early
1990s recession Silicon Valley had moved toward the more market-oriented
model, by focusing on computer networks and the commercialization of the
Internet. The economic crisis encouraged a revival of academic–industry collab-
oration among firms that were now often several generations from their
academic origin. The newly founded Center for Integrated Systems, for
example, provided a neutral meeting ground for inter-firm collaboration in the
semiconductor industry as well as with academic experts in the field. The loss of
institutional memory of previous academic–industry collaborations meant that
lost traditions had continually to be revived as the founders of later generations
of firms came to believe that the industrial complex from which they emanated
was self-generated.
In some instances, however, institutionalization occurs through normative or
legal change. The following chapter analyzes the passage of an amendment to US
patent law, the so-called Bayh-Dole Act, and its effects, in legitimizing academic
technology transfer by establishing “clear title” to university-originated intellec-
tual property, developed with federal government support.

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TECHNOLOGY TRANSFER
UNIVERSALIZED
The Bayh-Dole Regime1

The Bayh-Dole Act of 1980 turned over ownership of intellectual property


rights, emanating from federal government-sponsored research at universities,
to the university in which the discovery was made. The premise of the law was
that the results from billions of dollars of research funds contained significant
unrealized potential for technology development. Certainly, government was
not going to develop technology itself in potential competition with industry.
Prior to the passage of the Act, government had left it up to each agency to
dispose of intellectual property rights as it saw fit. Some agencies actively made
an effort to see that these rights were put to use; others did not.
Companies typically felt that if they arranged to use government-owned
intellectual property, and were successful in developing a marketable product, a
competitor would likely want to develop a similar product. The expectation
was that a claim would be made that since government had supported the
invention of the underlying technology, with the public’s tax monies, then the
second company should be granted access to the technology as well. Making
this analysis in advance, the first company would then typically decide not to
get involved – a classic free-rider effect. The Bayh-Dole Act resolved this
dilemma by granting universities, other non-profit organizations and small
firms, a clear title.
As a condition of receiving government funds, universities were required to
make an effort to transfer technology, in addition to traditional dissemination
of knowledge through publication and presentations at conferences. Starting
from practices developed early in the twentieth century at MIT, university
technology transfer has become a significant input into industrial develop-
ment. William Barton Roger’s mid-nineteenth-century vision of a university
that would infuse industry with new technology has become universalized from
a single school to the entire US academic research system. Greatly expanded
with federal research funding, the US academic enterprise has become a key
element of an indirect US industrial policy, involving university, industry and
government. The origins and effects of the Bayh-Dole Act are a significant
chapter in the spread of the MIT model and the rise of entrepreneurial
science.

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TECHNOLOGY TRANSFER UNIVERSALIZED

A framework for technology transfer


Industry’s view of academia as a source of intellectual property, prior to Bayh-
Dole, was exemplified in a 1980 survey in which 56 firms were asked why they
funded research at universities.2 Multiple answers were possible. The reasons
cited are shown in Table 3. The last of the reasons cited is a good working defi-
nition of a proprietary advantage; in 1980 it was the last reason that companies
looked to universities.
The Bayh-Dole Act of 1980 offered universities the opportunity to gain
income from licensing intellectual property rights, making receipt of federal
grant funds conditional on universities making an effort to put research results
to use. Universities responded by changing their patent rules to assume owner-
ship rights to this research. University offices and administrative procedures
were established to patent and market research results. As leading universities
went into the intellectual property business, others followed. In a relatively
short time, virtually all universities with a significant research capacity devel-
oped the capability to identify and market intellectual property. Bayh-Dole
dramatically changed the landscape of university technology transfer. The most
important contribution of the Act was that, once a secure rule was in place, it
enabled a nationwide infrastructure for university technology transfer to be
constructed. The law standardized and gave legal sanction to administrative
practices in federal agencies authorizing university patenting of federally funded
research.
In addition to rationalizing and legitimizing university patenting and
licensing, the law induced a psychological change in attitudes toward tech-
nology transfer as well as an organizational change in encouraging the creation
of offices for this purpose. Previously, only a very few research universities had
the interest and capabilities to patent and license technology invented on
campus. Post-1980, virtually all universities with significant research funding
took on this task. The numbers of universities with technology transfer offices
increased from twenty-five in 1980 to two hundred in 1990. The number of

Table 3 Reasons cited for sponsoring academic research in 1980


%
Gain access to manpower 75
Window on science and technology 52
General support of technical excellence 38
Gain access to university facilities 36
Obtain prestige; enhance company’s image 32
Good local citizen; foster community relations 29
Make use of an economical resource 14
Solve problem; get specific information unavailable elsewhere 11

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patents granted to American universities increased from approximately three


hundred in 1980 to almost 2,000 in 1995.
Beyond a simple increase in patent numbers, the Bayh-Dole Act had a
broader effect in making research universities an explicit part of the US innova-
tion system by re-structuring the relationship among university, industry and
government. The law created an “indirect industrial policy” going from the
federal government through the universities to reach firms. Enhancing univer-
sity technology transfer to industry was not subject to objections of government,
attempting to “pick winners” by providing assistance to industry directly. Thus,
the law helped create a framework for university–industry–government relations
in which each institutional sphere was encouraged to “take the role of the
other.”
Henceforth, universities would take the role of industry by infusing existing
firms with new technology through patent licenses and by using intellectual
property rights as the basis to capitalize and grow new firms in incubator facili-
ties on campus. Government would take the role of venture capitalist in
extending federal research funding programs to support the next steps in trans-
lating research into usable technologies through a Small Business Innovation
Research Program (SBIR). SBIR made available a small percentage of federal
research funds – initially 0.5 percent, currently 2 percent – to small firms and
prospective firm-founders for this purpose. Through relaxation of federal anti-
trust laws, industry would take on the role of the university in sharing
knowledge among firms though collaboration on so-called pre-competitive
R&D projects.

Origins of the law


The potential for university technology transfer was an outcome of the build-up
of federal funding for academic research during and after World War II. The
expectation was that this research would lead to manifold civilian uses in the
post-war era just as it had resulted in innovations in weaponry during the war.
The law itself arose from a debate between opponents of patenting who held
that research paid for by government should be made freely available to all
interested parties and proponents of patenting who argued that potentially
interested firms would be unlikely to take up this research unless they could be
assured of the limited monopoly protection offered by a patent, and preferably
by an exclusive license. The somewhat surprising result was a virtually unani-
mous vote in favor of the Bayh-Dole Act. This was in part due to a degradation
of US industrial competitiveness during the 1970s and the emergence of a
feeling, even among many of those who opposed patenting academic research
results, that US industry needed all the help it could get so long as it wasn’t
provided directly by government!
There was a fundamental difference between the role of government in
wartime and post-war innovation policy. During the war, a federal agency, the

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Office of Scientific Research and Development (OSRD) developed a strategy,


provided funding and administrative coordination to put research to use. When
the OSRD was closed at the war’s end, successor military R&D agencies
continued to provide all of these functions for their individual services, e.g.
Navy, Army, often by funding academic researchers. However, on the civilian
side, only funding was provided. Strategy and coordination were expected to
occur without government participation and this was typically seen as a virtue.
Vannevar Bush, a proponent of government activism in wartime expressed his
basic conservatism through the thesis of a “hands off ” science policy for the
post-war. His classic 1945 statement became the basis of a presumed “contract”
between government and university, to provide academic researchers with
support, without further intervention.3 Theorized as a linear model of innova-
tion, research was expected to translate into practical uses merely by the
dissemination of the results.
Under both regimes, active and passive, the federal government held patent
rights to the research it funded at the universities. During wartime OSRD saw
to it that a useful result was put into practice as soon as possible. Without an
OSRD equivalent on the civilian side, federally funded research at universities
was for the most part not utilized. However, there were a few exceptions in
which universities with a tradition of technology transfer, such as MIT, Stanford
and Wisconsin, continued the practices they had instituted for patenting and
licensing prior to the advent of large-scale government support of research,
outside of traditional areas such as agriculture. Prior to the war, patenting and
licensing had largely been based on foundation, industry, and self-funded
research. During the war, patent rights began to be generated on a large scale
from expanded federal research funding.

Management of intellectual property generated under federal


funding
As director of the wartime OSRD, Vannevar Bush arranged for the patenting of
government-sponsored research. He was aware from his earlier experience at
MIT that an expansion of research would generate intellectual property and that
patents would have to be managed if conflicts were to be avoided. Even during
war there was a view toward peace when, with the lifting of wartime constraints,
arguments would likely ensue over property rights in research if precautions were
not taken. The basic principle was that no company should have the exclusive
right to exploit patents that had been publicly funded by the taxpayer. Thus,
licenses were to be made available to all interested parties on the premise that
profits from publicly funded research should not accrue to a single company. It
was also expected that by licensing more than one company to practice a given
invention, competitive forces would keep prices “reasonable.”
The Department of Commerce’s National Technical and Information
Service (NTIS) centrally managed licensing in the early post-war period.

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Academic technology is typically embryonic, requiring the active involvement


of the inventor for its further development. With the inventor located in the
university, but NTIS controlling the licensing rights, there was a gap between
university, government and industry. Nevertheless, even though NTIS was
physically distant from the source of discoveries, the arrangement worked
reasonably well when companies learned about relevant research and
approached the government for licenses in fields such as mechanical devices,
electronics and chemical processes, where development costs and product
development times, and consequently risks, were low.
However, by the late 1960s there was increasing evidence of industry failing
to take advantage of many of these results, paradoxically, because they were
“freely available to all.” The approach completely broke down in areas with
long development time frames and high costs, such as the pharmaceutical
industry. In 1968, the Johnson administration conducted a study that found that
no pharmaceutical to which the government owned the patent had ever been
developed for commercial use. Companies were unwilling to make the invest-
ment required to develop a drug, a cost that could run into many millions of
dollars (even then, before the passage of the Food, Drug and Cosmetic Act of
1973 raised the cost of obtaining marketing approval for a new drug substan-
tially), without the guarantee that they would be able to recoup their
investment through exclusive marketing rights.
Government was divided internally during the 1970s, with various agencies
holding different positions on the best course to follow with respect to the intel-
lectual property they had helped to create. For example, the Atomic Energy
Commission wished to keep title within government to inventions in its
domain. Other agencies, such as NIH and NSF, were more willing to assign
inventions to their sources outside of government in order to facilitate develop-
ment. Government authorized Institutional Patent Management Agreements
(IPAs) in response to the Johnson administration’s study. The Department of
Health, Education and Welfare (HEW) initially implemented IPAs, followed by
the National Science Foundation.
Norman Latker, NIH patent counsel, invented a bureaucratic process for
universities to certify that they were taking appropriate measures to manage
technology transfer. He invented forms for university administrators to fill out
so that a record could be created of their compliance, ideally by establishing
professional in-house offices for patenting and licensing.4 For universities not
wishing to make such an extensive commitment, procedures were created for
individual patenting. Since the process could take as long as three years a
school might find that the potential licensee’s interest had lapsed by the time
the agreement was in place. Moreover, there were restrictions on the period of
exclusivity under IPAs, limited to ten years.
Nevertheless, some government officials, both in the legislative and executive
branches, strongly felt that these rights were public property and should not be
turned over to the universities to be licensed to industry. There was significant

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opposition in Congress, for example, from Senator Long of Louisiana, who


believed that patenting government-funded research was illegitimate privatiza-
tion of what should be a free public good. For as long as the few interested
universities were able to work out ways of accessing rights to the inventions that
they were interested in commercializing, this issue did not come to a head. When
Joseph Califano, Secretary of Health, Education and Welfare called a halt to the
transfer of NIH patent rights to universities in the late 1970s and ordered its
patent counsel, Norman Latker, to be fired, the issue of what to do with the
federal government’s growing patent portfolio was broached.5

Legitimizing academic technology transfer: the Bayh-Dole Act


Frustrated by diverse and shifting regulations that could be changed by adminis-
trative fiat, proponents of patenting inside and outside the government sought a
secure environment for technology transfer. Officials from a few academic insti-
tutions, typically with a “land grant” tradition and/or extensive capabilities in
bio-medical research with commercial implications, took the lead in pressing
for legislation to establish a stable intellectual property framework. Companies
frustrated about difficulty gaining access to patent rights from federally funded
academic research also helped build pressure for change. Another impetus for
legislation was the industrial downturn of the 1970s and increased international
competition, which led to proposals for greater government involvement in
innovation. The failure of the Carter administration’s “reindustrialization”
proposals to assist industry directly to improve its competitiveness created a
receptive atmosphere for ideas to assist firms with the results of government-
supported research.
Sometimes the idea for a law originates with the lawmaker or one of their
staff or, perhaps, from outside of the government with individual citizens, orga-
nizations and lobbyists who bring an idea, or even a draft of a bill, to the
attention of a Senator or congressperson. Other times the source can be found
in the executive branch of government. Laws are always named after their
congressional sponsors and, if they are significant innovations, like Bayh-Dole,
come to be taken as shorthand for an institutional complex that has grown up
around the law. In such cases, sponsors are recruited for bipartisan balance as
part of the endgame in policy-making that may have originated deep in the
federal bureaucracy. The true authors of such laws are often persons behind the
scenes who translate innovations into statutes with the assistance of congres-
sional staff persons. Such was the provenance of the Bayh-Dole Act.
In 1978, Purdue University wanted to negotiate an IPA in order to commer-
cialize promising medical device technology, but was told that HEW had
stopped granting such Agreements.6 They approached their Senator, Birch
Bayh, to protest what appeared to be an arbitrary decision, and elicited interest.
Bayh found that the Department of Commerce was starting to have concerns
about the USA’s international competitiveness and felt that the barriers that

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had developed between academic and industrial R&D were contributing to the
problem. In turn, Purdue found support for a change in the current system from
other leading universities such as Wisconsin, whose discovery of vitamin D and
warfarin had put them at the forefront of developing the academic technology
transfer paradigm, starting in the early 1930s, Stanford and MIT.
Bayh, a Democrat, found a bipartisan co-sponsor in Republican Robert Dole,
and in 1979 serious consideration started of the Bayh-Dole Bill. The bill came
under the jurisdiction of the Senate Judiciary Committee, chaired at the time
by Senator Edward (Ted) Kennedy of Massachusetts. The enormous importance
of higher education to the economy of Massachusetts ensured a sympathetic
hearing for the bill. The Senate Judiciary Committee found that in 1978, the
government owned title to over 28,000 patents, and had licensed fewer than 4
percent of them, glaring evidence of the lack of success of the then current
approach.

Making a law
A coalition emerged between the universities and small business, with
Washington representation groups of both interests consulted on provisions of
the draft act. For example, the language of the bill and the administrative regu-
lations worked out after its passage had to be adjusted to allow sufficient time to
report inventions without interfering with professors’ publication plans.
Similarly, small business was concerned with keeping access open to so-called
“background inventions,” exemplified soon after the act’s passage by the Cohn-
Boyer genetic engineering patent, licensed non-exclusively by Stanford
University.
Lasken, who informally drafted the bill, said that “It is probably the most
important thing I have done in my thirty years in government.”7 Universities
strongly supported its passage by lobbying their Congresspersons and Senators.
The University of Wisconsin, for example, turned initial opposition from
Senator Nelson of their state into support and even co-sponsorship. One reason
for the success of the bill was that it covered universities and small business but
left big business out, allaying concerns, such as those held by Senator Nelson,
that patents could contribute to monopolization. Neils Reimers, then Director
of Technology Transfer at Stanford, recalls a celebration over coffee, with some
of his colleagues who were lobbying Congress, when the law passed.8
Although the bill became a law relatively quickly, within one and a half
years of its inception, support was not unanimous. In the Judiciary committee,
where responsibility for patenting rested in the Senate, MIT’s representatives
failed to persuade Senator Ted Kennedy to sponsor the bill. The next person on
the committee was Senator Birch Bayh of Indiana, whom Purdue University
was successful in recruiting. Bayh had special concerns about the effects of the
proposed bill on labor, so a special section was drafted with language favoring
development in the USA. An intern on Robert Dole’s staff, Barry Leshowitz, an

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academic on leave from the University of Arizona, interested the Senator from
Kansas, a minority member of Judiciary, in becoming the co-sponsor, thus
making it a bi-partisan bill.

The provisions of the act


The Bayh-Dole Act, PL 96–517, formally known as the Patent And Trademark
Amendments Act, applied to not-for-profit institutions and small businesses
(defined as those with fewer than 500 employees). It contained six important
provisions:

1 Universities could elect to retain title to the results of federally funded


research.
2 Universities were required to share proceeds with inventors. This was a most
important aspect of the act. The concept of patenting was foreign to most
academics. Their academic reputations, under conditions then current,
would not be enhanced by adding patents and licenses to their curriculum
vitaes. In contrast to corporate R&D scientists who typically are required to
sign away their patent rights as a condition of employment, academic scien-
tists and engineers were given a tangible incentive to expand their purview
to include the commercialization of research. US academics joined German
workers as beneficiaries by law in the fruits of their creativity.
3 Restrictions on licensing terms were removed. Licenses to small businesses
could be for the lifetime of the patent. Licenses to large businesses were still
limited to ten years.
4 US manufacture was required for products to be sold in the USA. This
requirement was to ensure that a reasonable share of the benefits flowed
into the US economy. Waivers can be obtained if the licensor can show the
agency that funded the research that the licensee cannot economically
develop the product if this requirement is enforced.
5 Small business preference. This was one of the most debated aspects of the
act. There remained considerable concern in the Senate about handing
monopoly power that had been created with government funding to large
corporations. It was felt that small companies would be less able to exploit
that monopoly power at the expense of the public than would large compa-
nies, so a preference for small companies was incorporated into the act. The
meaning of the requirement has never been seriously tested. If an institu-
tion received equal offers to license a technology from a large and a small
company, then clearly it would have to accept the small company offer.
However, this is never the case. Licensing proposals always differ, so the
overall economic attractiveness of the competing offers must be compared
and weighed.
6 The government retained a non-exclusive license to use the technology
and march-in rights. The government’s license is for its own use only. This

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therefore primarily impacts technologies for which the government is the


primary consumer and has not been a major factor. The march-in rights
give the government the right to take back title if it believes that an impor-
tant technology is not being properly exploited. This rarely happens and
has not been an important factor in technology commercialization.

Another of the issues that was intensively debated at the time was whether
the government should receive a share of the results of licensing the technology
it had funded. The Senate Judiciary Committee decided that the government’s
return would come not directly from a share in the proceeds, but rather from
the increased taxation that would result from the increased economic activity
that would be a consequence of the act’s successful implementation.
The purpose of the new federal legislation was to speed the transfer of tech-
nology from university to private industrial firms by eliminating governmental
restrictions on the private use of the results of government-supported research.
According to NSF Counsel Jesse Lasken, the Bayh-Dole act:

eliminated the problem of who owns what. The university would then
have a right if there was an issue coming out of university work that
they are going to be able to give assurances that they could work out
some reasonable arrangement. It was a useful law that actually accom-
plished something. It made it simple. A university could tell a
company that was interested in working with them that just because
we made this invention on our NSF work doesn’t mean we won’t have
the right to give you a license, because we do have the right.9

It was left to academic institutions to make a deal.

Technology transfer as a university mission


Universities that were previously little involved in the transfer of technology
quickly established administrative offices in the wake of the federal decision.
Universities with some experience either on their own or through arrangements
with the Research Corporation soon expanded their efforts to take out patents
on the commercializable research of their academic staff. By the late 1980s
virtually all research universities had established a technology transfer office.
Following on from the growth of these offices, a membership organization, the
Association of University Technology Managers (AUTM), was established to
represent the emerging profession. AUTM membership has since risen to more
than 1,300 regular and more than 1,000 affiliate members and the organization
runs its own training programs. AUTM has doubled in size since 1995.10
All major, and many minor, academic institutions, as well as an increasing
number of government laboratories in the USA, now have technology transfer
offices. Some, such as the National Institutes of Health, Stanford, MIT and the

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University of California, have offices of 30–50 people. A smaller, less research-


oriented medical school, New York Medical College, has a staff consisting of a
single person. Awaiting a build-up of research with commercial potential, the
Westchester-based medical school is at the stage of developing its policy docu-
ments and seeking partners in the pharmaceutical industry to enable it to
become a site for clinical trials.
There are two essential elements to academic technology transfer:

• the ability to license established technologies for which patents have been
applied; and
• the ability to collaborate with the inventor of the technology to further
develop it.

While the first of these two steps in fact constitutes the actual transfer of the
technology, because of the very early stage of academic technology, it is not
worthwhile unless the second option is also available and the cooperation of the
inventor also achieved. Academic scientists in the USA are entrepreneurs.
Under the peer review system, they must raise the funding for their research
activities themselves. A large research division at a university or teaching
hospital can therefore be regarded as a quasi-business with $1–10 million in
annual revenues.
Some universities extended their efforts from the taking out and licensing of
patents to put income for the university into a portfolio of measures designed to
establish new firms and thereby promote regional economic development. All
of these efforts depended upon research staff and students bringing their
commercializable ideas to the attention of a university technology transfer
office. In part because the taking out of patents was expensive, patents were
often only sought when a prospective licensee could be identified. Universities
had the reputation of being conservative patent-takers. There was either an
immediate sale or a long-term prospect of significant gain, with little middle
ground. Niels Reimers at Stanford originated the shift from a legal to a
marketing approach. Occasionally, a faculty member at a university new to
technology transfer manages to go around the office and deal directly with the
university’s patent attorneys, running up a legal bill for an invention without an
assessment of its potential having been made first.

Issues
The Bayh-Dole Act provided a stable ground for university technology transfer
and a framework for resolving some issues; other issues remained, however. The
potentially contentious issue of division of proceeds appears to have been
settled within the context of the Bayh-Dole Act, which guarantees the inventor
a share through a more-or-less equal three-way division of proceeds among the
university administration on behalf of the institution as a whole, the faculty

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members’ department and the individual themselves. Student-generated rights


were traditionally left entirely with the individual, perhaps on the grounds that
they paid tuition and did not have employee status. However, since most grad-
uate students in the sciences are on fellowships, often from a government or
university source, graduate students have increasingly been defined as “officers
of the university” subject to the same intellectual property rules as faculty.
Nevertheless, whatever the administrative definition, student status is quite
different in reality. Student work is typically conducted under the control of
faculty members’ and it can become a matter of faculty discretion whether to
include students in disclosure statements unless a university has clear rules and
procedures. A below-the-surface issue that rarely comes to light given faculty
members’ near feudal power over their students in assessing progress toward the
PhD and in granting degrees is claims made by faculty members to credit, both
intellectual and pecuniary, from graduate student research. The academic
system has virtually accepted a system of authorship by status in which provi-
sion of resources to conduct research caries with in an entitlement to credit of
all kinds. As intellectual property rights become increasingly salient it can be
expected that relations among teachers, students and the university will have to
become more clearly defined.
Access of academic researchers to patented discoveries has also become an
issue. In a previous era when there was a clear distinction between basic and
applied research this was not a great problem, since patenting largely took place
away from the research frontier. However, at the present time, when basic
discoveries in molecular biology produce practical results simultaneously with
research advances, the issue of access has come to the fore. The Bayh-Dole Act
places control over this problem into the hands of the universities. Universities
can protect access of academic researchers by including provisions in licensing
agreements authorizing access. What happens when a university licenses to a
firm in which it has an equity interest and therefore a potential pecuniary
interest in excluding others? Moreover, what happens, or should happen, when
the academic requesting access is also a principal in a competing company?
Nevertheless, it should be kept in mind that the very act of patenting involves a
release of information since that is a basic patent requirement in exchange for a
temporary economic monopoly.

Effects on universities
The university’s own economic base also begins to be transformed as it gener-
ates some of its income from the sale of inventions. In 1992, Columbia
University earned $24 million from its intellectual property rights, the equiva-
lent of the income on almost half a billion dollars of endowment. This
income rose to $100 million by the end of the decade, most of it derived from
a single patent on the transgenic mouse that would soon expire. In recogni-
tion of this eventuality, the university is expanding its efforts into additional

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areas such as software. Academic institutions have also begun to use funds
earned from technology transfer to support the operation of the university.
Columbia University recently announced a $2 million program to support
new research initiatives drawing upon monies earned from patents licensed to
companies.
Even at a less intensive level, academic technology transfer efforts have been
found to be economically successful. Many observers were quite skeptical a
decade ago, and some still are, that universities could even make enough money
from their technology transfer efforts to cover costs. In the early 1980s most
universities merely hoped to earn enough to pay for the running of a technology
transfer office, so that they could satisfy the new government requirements of
playing a role in support of industry in exchange for receiving government
research funds. That level of income was achieved relatively quickly at many
universities, almost to their own surprise. US universities earned a total of $1
billion, mostly in royalty income, in 2000. However, a few large returns came
from infringement proceedings, in which a company was found to be utilizing
patented research without authorization, and from sale of equity in a firm
founded with university intellectual property.

Measuring the economic impact of technology transfer


The economic impact of technology transfer from universities and government
laboratories has evolved since the passage of Bayh-Dole and related laws to a
point where it can be considered to be playing a recognizable and increasingly
significant role in aiding the growth of the US economy. The establishment of
technology transfer offices and the array of mechanisms, including incubator
facilities and science parks, gives hope (some say, false hope) to regions that
have not yet seen a glimmer of a high-tech valley, coast or corridor. In the face
of continuing opposition to the protection and marketing of intellectual prop-
erty, both on principled arguments of free dissemination and economic grounds
that it simply doesn’t pay for itself, AUTM has attempted to evaluate the
contribution of university-originated technologies to the US economy and, by
implication, to justify the utility of the technology transfer profession. Its yearly
questionnaire to its members provides data on royalty income that can be used
to provide a very crude estimate of the economic impact of technology transfer
activity from universities and government laboratories.11
Based upon the rate paid to the universities and government laboratories of
$344.4 million in royalties at a 2 percent average royalty, the total sales of the
licensed products can be estimated to be $17.2 billion. Product sales can also be
used to estimate the employment generated by technology transfer, giving a
figure of 137,800 jobs created.
The figures in Table 4 justify the expense that universities have undertaken
in subsidizing technology transfer offices, patiently waiting out the seven lean
years that are not expected to pay for themselves as the process gets underway.

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TECHNOLOGY TRANSFER UNIVERSALIZED

The drafters of the Bayh-Dole Act also realized their legislative intent to attain
public benefit from university technology transfer through contribution to tax
revenues. The economic activity arising from technology transfer shows a return
to federal and state governments of approximately $3.9 billion in 1993. It is also
worth noting that these estimates are undoubtedly low, for two reasons:

Table 4 Estimated economic impact of university and government lab technologies (US$ million)

1980 1986 1990 1993 1999


Product Sales (US$ million) 365 1,905 6,825 17,220 35,800
Employment (jobs generated) 2,920 15,240 54,600 137,760 270,900
Note: For a discussion of the Association of University Technology Managers (AUTM) Survey and other
sources on which this table is based, see Etzkowitz, Henry and Ashley J. Stevens. 1995. “Inching toward
industrial policy: the university’s role in government initiatives to assist small, innovative companies in the
U.S.,” Science Studies 8(2): 13–31.

1 Once patents expire, royalties cease, but the products remain in the
market. For instance, in the mid-1960s, MIT had licensed two very
important technologies – synthetic penicillin and computer core memory.
Both patents have now expired, but were the foundation of major
markets.
2 This methodology doesn’t capture the induced investment effect, when
technologies are in development and are employing people but not yet
generating revenues. Thus, the above figures are conservative estimates of
the economic impact of indirect industrial policy.

Inching toward industrial policy


The reorientation of the universities toward a commercial role was not inter-
vention in the sense of specific government measures requiring targeting of
particular areas of R&D for support, as in Japan, or requiring enterprises and
research institutes to make research contracts with each other, as in the Eastern
European socialist model. Instead, incentives were built into the research-
funding system to move the universities closer to industry, in their motivation
and structure. This occurred in a context in which government was unable to
take more direct measures itself.
The Bayh-Dole Act altered the regulatory infrastructure which determined
how the results of research which would have been funded anyway could be
utilized. No funds were appropriated for its implementation or administration.
By changing the rules of the game, placing responsibility for technology transfer
in the university where it was being conducted rather than with government,
the funder, potentially useful research was moved closer to users. In the context
of federal research budgets that were not growing at a fast enough rate to meet

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academic researchers’ needs, universities were given the opportunity to earn


monies from the royalties and equity that they could generate from federally
sponsored research on their campuses.
The Morill Act of 1861 donated federal land to support the development of
higher education for the improvement of agricultural and industrial practice.
The Bayh-Dole Act of 1980 turned over intangible property of scientific and
technological knowledge to the universities with similar intentions. This legis-
lation encouraged individual academics to include commercial activities in
their roles and universities to experiment with a variety of arrangements such as
research parks, “incubator” facilities and offices for the transfer of technology to
develop fruitful relations with industry. The next chapter focuses on the engage-
ment of individual scientists in entrepreneurial activities.

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11
THE MAKING OF
ENTREPRENEURIAL SCIENTISTS

Faculty members and graduate students are learning to assess the commercial as
well as the intellectual potential of their research. An increasing number of
academic scientists are turning their discoveries into marketable products,
broadening their interests from a single-minded concern with publication and
peer recognition. Some are going beyond traditional modes of technology
transfer, in which the tasks of commercialization were left to others, by partici-
pating directly in the creation of entrepreneurial ventures. Academic scientists
who are leaders in their field have formed some of these firms. Nobel Prize
winner Arthur Kornberg, for example, became intrigued by and increasingly
involved in entrepreneurial ventures in biotechnology, much to his bemused
surprise.1 As they seek intellectual property from their findings as well as
publishable articles and an enhanced scientific reputation, academic scientists
become inventors, developers and entrepreneurs.
Some academic scientists were concerned that entrepreneurial ventures
threatened the integrity of academic science and charged that their colleagues
who were involved in such ventures had conflicts of interest and obligation.
Some of these critics viewed academic scientists’ involvement in firm formation
as a temporary phenomenon and suggested that these firm founders would
return to their traditional tasks. In one sense this prediction has proved true.
Relatively few academic entrepreneurs have left the academy. Most have
pursued their commercial interests in tandem with their academic work, some-
times taking leave of their professorships to temporarily devote full-time effort
to their firm. Use of academic leave provisions has allayed concerns about
conflict of obligation, an inability to fully perform regular academic tasks given
the time-consuming nature of the early stages of firm formation. Nevertheless,
firm formation from academic research has not disappeared, even though
charges of conflicts of obligation have abated.
There are proximate and long-term causes of these developments. The
creation of new firms has become a permanent part of the academic scene, with
support structures such as incubator facilities created to assist the process. In
addition to extending the organizational process forward into the industrial
scene outside of the university, the academic world has long been involved in a

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relatively hidden process of organizational development leading up to firm


formation through the expansion of group research. Science and entrepreneur-
ship became ever more closely associated as a consequence of scientists’ need to
find support for their research, before opportunities to commercialize their
research became available.

The research group as quasi-firm


Although the scientist’s role as synthesizer of knowledge and the entrepreneur’s
as economic risk-taker may appear too incompatible to be fulfilled by one indi-
vidual, their inner logic has much in common.2 Both roles underscore the
importance of individual ingenuity in creating new constructs, whether concep-
tual or organizational, to bring order to an uncertain environment. Enter the
university research group leader. As, increasingly, faculty scientists are
managing teams of researchers rather than working one-on-one with individual
graduate students, academic research is becoming an entrepreneurial venture
similar to a start-up firm.
A university science department typically consists of separately organized
groups made up of professors, graduate students, post-doctoral fellows, technical
staff and sometimes a research administrator or secretary. The series of
photographs depicting these collectives, hung at the entrance to many depart-
ments, signifies that the research group really is the basic unit of the
contemporary science department. It is headed by a “principal investigator”
assisted by a team of colleagues, many of whom are still students or in the early
stages of their scientific careers. An assistant professor may be responsible for
three or four people, an associate professor for perhaps seven, and a full professor
for up to fifteen or twenty, or, in some fields, even more.
These groups exhibit many of the characteristics of private business firms.
Their formation and maintenance require large sums of money, and they need
to seek funds almost continuously. The transformation of individual investiga-
tions into collective enterprises typically funded by outside agencies has
required professors (although they are still called “individual investigators”) to
become enmeshed in the multiplicity of external organizational and economic
factors that affect their research, and to undertake collaborations that have led
to the contemporary phenomenon of firms founded by faculty members who
treat their scientific discoveries as marketable goods.
When visited in their laboratories, these scientists are typically not at the
research bench but in an office off to the side, when in residence at all. Many
identify their role as that of running a small business, and acknowledge that it
has been years since they actually performed an experiment. Instead, they spend
their time going to scientific meetings to publicize the research, doing the
paperwork to organize the students engaged in it, and dealing with administra-
tive, personnel and other problems more native to commerce. Having many of
the characteristics of a small business, some of these research groups are only a

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short step away from being an actual firm when the opportunity to really
become one arises.

The impetus to entrepreneurial science


The introduction of economic values into science follows from scientists’
successful quest for the capital and logistical resources to achieve their objec-
tive: the extension of certified knowledge. As scientists succeed in their quests
for credit through paper production, they accumulate resources (funds, labora-
tory space and assistants) that enable them to increase their productivity.
Indeed, they are able to maintain or to increase their access to resources and
hence their rates of production only insofar as they are able to sustain or
increase their credibility-based credit.3 Scientists whose credit rating drops too
low lose access to resources because their work no longer qualifies for support
grants, and they may have to give up their research or at least research assis-
tance.
A science faculty member’s ability to organize and obtain support for a group
has become a tacit requirement for appointment to permanent tenure. At some
universities this requirement, and its extension into the commercialization of
research, is being included in the official criteria for the granting of permanent
appointments. The process of translating recognition into grants, equipment,
data and articles has been called the cycle of credibility. Successful scientists
have as their objective the speeding up of these credibility cycles because such
acceleration equates to organizational and structural growth, as additional
recognition is used to gain more laboratory space, equipment and assistants.
Combining advanced training with original investigation, the academic
research group is a distinctive feature of American academic science. A rela-
tively modest-sized group operates at the level of between the low hundreds and
several hundred thousands of research dollars. A group in the biological
sciences may have a main grant from a single agency such as the National
Institutes of Health, and perhaps a secondary grant from an additional agency
such as the National Science Foundation. When the size of the group increases
to seven or eight members, professors who were at the bench conducting experi-
ments are forced to remove themselves to devote themselves virtually full-time
to organizational and public relations tasks, including:

• fundraising and proposal writing;


• attending conferences to make new contacts and to announce results
achieved by the group;
• recruiting new group members and handling the personnel problems of old
ones;
• writing and reviewing articles;
• serving on review panels; and
• managing the intellectual direction of the research.

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Having attained organizational momentum, it is extremely difficult for


professors to function again as individual researchers. Occasionally, however, in
the nooks and crannies of the experimental science departments of a major
research university, sometimes literally in an attic, an individual can be found
who is working alone, typically in an unfashionable specialty. But this circum-
stance is now very unusual even though the notion of the individual
investigator is still deeply embedded in the ideology of academic science.
As noted above, so-called individual investigators most often operate as the
heads of research groups that they must sustain in order for their scientific
efforts to survive. They typically expand their teams by appointing sequences of
post-doctoral fellows and technicians. As older students graduate and new
students carry on the research, the group becomes an activity with a life of its
own. The students carrying out research activities establish working relation-
ships among themselves, as well as with their professor, that become important
to the success of the group. Groups usually decline in size as a professor nears
retirement, or they may disappear altogether at earlier stages as a result of loss of
support from patrons, governmental or private. The cycle is renewed when the
department appoints as professors former graduates and post-doctoral fellows,
either from its own ranks or, more often, from other universities, and they start
their own research groups.

The effect of funding pressures


In US academic research, where each principal investigator is responsible for
the financing of his or her group, what happens when funding gets tight?
Proposals to supporting agencies must, of course, receive higher scores to merit a
grant, and the increased competitive pressure forces investigators to seek alter-
native sources of funding. Under these conditions, some research groups will
diminish in size or even close down. Others, however, will increase their size by
finding a wider variety of support sources to draw from, with the attendant
result of broadening the universe of potential donors supporting academic
research.
To keep the level of research going at a pace of quality and quantity that will
attract continued funding, an investigator’s productivity must go up as the
competition increases. One strategy to improve productivity is to expand the
size of the research group. The investigator with three or four assistants feels
compelled to expand to five or six. If seven or eight is the norm, then the inves-
tigator has to break through the scale barrier, leave the bench, and go to nine or
ten or even fifteen or twenty. As a research group becomes larger, the lead
investigator spends less time on the floor of the laboratory.
As the laboratory becomes larger and more productive, he or she has to
spend more time writing papers and proposals and seeking additional grants.
Instead of operating with the support of one or two funding sources, the group
leader must start cultivating additional agencies. If the relevant federal agencies

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have been exhausted, then a foundation must be solicited. Then, beyond the
foundation and non-profit sector, other donors and new streams of funding must
often be sought. State and local governments, for example, are sometimes
willing to provide research funds to improve the competitiveness of regional
industry. The investigator might also engage in collaborations with colleagues
from other disciplines and universities to seek NSF funds under its new
programs for creating interdisciplinary research centers related to industry.

From quasi-firms to firm formation


The inner entrepreneurial dynamic of US academic science helps explain why
the university–industry divide is often less than what it is reputed to be.
Research groups operate as quasi-firms according to the model of classical capi-
talism in which small entities compete with each other for resources. Firm
formation, then, is merely a further step in the process by which scientists
manage research groups, not a radical departure from professional practice in
academic science. Located in research institutes and universities, these scien-
tific quasi-firms, if they are to survive, require their entrepreneur organizers to
continuously search for support. The formation of firms reduces or at least
changes the form of this pressure because the entrepreneur can, through the
firm’s sale of its knowledge or its products or both, provide a continuous source
of funds to sustain research activities.
It is usually not the intention of the professor who founds or helps initiate a
science-based firm to leave the university and become a full-time entrepreneur.
Typically the goal of most academic entrepreneurs, once the firm is underway, is
to participate in research as a consultant to the firm and play a role in policy-
making as a member of the board of directors. Some academics also wish to
provide a site for their graduate students and post-doctorates to be consultants
to earn extra monies. They believe that this opportunity will help their research
group to be financially competitive with other universities in its ability to
attract graduate students and post-doctorates, or expect that their assistants will
find consulting opportunities in a colleague’s firm to avoid the appearance of a
conflict of interest.
The hope is that the firm will produce a successful product and that its stock
will become valuable. In this event it is expected that there will be a return of
funds from the firm to support the professor’s research group. That is typically
what academic scientists say is their long-term goal when they get involved in
the founding of a firm. Of course they are interested in making money person-
ally, but also express their motivation in terms of a desire to find a stable source
of support for their research. The founding of companies by academic scientists,
formerly a phenomenon associated with a relatively few universities, has
become more widespread in recent years. Sometimes the entrepreneurial culture
in which firm formation has been encouraged is spread by scientists who have
left universities where this culture had long taken root; other times it is an

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example gleaned from afar, through the media and informal conversations in
departmental corridors and at scientific meetings.
Even those scientific colleagues, who have no desire to become
entrepreneurs themselves, rarely look upon their colleagues who do with
disdain. The paucity of “definition of deviance” can be explained by examining
the position in the scientific world of many of the entrepreneurial scientists.
Entrepreneurial activities have been undertaken by leading scientists, who are
looked upon as role models. For example, a molecular biologist interviewed at
Columbia University viewed his colleagues at Harvard, who had formed firms,
with admiration and wished to emulate them. Willingness of a few “low status”
scientists to use findings for pecuniary advantage would likely have been taken
as evidence of “deviance.” If such normative infractions were negatively sanc-
tioned they would even have served to strengthen the old normative pattern.
However, for many scientists, formation of a firm has now come to be positively
defined as a new badge of scientific achievement.
Professors not inclined toward business, such as the founder of the Genetics
Institute, Mark Ptashne, have participated in the formation of firms and, at
times, like his colleague Walter Gilbert, taken a leading organizational role.
Professor Ptashne of the Harvard University Department of Biological Sciences
is a good example of a scientist who is acting on opportunities to commercialize
his research, while also remaining committed to the academic mode of basic
research. Ptashne was originally apprised of the potential commercial value of
his research by a university administrator responsible for securing patent rights
for campus-based research at Harvard. Although initially he expressed a lack of
interest in pursuing such possibilities, Ptashne soon became intrigued with the
notion of establishing a company to recreate his previous academic lab groups
by inviting their members to work in the firm.
Ptashne initially invited the university to take the lead in founding the firm
and share in its ownership. However, when other Harvard faculty objected to
the idea, he took on the entrepreneurial role himself and negotiated successfully
for financing a firm independently of the university. Ptashne’s colleague at
Harvard, Walter Gilbert, took on administrative as well as entrepreneurial
responsibilities in his firm, Biogen, serving as Chief Executive Officer for a
time. He eventually returned to his position at Harvard after he was replaced by
the board of directors. They felt that the firm had to focus more sharply on
commercial goals and brought in professional management, a not unusual
occurrence in the life-cycle of a technical firm originating in academia.
When he was negotiating to form Genetics Institute in the mid-1980s,
Professor Ptashne said that, at this point, “to have no commercial relationship
whatsoever is almost … it’s mind boggling. I’m courted every day. Yesterday,
some guy offered me literally millions of dollars to go direct a research outfit on
the west coast. … He said any price. Any price.”4 Ptashne chose to remain in
Cambridge. He wanted to bring together again, within a company, his
“extended family” from the university lab. Ptashne’s first thought was to form a

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firm in partnership with his university, hoping thus to keep the line of commu-
nication open. He gave up this effort in the face of opposition from university
faculty who opposed, in principle, the direct involvement of the university in
commercial ventures.
Moreover, his colleague Walter Gilbert, who was organizing an independent
firm, did not like the idea of competing against a university-affiliated firm. A
convoluted series of negotiations ensued involving a venture capital firm in
which Harvard University had a financial interest as well as other firms. When
the negotiations stalled, Ptashne took the advice of the late William Paley,
former Chairman of the Board of CBS, and a potential investor, to take charge
himself. Professor Ptashne found himself fascinated with the process of orga-
nizing a company, comparing it to “a puzzle with five thousand loose pieces. It’s
night and day, up and down, this guy’s out, that guy’s in. The money’s in, the
money’s out. The buildings here. … It’s all quite extraordinary.”5 When
Genetics Institute was formed, Ptashne retained his professorship and operated
two research programs simultaneously. He held that he kept the two entirely
separate, applied research at the company and more basic research concerning
genes, and the mechanisms by which they are conditioned, in his university lab.
In 1992, Ptashne celebrated the sale of a portion of his personal share of the
company’s stock at a party in Cambridge. He used some of the proceeds to
expand his activities as an art collector; he had continued his participation in
Harvard’s musical activities during his commercial involvement.

The faculty’s changing role in technology transfer


The increase in conflict of interest charges against academics involved in the
commercialization of research is an indicator of a broader change in the univer-
sity’s purpose and mission: its contribution to economic development. As this
change takes place, attitudes are modified and what was once seen as a conflict
should come to be regarded as a new confluence of interest. This is not to say
that conflicts of interest disappear, but rather that they are managed.
When research was introduced as an academic mission during the late nine-
teenth century – some said at the expense of teaching (some still say so!) –
similar charges of conflict of interest were made. These concerns dissipated as
confluence was also found, but they never entirely disappeared. We can discern
a similar evolution with respect to technology transfer. The universities, and an
increasing number of their faculty members, are learning how to pursue basic
research in tandem with the capitalization of knowledge.

The issue of investigator initiation


Although serious controversy has erupted at relatively few universities, a signifi-
cant division of opinion persists over faculty involvement with industry. At one
extreme, private funding is still regarded by a few department chairs as “tainted

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money,” and they tend to abjure support from any sources other than non-
profits or government agencies such as the National Institutes of Health (NIH).
On the whole, however, there has been a change of attitude among many
faculty members in the sciences toward industrial funding, a shift away from the
old view of industrial money as unacceptable.
A study of a public university that developed technology transfer mecha-
nisms during the past decade found that departmental support for faculty
involvement in technology transfer varies widely, from active encouragement to
active discouragement. In between, some departments view technology transfer
as simply another bureaucratic requirement of academic life, in this case
preparing a disclosure and sending it on to the designated administrator.
On the whole, however, there are indications that the academic atmosphere
has become more pragmatic because of the growing recognition that it is one of
the functions of a public university to help the economy and that technology
transfer is the way to do it.

Faculty technology transfer styles Several attitudes toward technology transfer,


reflecting increasing degrees of willingness to participate in commercialization
activities, are apparent among faculty researchers:

• residual resistance to industrial involvement – these researchers are often


equated to the federal agency that is their primary source of support and
referred to, for example, as “NIH persons”;
• indifference, opting to leave the matter entirely to the transfer office;
• willingness to play a significant role in arranging transfer of their research
to industry because they have business acumen and are aware of its poten-
tial commercial value;
• full commitment to industrial development through the seamless integra-
tion of their campus research group with an industrial research program.

The approach of leaving it up to the technology transfer office to find a


developer and marketer for a discovery has for some time now precisely met the
needs of many faculty members who strictly delimit their role in putting their
technology into use. This group sees the division of labor in technology transfer
weighted toward technology transfer officers, whose expertise and advice they
rely on. Although such academics are keenly interested in seeing whether their
research could be brought into the market and typically express a strong belief
in its worth – some are even convinced it could have a beneficial impact on
people’s lives – they are likely to add the disclaimer: “I’m not looking to become
a business person.” This attitude does not necessarily preclude a start-up firm,
but it does exclude the possibility that such a faculty member will be the
entrepreneur.
A stance of moderate involvement – becoming knowledgeable and comfort-
able operating in a business milieu while retaining primary interest and identity

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as an academic scientist – is increasing. One researcher who is taking this


approach describes it as a matter of adjusting to changed priorities and timing
for “details”: In business,

You have to be very careful about what you say with regard to details
because that is what business is about: keeping your arms around your
details so that you can sell them to somebody else; otherwise there is
no point. … [T]he details are usually done later. … [I]n science, you
share ideas; there tends to be a very open and very detailed
exchange.6

Consistent with that insight, faculty are learning to calibrate their interaction
to both scientific and business needs, giving out enough information to interest
business persons in their research but not so much that a business transaction
becomes superfluous. Significantly, even among these more business-oriented
researchers, it appears that their primary objective is still scientific; business
objectives are strictly secondary.

Financial drivers The pressure to seek alternative sources of support in order to


maintain viability as a researcher is surely increasing the numbers of faculty
interested in obtaining industrial funds. Financial constrictions in academia,
both real and perceived, have motivated faculty to seek new ways to work with
industry, particularly as government money has become tighter. Departments
typically sanction these quests, on the condition that required disclosures are
made and salary arrangements modified. During an era of tightening federal
research budgets, soliciting support from private industry is increasingly
becoming the thing to do. Researchers point especially to the drying up of NIH
funding as causing them to go elsewhere for money. Even given the present
expansion of the NIH, competition for research funds remains acute because
the number of faculty members and universities competing for their support
funds continuously expands.

The university–industrial penumbra: confluence visible


Perhaps the most significant change in faculty–industry relations lies in their
intensification, the impetus for a penumbra of companies now surrounding the
university. Many businesses, both large established firms and start-ups, want a
closer, more involved relationship with the academic scientists with whom they
work, and geographical proximity makes a difference in encouraging appropriate
interaction. The changed situation has been described this way: “More and
more the company’s attitude is, ‘We want you with your unique expertise to
contribute, not to the development of an as yet uninvented product, but to the
definition of this product which we as a company may need.’ ” In this scheme,
professors will not merely hand over a technology developed as a by-product of

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academic research that happens to coincide with a corporate need; they will
help to set the company’s strategic research direction. Such intensified collabo-
rations make the old model of licensing intellectual property just an initial step
in setting the ground rules as to how the relationship should be structured and
any profits divided because once the contract is signed, a much more complex
level of participation by both parties will occur than a simple relationship
between licensee and inventor.
The penumbra of companies surrounding the university has given rise to an
industrial pull that augurs an ongoing relationship beyond current projects.
Such intensive interaction sheds new light on the question of industrial influ-
ence on faculty research direction and whether this is good, bad or irrelevant.
The issue of investigator initiation is moot because the investigator brings the
university-initiated technology to a company-initiated product in a fairly even
intellectual property exchange, effecting a confluence of interest. To the extent
that this partnership contributes measurably to regional economic development,
moreover, “confluence” may replace “conflict” of interest in public perceptions
of university–industry relations.
Previous conflicts attributable to the assumption that a dividing line exists
between the academic and industrial sides of a relationship are superseded as
divisions disappear. A more integrated model of academic–industry partnerships
is emerging along with a diversified network of transfer institutions. Indeed, the
very notion of technology transfer, or at least transfer at a distance, is super-
seded as universities develop their own industrial sector.

Science and entrepreneurship


Scientists have thus come to treat the uses of their research in distinctly
different ways. In an editorial in Communications of the ACM, Peter Denning,
President of the Association of Computing Machinery (ACM), the leading
association of computer scientists and engineers, said that:

I see how these different ways of thinking [extension and capitalization


of knowledge], have appeared in my own professional life which began
with extensive training in the American research paradigm–federally
funded basic research. I see that many of the ideas that I rushed into
the public domain through my publications might have been the bases
of innovations in computer systems. For example, a working set
detector for memory management, a working set loading controlling
scheduler or a circulating ring queue for scheduling parallel tasks. My
only concern was writing the paper and getting it into the literature.
None of the following actions occurred to me: patenting these devices,
building prototypes, consulting, forming business alliances with those
having a manufacturing capability or starting my own business.7

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Virtually all of the repertoire of technology transfer mechanisms are laid out
here. Denning continued: “Indeed, had I engaged in such actions I would have
had less time for publication and teaching which would have put my prospects
for academic advancement at risk. My actions were consistent with feeding the
pipeline.”8 But Denning is writing this editorial not to defend the traditional
academic system of which he is a part and whose values he obviously shares.
Rather it is to suggest as a possible role model a different scientist than himself,
namely Lofti Zadeh of the computer science department at the University of
California, Berkeley. He says: “Zadeh’s career was in a different direction.”9
Zadeh was the originator of “fuzzy logic”, which opened up a new area of
computer science and has also led to large numbers of practical uses, most of
those having been found not in the USA but in Japan. From controlling banks
of elevators to improving techniques in artificial intelligence research – both
the practical applications and most of the follow-up research from Zadeh’s orig-
inal ideas have taken place in Japan.
I happen to have interviewed Professor Zadeh, not in the context of a study
of academic–industry relations, but as part of a study of the development of
computer science as an academic discipline.10 Zadeh’s office is the quintessen-
tial academic office. It is logically organized with rows of plastic bins piled in
stacks upon one another, each containing a stack of reprints of an article. So
Zadeh cannot be taken as an example of an academic who becomes intrigued by
industry, leaves an academic career and pursues a different direction. Zadeh has
pursued an academic career at the highest level and received due recognition
from his peers. But at the same time as he was pursuing traditional academic
goals he was also involved in consulting and taking out patents: all of the activ-
ities that Denning listed as not having undertaken himself.
Opportunities for commercial utilization of scientific research were often
available to scientists, whose norms did not permit them to violate the
boundary between science and business. What is new in the present situation is
that many academic scientists no longer believe in the necessity of an isolated
“ivory tower” for the working out of the logic of scientific discovery. Previously,
in the long hiatus between scientific discovery and application, industry was
expected to have its industrial scientists pursue research and development, an
activity presumed to be too mundane for university scientists. Now, academic
scientists are often eager and willing to direct, or participate in, developmental
research programs leading to commercial application.
The conduct of science as an organized activity changes the nature of the
scientific role and the social, if not cognitive, norms of science. The
entrepreneurial scientist seeks financial gain as well as advancement of knowl-
edge and recognition from their peers. Attention to the economic value of
academic research has meant that research results have been defined as “intel-
lectual property” and that property in knowledge is contested not only for its
symbolic but also for its monetary value. The placement of economic

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motivation on a comparable status with advancement of knowledge in science


has significant consequences for the definition of the scientific role, the social
organization of science and the mission of the university.

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12
INNOVATION
The endless transition

We are moving from the era of the Endless Frontier, based on an assumption
that research automatically translates into use, to the era of the Endless
Transition. Three fields of transition in science and technology policy can be
identified in innovation, technology and institutions. The first transition is in
the relationship between basic research, applied research and product develop-
ment. The three previously relatively distinct phases are moving together.
There will no longer be such strict boundaries between different types of
research. Instead, they will blend into each other and move back and forth,
without strict separation among them.
The second “endless”, transition is between different technological areas.
They had been thought of as being connected to different disciplines and
different industries but they are now cross-fertilizing each other. Previously there
were strong boundaries between individual disciplines. More recently interdisci-
plinary collaboration has expanded and new disciplines have been created at the
intersections between old ones. Biochemistry is an early example. Moreover, new
interdisciplinary synthetic disciplines have been created such as bio-informatics,
whose components came out of the previous syntheses that created computer
science and molecular biology. Now these two have themselves been brought
together to form a new field in a continuing process of combination and re-
combination that has created other new fields such as behavioral economics.
The third transition is toward the “triple helix” of university, industry and
government relations as the framework for innovation systems at the national,
regional and multi-national levels. As these three institutional sectors (public,
private and academic) interact, a spiral pattern of linkages emerges at various
stages of the innovation process. Start-up firms are a common outgrowth of the
three sectors: arising from academic research groups, national laboratories and
the laboratories of large corporations.

The triple helix


Society is more complex than biology. A “double helix” was sufficient to model
DNA. A “triple helix” is required to model university–industry–government

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interactions. The triple helix comprises universities and other knowledge-


producing institutions; industry, including high-tech start-ups as well as
multinational corporations; and government at various levels – local, regional,
national and transnational.
From various starting points in different parts of the world, there is a move-
ment toward a new global model for the management of knowledge and
technology, the triple helix. Four stages can be identified in its development:

1. Internal transformation in each of the helices Universities and other knowledge-


producing institutions play a new role in society, not only in training students and
conducting research, but also in making efforts to put knowledge to use effec-
tively. Expressed through technology transfer offices and the requirements of
government grant programs for the support of research, the entrepreneurial
university elides the traditional boundaries between academia and industry.
Strategic alliances for R&D among companies and governments taking the role
of venture capitalist are parallel, intersecting developments.

2. Influence of one helix upon another The US federal government established a


stable framework for academic technology transfer through the Bayh-Dole Act
of 1980. This amendment to the Patent and Trademark Law instituted an indi-
rect industrial policy through which government encouraged universities to
assist industrial innovation. Secure rules of the game for the disposition of intel-
lectual property, arising from government-sponsored research, encouraged the
spread of technology transfer to a broader range of universities and expanded
the academic technology transfer profession. Since universities and their repre-
sentatives were involved in lobbying for the law, the direction of influence went
both ways.

3. Creation of a new overlay of trilateral networks and organizations from the inter-
action among the three helices Such groups typically form to fill gaps in an
innovation system by “brainstorming” new ideas. Joint Venture Silicon Valley,
established during the economic downturn in the early 1990s, the Knowledge
Circle of Amsterdam, organized during the past decade, and the New England
Council, founded in the 1920s, included participants from small and large
companies, local government and academia. The New England Council played
a key role in inventing the venture capital firm, crucial to the growth of Route
128 and Silicon Valley.

4. A recursive effect of these triple helix networks, both on the spirals from which they
emerged and the larger society One effect is on science itself. The capitalization
of knowledge has displaced disinterestedness, the expectation that scientific
knowledge would be freely distributed, with researchers taking their rewards
solely in recognition from their peers.1 This new norm has arisen from the prac-
tices of industrial science, an internal entrepreneurial dynamic within

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academia, and from government policies. The capitalization of knowledge


transforms both the way that academic scientists view the results of their
research and the role of the university in relation to industry and government.
The knowledge base and its role in innovation can be explained in terms of
changing relationships between university, industry, and government.

Innovation is increasingly likely to come from outside the individual firm or


even from another institutional sphere such as the university where the focus
of attention is on original path-breaking developments, whether in science or
technology. It was not an accident that US universities were favored over
government and industrial laboratories as the site for path-breaking military R&D
during the Second World War. Moreover, it can be expected that discontinuous
innovations, which originate in one company, are more likely to be utilized in a
different environment where the blinders of current taken-for-granted practices
or commitment to existing technologies and products are less likely to have effect.
The triple helix model of innovation, with converging institutional spheres
of academia, industry and government each taking the role of the other, has
been read in different ways in various parts of the world. In countries where the
interface is well underway, whether occurring from the bottom up, through the
interactions of individuals and organizations from different institutional
spheres, or top down, encouraged by policy measures, the triple helix can be
recognized as an empirical phenomenon. the USA has been seen to exemplify
the former and Europe the latter mode of triple helix development.2
Both types of triple helix development may actually be underway in the
USA and Europe albeit at different rates and with varying emphases. Top down
processes can be identified in the USA, even though they are often hidden
behind “bottom up” formats. Thus, Advanced Technology Program (ATP)
program managers at the National Institute for Standards and Technology have
been known to seek out technical leaders in industry to encourage them to
initiate an “industry led” focus program. Nevertheless, as industry takes on the
project as its own and draws academics as well, or vice versa, who can say where
top down ends and bottom up begins? It may be more accurate to recognize
both processes going on simultaneously and in tandem. Indeed, such a dual
track for innovation promotion may be more productive than any single path.
Similarly, in Sweden when young computer and business consultants join
together to form an e-commerce firm, a new development is at hand in a society
whose industry was led by a definable group of large firms for several decades.
Certainly government-supported entrepreneurship programs and incubator
facilities are available to support these initiatives. Once again bottom up meets
top down in a creative fashion, creating a broader context for innovation than
would likely arise from either approach in isolation.
In other parts of the world (Latin America, for example) where industry and
university have traditionally existed apart from each other, with academia as
part of the governmental sphere, the triple helix is sometimes taken as a

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normative model. Some view it as a goal to strive for in bringing about change
to enhance the prospects for innovation. Other observers see the coming of the
triple helix as representing the downfall of the existing system of innovation,
represented by government-owned corporations sponsoring laboratories adja-
cent to university campuses.
Privatization of companies, it is believed, will reduce the resources available
for R&D, including collaborations between the state-owned company labora-
tory and university researchers. On the other hand, many of these
collaborations were not sufficiently market driven and resulted in innovations
that lacked a context to be put to use, having been based upon a negotiation
between two public laboratories, neither of which was closely enough tied to
production and use.3
This gap is not only a peculiarity of Latin American public research but has
been noted in the large corporate laboratories in the USA that had been sepa-
rated from production facilities and were operating as isolated entities until
quite recently. In the latter case the reintegration of the laboratory into the firm
and directing it more closely toward company goals has been occurring at IBM
and GM in recent years. Typically, as corporate R&D facilities are moved closer
to product development, longer-term R&D is conducted in collaboration with
other firms, university research groups and government laboratories.

Beyond “the power elite”


The triple helix model of simultaneously competing and cooperating institu-
tional spheres supersedes C. Wright Mills’ societal model in which the military
formed the third element of an institutional triad with large industry and the
executive branch of the US federal government. Mills argued that the inter-
locking “power elite,” sharing a common educational and social background,
ran the major institutions in the United States. He further held that this
coalition of institutional leaders transcended mere electoral politics and guided
decision making on important policy issues. The end of the Cold War vitiated
Mills’ analysis, however, especially since the major instance of decision
making that he sought to analyze was the nation’s ability to initiate World
War III.4
As geopolitical and military issues were gradually displaced during the 1970s
and 1980s by issues of economic competitiveness, decision making became
more diffuse, involved other actors, and often devolved from the national to the
regional level. Science and technology policy issues, which had been under-
stood as spin-offs of Cold War military and political exigencies – and therefore
seen as taking place according to a linear model – required a framework that
could account for the increasing importance of the science base and the
decreasing relevance of the military. The triple helix model has enabled analysis
of the dynamics of innovation in terms of historical trends, new structural
arrangements and emerging moments of change.

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Innovation in innovation
Academic research now increasingly intersects with industrial progress and
government economic development policy. The growth of industrial “conurba-
tions” around universities, supported by government research funding, has
become the hallmark of the new development model, exemplified by Silicon
Valley; the profile of knowledge-based economic development was further
raised by the founding of Genentech and other biotechnology companies based
on academic research in the 1980s. The triple helix thesis is expressed in seven
propositions:

1. Arrangements and networks among the Triple Helix institutional spheres provide
the source of innovation rather than any single driver New initiatives arising from
these networks become the source of innovation policies at national, sub-
national, and supra-national levels. Government thus becomes a partner in the
policy-making process as policies become an outcome of the interactions among
the triple helix agencies.

2. Invention of new social arrangements becomes as important as the creation of


physical devices New organizational mechanisms such as incubators, science
parks and networks among them become a source of economic activity, commu-
nity formation, and international exchange. New modes of interdisciplinary
knowledge production, involving triple helix partners, translate into firm
formation at the Internet and business incubation in various settings.

3. New channels for interaction link the various institutional spheres and speed the
pace of innovation The linear model of transfer of knowledge generated in
academia is supplemented with the transfer of technology both as intellectual
property and through the formation of firms by alumni and staff. The reverse
linear model starting from industrial and social problems provides starting
points for new research programs and discipline formation. The interaction
between these two dynamics results in the emergence of an interactive mode of
innovation.

4. Capital-formation takes on new aspects even as new forms of capital are


created The transformation of capital cannot be fully understood from the
perspective of either the individual firm or the operation of markets. New forms
of capital are created based upon social interaction (“who you know”) and intel-
lectual activities (“what you know”). Forms of capital are interchangeable.
Thus, raising financial capital is based on accumulating intellectual as well as
social capital. Human, social, and intellectual capital needs are redefined as
firms relate to universities and government.

5. Globalization becomes decentralized and takes place through networks among


universities as well as through multi-national corporations and international

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organizations As organizational innovations for technology transfer diffuse


from one part of the world to another, interaction across regions and nations
reinforces globalization. As universities develop links, they can combine
discrete pieces of intellectual property and jointly exploit them. These new
configurations become the basis of a continuous process of firm formation,
diversification and collaborations among competitors.

6. Developing countries and regions have the possibility of making rapid progress
insofar as knowledge sources can be absorbed into the political economy Political
and social arrangements based upon principles of equity and transparency lay
the groundwork for rapid development in a stable environment. “Leapfrogging,”
to skip some stages of development, is thus more likely. Universities and
networked incubators can be utilized both to adapt advanced technologies to
solve local problems as well as to transfer local innovations abroad.

7. Reorganizations across institutional spheres, industrial sectors and nation-states are


induced by opportunities in new technologies Technological innovation reshapes
the landscape in terms of the development of niches and clusters, relations
among firms of different sizes and types and the creation of both public and
private sources of venture capital. Enterprises are constructed out of elements
from all the relevant institutional spheres, not just from industry itself. Social
developments take unexpected turns as new technologies reinforce the
dynamics of firm formation and vice versa.

Science has always been “mode 2”


During the first academic revolution, the theoretical and specialized outlook of
the graduate schools was conveyed throughout the academic institutional
order.5 In the course of the second academic revolution, the valorization of
research has been integrated with scientific discovery, returning science to its
original seventeenth-century format prior to the appearance of an ideology of
basic research in the mid-nineteenth century.6
The so-called “mode 2” of interdisciplinary research, with both theoretical
and practical implications, is not new; it is the original format of science from
its institutionalization in the seventeenth century. The real question to be
answered is why mode 1, meaning disciplinary research isolated from the
context of application, has arisen after mode 2, the original organizational and
institutional basis of science which consists of collaborations, networks and
invisible colleges.7 Mersenne, before denoting an Internet site, was a person
who by visits and letters knitted the early European scientific community
together. The Academies of Science played a similar role in local and national
contexts from the sixteenth century.
Modern science has always been organized through networks and has
pursued practical as well as theoretical interests. Robert K. Merton reported that

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somewhere between 40 and 60 percent of discoveries in the seventeenth


century could be identified as having their impetus in trying to solve practical
problems in navigation, mining, etc.8 Trying to solve practical problems
through scientific means is neither new nor is it a modest part of science. It has
been an important impetus to science from its inception. The two have always
gone together.
Mode 2 represents the material base of science – how it actually operates.
Mode 1 is an ideological construct upon that base intended to justify autonomy
for science, especially in an era when it was still a very fragile institution and
needed all the help it could get. This ideology appeared in association with the
funding of universities by holders of large industrial fortunes and may have
served to protect them from interference. There were grave concerns that the
industrialists making these gifts would try to directly influence the direction of
research at the universities, including the hiring and firing of professors as well
as what topics were acceptable to be studied.9 When universities were a weak
institutional sphere, it can be argued that an ivory tower model, emphasizing
isolation and de-emphasizing practical concerns, served to protect academic
freedom. The President of the American Association for the Advancement of
Science, Henry Rowland, posited a sphere of science that would be beyond the
control of any one with economic interests. The notion was put forth that if
anyone with external interests tried to intervene it would harm the conduct of
science. The ideology of basic research carved out a protected space for science.
At the same time there was also the growth of the land grant universities and
the founding of MIT as a part of that mode. The two modes have existed, of
course, in parallel. The ideology of basic research was then strengthened by
Robert K. Merton’s positing of the normative structure of science during World
War II. This arose from the need to defend science from external attack by the
Nazi ideas of how science should be used, as well as from Lysenko in the Soviet
Union. Again this formulation of a set of norms was to protect the free space of
science.
The third element in establishing this ideology of science was, of course, the
1945 report Science: The Endless Frontier.10 The huge success of science in
supplying practical results during World War II in one sense provided its own
legitimation. But with the end of the war and the desire to keep science funded,
and without awareness in advance of what the Cold War and Sputnik would do,
a rationale was needed in 1944 when Vannevar Bush got President Roosevelt to
write a letter commissioning the report.
The authors of the report developed an implicit concept of science as a self-
regulating mechanism, operating according to a linear progression: put in the
money at one end and the results will flow out at the other in 50 years’ time.
This can be seen in the organizational framework for ensuring that funds for
research would be distributed under the control of scientists. In the first draft of
his report, Bush proposed to follow the then current British method of funding
science at universities. It would be distributed on a per capita basis according to

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the number of students. In the then current British system of a small number of
universities, the funds automatically went to an elite. However, if that model
had been applied in the USA, even in the early post-war era, with large land
grant universities, the funding would not have flowed only to an elite but would
have been much more broadly distributed across the academic spectrum.
In the time between the draft and the final report, the mechanism for the
distribution of government funds to academic research was revised and peer
review was put in. One could be sure that the peers, the leading elite scientists
who would most surely be on these committees, would distribute the funds
primarily to their fellow scientists at elite universities. So it was guaranteed
through the peer review system that funds would be distributed to a scientific
elite, reinforcing a status system of US universities that had been in place since
the 1920s.
And in fact this linear model has worked, but not on its own. As we have
seen, the USA established a series of programs and a regulatory environment to
facilitate technology transfer in order to reap the benefits of munificent research
funding. Other countries, such as Sweden, with high rates of R&D spending
and relatively low rates of economic return, are currently undertaking parallel
steps. The two modes have often existed in parallel. Although the “endless
frontier” provided a justification for the establishment of the National Science
Foundation, at the same time much greater amounts of funds were devoted to
science through the military for practical results in computer science and also
for health through the National Institutes of Health.
Nevertheless, why, at this point in time are we seeing the decline of mode 1
and the end of the endless frontier? Why has peer review been disregarded
through the very practical method of distributing funds by direct appropriation,
often labeled pork barrel? Because these funds are also directed toward serious
scientific research and instrumentation projects. In fact, the leading universi-
ties, like Columbia when it needed to renew the infrastructure of its chemistry
and could identify no other route to fund its projects, went to the same lobbying
firm in Washington as universities that wished to break into the funded
research mode. Columbia relabeled the chemistry department “The Center for
Excellence in Chemistry” and, in time, an appropriation was made and the
buildings were renovated. The university did not want to wait to go through the
slower process of peer review, and likely receive smaller amounts of funding.
The fundamental reason why the endless frontier model is at an end and we
are moving now into an endless transition model, not only in the USA and
Western Europe but also in Latin America, the former Soviet Union and the
developing world, is that it is now clear that the development of science is the
basis for future industrial development. These connections, of course, have
always been there. They showed clearly in the mid-nineteenth century in
chemistry. This can be traced back to seventeenth-century pharmaceutical
science and the development of a pharmaceutical industry in Germany. Marx
could find one example, Perkins’ research on dyestuffs in the UK, leading to the

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development of an industry in Germany that he translated into a thesis of the


growth of science-based industry on the basis of a single empirical example.

The endless transition


The endless transition means that science and funds for research must now be
distributed to all areas of the country. It is no longer acceptable for funds to go
primarily to the east and west coasts and a few places in-between in the
Midwest. All regions want a share of research funding because they are now
aware that it is the basis of future economic growth. That is why the peer system
breaks down. It is also why funding decisions are now made on other bases.

The future legitimation of science


The old cultural legitimation still holds, and to some extent the military and
health, of course, remain as a strong stimulus to research funding. The future
legitimation for scientific research that will keep funding at a high level is that
it is the basis of economic development. This often occurs through these newly
created disciplines. These disciplines are created not purely out of science the
way Ben-David analyzed the splitting-off of new disciplines from old ones in the
nineteenth century.11 New disciplines, more recently, have been created
through synthesis of practical and theoretical interests; of elements of older
disciplines such as electrical engineering, a bit of psychology and philosophy
and a machine, made into computer science. Similar processes operate to create
material science bio-informatics and the other sciences that are on everyone’s
critical technology list.

The triple helix era


The triple helix denotes not only the relationship of university, industry and
government, which constitutes these new scientific disciplines and the basis for
scientific funding, but also the internal transformation within each of these
spheres. The transformation of the university from a teaching institution into
one which combines teaching with research is still ongoing, not only in the
USA, but also in many other countries. There is a tension between the two
activities but nevertheless they co-exist in a more or less compatible relation-
ship with each other because it has been found to be both more productive and
more cost effective to combine the two functions.
As the idea of transforming science into economically useful goods is intro-
duced, a process of normative change gets underway. Scientists who adhered to
the ideology of pure research, as well as those from the land grant tradition, also
become involved in identifying practical results from their research and putting
them to use. They find when they become engaged in these practical ventures
that they are doing things that are not so different from their work in US

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universities. Research in the USA grew up in an entrepreneurial mode. The


professor was not a civil servant as he or she often is in Europe. To be a
researcher you had to be an entrepreneur to get the funds, first from your own
university, next from foundations and then from government agencies or from
industry. Universities operated as a series of quasi-firms that later became actual
firms.
This is why academic scientists that I interviewed often said there is not such
a great difference between what they were doing in the university in negotiating
for funds and dealing with personnel problems in their research group, and what
they were doing helping to organize a new firm. The two are made compatible
with each other because the people who are doing this find that they can now
have in mind the goals of mode 1 as well as those of mode 2, and they can place
them in a compatible relationship to each other. They do not find a contradic-
tion between identifying the economically useful goods of their research and
the advancement of theory. Theory can advance practical uses as we know from
biotechnology and from computer science, where speech recognition has been
developed from artificial intelligence research.
We have similar transformations in industry where there is a shift from the
hierarchical model of large firms to small firms, and especially small firms
emanating from universities that operate fairly close to an academic model.
This can be seen in biotechnology firms that advertise for post-doctoral fellows.
Similar processes are at work in transforming government from working in
different directions to pursuing a common goal. In countries such as the USA
that adhered to a laissez-faire ideology, government is playing a more interven-
tionist role in innovation. Conversely, in countries where government was a
totalizing force, it has reduced its level of intervention to allow more autonomy
to the industrial and academic spheres.

Breaking boundaries and building bridges


Each of these spheres is also taking the role of the other. Universities are taking
the role of industry in forming companies. A penumbra of firms generated from
the university and/or attracted to the university surround campuses.
Governments, especially at the regional and local levels, are playing a new role
in industrial development to encourage the growth of science and technology
research as a basis for firm formation in regions that formerly lacked these capa-
bilities. Industry is acting a little more like a university in sharing knowledge
not only with the universities but also with fellow firms, collaborating with
each other through strategic alliances in a quasi-academic mode.
The USA was formerly characterized by relationships among universities,
industry and government in a laisez-faire triple helix model of separate spheres
with strong borders and boundary lines. There was transfer across these borders
through technology transfer offices and industrial liaison people, to keep the
spheres separate and yet move technology across. The USA is currently moving

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into a mode of integration in which the spheres move more closely together and
start to overlap as in a Venn diagram.
It is becoming commonplace to have negotiated arrangements in which
universities own intellectual property and assign it to a firm, often started by a
professor in the university, with the university retaining part-ownership of the
company instead of seeking royalty payments as it typically would from a large
firm. Thus when these two interests (academic and industrial) are joined
together, it is not necessary to construct a “Great Wall of China” between the
firm and the university. Instead data and ideas may go back and forth between
the academic and firm laboratories.
If the disjuncture between theory and invention is accepted, the appearance
of entrepreneurial scientists is an anomaly.12 Their research is typically at the
frontiers of science and leads to theoretical and methodological advances as
well as the invention of devices. These activities involve sectors of the univer-
sity, such as basic science departments, that have previously, in principle,
limited their involvement with industry. Thus, the phenomenon of academic
scientists commercializing their research requires a new explanation. It must be
one that goes beyond the availability of investment funds since earlier genera-
tions of scientists, such as Pasteur and the Curies, seldom took advantage of
commercial opportunities.13 The emergence of this new role calls for the
construction of a framework that can account for a pluralistic universe of
science and a differentiated normative structure among scientists. Such a model
should account for the emergent role of the entrepreneurial scientist in the
university as well as industrial scientists who do not necessarily experience role
strain in their research setting.
Resource dependency theory suggests that entrepreneurial academic
behavior can be explained by the fact that universities follow their interests
and seek funds wherever they become available: from government, as in the
early post-war period, or from industry, as in the present time.14 The premise of
this framework is that the seeker is subordinate to the funding source. A theo-
retical analogue, principal–agent theory, has also been applied to understand
the so-called contract between government and academia in the early post-war
era.15 However, if entrepreneurial scientists and entrepreneurial universities are
now active and equal partners in their relations with industry and government,
able to negotiate on an equal basis and maintain fundamental institutional
interests such as the ability to publish, then the above explanations are partial,
at best.
The first phase of entrepreneurial science is the internal development of
academic research groups into “quasi-firms.” The second phase refers to
academic participation in the externalization and capitalization of knowledge in
tangible products and distance-learning courseware. As universities spin-off for-
profit entities from their research and educational activities, and fund some of
their own research, they shift their institutional focus from eleemosynary to self-
generation. The ability to balance multiple sources of support, including

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industry, state and local government and self-funding can be expected to


increase the independence of the university. This transition to decreased depen-
dence upon the federal government is partially hidden by increases of research
funding in selected areas such as health.16
As the production of scientific knowledge has been transformed into an
economic enterprise, the economy has also been transformed, since it increas-
ingly operates on an epistemological base.17 Intellectual property is becoming as
important as financial capital as the basis of future economic growth, indicated
by the inadequacy of traditional models of valuing firms primarily in terms of
their tangible assets. Although the contemporary research university has not
become a fully fledged commercial enterprise, it has taken on some of the
entrepreneurial characteristics of a “Silicon Valley” or “Route 128” high tech-
nology firm, even as such firms were adopting some of the collegial forms and
campus architecture of the university. The university’s emergence as a partici-
pant in economic development has not only changed the nature of the
relationship between industry and the university but has also made the national
university a significant regional actor.18
An entrepreneurial academic ethos that combines an interest in funda-
mental discovery with application is emerging as new and old academic
missions persist in tension. Rather than being suborned to either industry or
government, the university is emerging as an influential actor and equal partner
in an innovation promotion and industrial policy regime, the “triple helix” of
university–industry–government relations. The institutional spheres of science
and the economy, which were hitherto relatively separate and distinct, have
become inextricably intertwined.
The university’s unique status as a teaching, research and economic develop-
ment enterprise, whose traditional and new roles reinforce each other, places it
in a central position in the new economy. The broader underlying process here
is the movement of universities away from being eleemosynary or charitable
institutions that gain their support from other sectors of society. It is expected
that the generation of their own support from their research activities can rise
to a much higher level on the assumption that only a very small proportion of
the academic capacities for translating knowledge into the economy are
currently being utilized. As the universities’ involvement in the capitalization
of knowledge increases, their position in society is transformed from a secondary
to a primary institution.
Even as the university retains its traditional functions of conservation and
production of knowledge, socialization of youth and dissemination of research,
it becomes a founder of firms in incubator facilities, playing a new role in
forming organizations. These practices represent a potentially fundamental
modification of the traditional view of universities as institutions supported by
governmental, ecclesiastical and lay patronage. The new arrangements open the
possibility that universities will become, at least in part, financially self-
supporting institutions, entities obtaining revenues through licensing agree-

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ments and other financial arrangements for the industrial use of new knowledge
discovered at the universities. At present, this possibility is little more than that
but it certainly represents a novel idea in the history of universities.

151
NOTES

INTRODUCTION
1 Geiger, Roger. 1986. To Advance Knowledge: The Growth of American Research
Universities, 1900–1940. New York: Oxford University Press.
2 Bush, Vannevar. 1970. Pieces of the Action. New York: Morrow, p. 159.
3 Ibid., p. 168.
4 Veysey, Laurence. 1965. The Emergence of the American University. Chicago:
University of Chicago Press.
5 Genuth, Joel. 1987. “Groping toward science policy in the United States in the
1930s,” Minerva 25(3): 238–68.
6 Zusman, Ami. 1999. “Issues facing higher education in the twenty-first century,” in
Philip Altbach, Robert Berdahl and Patricia Gumport (eds), American Higher
Education in the Twenty-first Century. Baltimore: Johns Hopkins University Press, pp.
109–50.

1 THE SECOND ACADEMIC REVOLUTION


1 Director of Technology Transfer, Columbia University, Interview with Henry
Etzkowitz, 1982.
2 Eugene Schuler, Director, CESTM, State University of New York at Albany,
formerly Director, Long Island High Technology Incubator, SUNY, Stony Brook,
Interview with Henry Etzkowitz, April 1995.
3 Blakeslee, Sandra. 1996. “A protein tells eaters to stop,” New York Times 4 January,
A1, B10.
4 Jencks, Christopher and David Riesman. 1968. The Academic Revolution. New York:
Doubleday, p. 12.
5 Oleson, Alexandra and John Voss. 1979. The Organization of Knowledge in Modern
America. Baltimore: Johns Hopkins University Press.
6 Kerr, Clark. 1963. The Uses of the University. Cambridge: Harvard University Press.
7 Apple, Rima. 1989. “Patenting university research: Harry Steenbock and the
Wisconsin Alumni Research Foundation,” ISIS 30 (September): 375–94.
8 Wise, George. 1980. “A new role for professional scientists in industry: industrial
research at General Electric, 1900–1916,” Technology and Culture, pp. 408–29.
9 Noble, David. 1976. America By Design: Science, Technology and the Rise of Corporate
Capitalism. New York: Knopf. See especially Chapter 7.
10 Faulkner, Wendy and Jacqueline Senker. 1995. Knowledge Frontiers: Public Sector
Research and Industrial Innovation in Biotechnology, Engineering Ceramics, and Parallel
Computing. Oxford: Oxford University Press.

152
NOTES

11 See Bok, Derek. 1982. Beyond the Ivory Tower: Social Responsibilities of the Modern
University. Cambridge: Harvard University Press.
12 “Harvard University, in policy reversal, will raise money for investments aimed at
bringing faculty members’ research to marketplace and making profit for school,”
New York Times, 16 September 1988, I, 14: 1.
13 Kolata, Gina. 1997. “Scientist reports first cloning ever of adult mammal,” New York
Times, 13 February, 1: 1.
14 Aitken, Hugh. 1976. Syntony and Spark: The Origins of Radio. New York: Wiley, p.
209.
15 Office of Technology Assessment. 1984. Commercial Biotechnology: An International
Analysis. Washington, DC: Office of Technology Assessment.
16 Aitken, op. cit.
17 See Etzkowitz, Henry. 1983. “Entrepreneurial scientists and entrepreneurial universi-
ties in American academic science,” Minerva 21: 198–233.
18 Aborn, Timothy. 1996. “The Business of Induction: Industry and Genius in the
Language of British Scientific Reform,” History of Science 31(103): 91–121.
19 Schumpeter, J.A. (1951) [1949]. “Economic theory and entrepreneurial history,” in
Change and the Entrepreneur: Postulates and Patterns for Entrepreneurial History.
Cambridge: Harvard University Press, p. 256.
20 Eisinger, Peter. 1988. The Rise of the Entrepreneurial State: State and Local Economic
Development Policy in the United States. Madison: University of Wisconsin Press.

2 MIT: THE FOUNDING OF AN ENTREPRENEURIAL


UNIVERSITY
1 Rogers, William. 1954 [1846]. “A plan for a polytechnic school in Boston,” in S.
Prescott, When MIT was Boston Tech. Cambridge: MIT Press.
2 Ibid.
3 Ibid.
4 Pearson, Henry. 1937. Richard Cockburn Maclaurin. New York: Macmillan.
5 See Wolf, Steven and David Zilberman (eds). 2001. Knowledge Generation and
Institutional Innovation in Agriculture. Dordrecht: Kluwer.
6 Sinclair, Bruce. 1974. Philadelphia’s Mechanics: A History of the Franklin Institute,
1824–1865. Baltimore: Johns Hopkins University Press, p. 261.
7 Pierson, George. 1952. Yale College: An Educational History, 1871–1921. New Haven:
Yale University Press.
8 Storr, Richard. 1966. Harper’s University: The Beginnings; A History of the University
of Chicago. Chicago: University of Chicago Press.
9 Wise, George. 1985. Willis Whitney, General Electric and the Origins of U.S. Industrial
Research. New York: Columbia University Press.
10 Carty, J.J. 1917. “The relation of pure science to industrial research,” in Smithsonian
Institution Annual Report – 1916. Washington, DC: Government Printing Office, p.
525.
11 Ibid., p. 92
12 Servos, John. 1970. “The knowledge corporation: A.A. Noyes and chemistry at Cal-
Tech, 1915–1930,” Ambix November.

3 CONTROVERSY OVER CONSULTATION


1 Wildes, Karl and Nilo Lindgren. 1985. A Century of Electrical Engineering and
Computer Science at MIT. Cambridge: MIT Press, pp. 47–8.
2 Ibid., p. 49.

153
NOTES

3 Stankiewicz, Rikard. 1986. Academics and Entrepreneurs. London: Frances Pinter,


p. 46.
4 Greene, John C. 1979. “Protestantism, science and the American enterprise:
Benjamin Silliman’s moral universe,” in Leonard G. Wilson (ed.), Benjamin Silliman
and his Circle. New York: Science History Publications.
5 “F.G. Keyes Memorandum Regarding Outside Work: Chemistry Department,” 21
January 1931, MIT Archives, Collection AC 4, Box 217, Folder 30.
6 Ibid.
7 “Letter from Watson Vredenburg, President of the National Engineering Inspection
Association, to President Compton,” 9 January 1932, MIT Archives, Collection AC
4, Box 217, Folder 3.
8 “Executive Memorandum from C.L. Norton To Dr K.T. Compton,” 13 February
1931, MIT Archives, Collection AC 4, Box 217, Folder 3.
9 See Kahn, Ely. 1986. The Problem Solvers: A History of Arthur D. Little Inc., Boston:
Little, Brown.
10 “F.G. Keyes Memorandum Regarding Outside Work: Chemistry Department,” 21
January 1931, MIT Archives, Collection AC 4, Box 217, Folder 3.
11 Servos, John. 1980. “The industrial relations of science: chemical engineering at
MIT. 1900–1939,” ISIS LXXI (December): 531–49.

4 THE TRAFFIC AMONG MIT, INDUSTRY AND THE MILITARY


1 Walker, William. 1920. “Co-ordinating scientific and industrial effort,” Chemical and
Metallurgical Engineering. 22(10): 433.
2 Technology Review, 1904: 198.
3 Walker, William. 1920. “The technology plan,” Chemical and Metallurgical
Engineering 22(10).
4 Pearson, Henry. 1937. Richard Cockburn Maclaurin. New York: Macmillan, pp.
266–7.
5 Walker, William. 1920. “The technology plan,” Chemical and Metallurgical
Engineering 22(10): 463.
6 Ibid.
7 Servos, John. 1980. “The industrial relations of science: chemical engineering at
MIT. 1900–1939,” ISIS LXXI (December).
8 Morrison, Philip. 1977. In at the Beginnings. Cambridge, MA: MIT Press.
9 Guerlac, Henry. 1946. “History of the Radiation Laboratory”, B-II
81 MDRC Minutes, 25 October 1940, MIT Archives.
10 Meigs, Montgomery. 1982. “Managing uncertainty: Vannevar Bush, James B.
Conant and the development of the atomic bomb, 1940–1945,” PhD dissertation,
University of Wisconsin.
11 Ibid.
12 MIT (Commission on MIT Education). 1949. “Report of the Committee on
Educational Survey to the Faculty of the Massachusetts Institute of Technology,”
MIT Archives, Collection AC 124.
13 Foster, Leroy. 1984. “Sponsored Research at MIT,” unpublished manuscript, MIT
Archives, p. 45.
14 Burchard, J. 1948. MIT in World War II. New York: Tech Press/Wiley, p. 126.
15 Foster, 1984 op. cit., p. 25.
16 Ibid., p. 28.
17 Ibid.
18 Compton quoted in Burchard, J. 1948. MIT in World War II. New York: Tech
Press/Wiley, p. vii.
19 Clark, R. 1965. Tizard. London: Methuen.

154
NOTES

20 Guerlac, op. cit: 24.


21 Ibid.: I 75.
22 Ibid.: D-IV 1.
23 Ibid.: D-IV 2.
24 Ibid.: D-IV 2.

5 KNOWLEDGE AS PROPERTY: THE DEBATE OVER PATENTING


ACADEMIC SCIENCE
1 See Long, Pamela. 1991. “Invention, authorship ‘intellectual property,’ and the
origin of patents: notes toward a conceptual history,” Technology and Culture, 32(4):
846–84; see also Macleod, Christine. 1988. Inventing the Industrial Revolution.
Cambridge: Cambridge University Press, 1988.
2 Article I, Section 8, Clause 8.
3 Mowery, David and Bhaven Sampat. 2001. “Patenting and licensing university
inventions: lessons from the history of the Research Corporation,” Industrial and
Corporate Change 10(2): 317–55.
4 Etzkowitz, Henry. 2001. “The Second Academic Revolution and the Rise of
Entrepreneurial Science,” IEEE Technology and Society Magazine, Summer.
5 Potter, A.A. 1940. “Research and invention in engineering colleges,” Science
91(2349): 6.
6 Association of University Technology Managers (AUTM). 1999. Licensing Survey.
www.autm.net
7 Technology Access Report 1993 6(12): 18.
8 Association of University Technology Managers (AUTM). 1999. Licensing Survey.
www.autm.net, Executive Summary.
9 Weiner, Charles. 1982. “Relations of science, government and industry: the case of
recombinant DNA,” in Albert Teich and Ray Thornton (eds), Science, Technology
and the Issues of the Eighties: Policy Outlook. Boulder: Westview.
10 “Statement Concerning Patent Policy for the 1936 Annual Meeting of the
Corporation,” 14 October 1936, MIT Archives, Collection AC 4, Box 2, Folder 3.
11 “Institute Policy Regarding Patents,” 15 April 1932, MIT Archives, Collection AC
64, Box 2, Folder 3.
12 Lecuyer, Christopher. 1992. “The making of a science-based technological univer-
sity: Karl Compton, James Killian and the reform of MIT, 1930–1957,” History of the
Physical and Biological Sciences 23(1): 153–80.
13 “Memorandum from Professor John Bunker to President Karl Compton,” 17 October
1931. Quoted in “Letter from Professor John Bunker to Vannevar Bush,” 19 May
1936, MIT Archives, Collection AC 64, Box 1.
14 “Letter from Professor John Bunker to Vannevar Bush,” 19 May 1936, MIT
Archives, Collection AC 64, Box 1.
15 Ibid.
16 Ibid.
17 Gray, G.W. 1936. “Science and profits,” Harpers Magazine 172 (April): 539.
18 “Memorandum on Patent Policy and its Effects,” John Bunker to Vannevar Bush, 23
April 1936, MIT Archives, Collection AC 64, Box 1.
19 “Massachusetts Institute of Technology,” Speech by Karl T. Compton, 25 October
1935. MIT Archives AC 64, Box 2, Folder 1.
20 “Minutes of Meeting of Institute Patent Committee,” 6 November 1936, MIT
Archives, Collection AC 64, Box 1.

155
NOTES

21 National Research Council. 1992. “Global dimensions of intellectual property rights


in science and technology,” Conference, Washington, DC.

6 THE REGULATION OF ACADEMIC PATENTING


1 Etzkowitz, Henry and Andrew Webster. 1994. “Science as intellectual property,” in
James Peterson, Gerald Markle, Sheila Jasanoff and Trevor Pinch (eds), Handbook of
Science, Technology and Society. Beverly Hills: Sage.
2 Bliss, Michael. 1982. The Discovery of Insulin. Chicago: University of Chicago Press.
3 The award was given jointly to Banting and Professor J.J.R. Macleod, the academic
sponsor of the research; Banting split his prize money with Best and Macleod split
his with J.B. Collip, the biochemist on the project. The appropriate allocation of
credit became part of the issue of ownership when it was realized that it was neces-
sary to insure a valid patent.
4 “Statement of Patent Policy,” 15 April 1932, MIT Archives, Collection AC 64, Box
2, Folder 3.
5 “Minutes of Meeting of Institute Patent Committee,” 6 November 1936, MIT
Archives, Collection AC 64, Box 1.
6 “Statement of Patent Policy,” 15 April 1932, MIT Archives, Collection AC 64, Box
2, Folder 3.
7 Foster, Leroy. 1968. “Sponsored research at MIT,” unpublished manuscript, MIT
Archives, Volume 1, p. 104.
8 Anonymous, “For the Information of MIT Patent Committees,” 1945, MIT
Archives, Collection AC 64, Box 2, Folder 3.
9 “Minutes of Meeting of Institute Patent Committee,” 7 April 1938, MIT Archives,
Collection AC 64, Box 1.
10 “Letter from Vannevar Bush to members of the Patent Committee,” 21 May 1936,
MIT Archives, Collection AC 64, Box 1.
11 Professor Harold Edgerton, Interview with Henry Etzkowitz, July 1986.
12 “Minutes of Meeting of Institute Patent Committee,” 5 November 1935, MIT
Archives, Collection AC 64, Box 1.
13 “Letter from Vannevar Bush to members of the Patent Committee,” 21 May 1936,
MIT Archives, Collection AC 64, Box 1.
14 Ibid.
15 Ibid.
16 Ibid.
17 Ibid.
18 Ibid.
19 “Statement Concerning Patent Policy for the 1936 Annual Meeting of the
Corporation,” 14 October 1936, MIT Archives, Collection AC 4, Box 2, Folder 3.
20 “Memorandum on Patent Policy and its Effects,” John Bunker to Vannevar Bush, 23
April 1936, MIT Archives, Collection AC 64, Box 1.
21 “Minutes of the Patent Committee,” 11 February 1936, MIT Archives, Collection
AC 64, Box 1.
22 The Institute Gazette, “Patenting of Institute inventions”, Technology Review,
XXXIX (June 1937) pp. 348–50.
23 McKusick, Vincent. 1948. “A study of patent policies,” Journal of the Franklin
Institute March: 194–225.
24 The arrangement lasted until the early 1960s, when MIT and the Research
Corporation parted ways over differences about how to license the core memory
patent to IBM. The Research Corporation wished to obtain maximum income.
However, when IBM objected to the terms, MIT was willing to reduce its rate, aware
that its relationship to IBM covered a broader field of topics than a single patent.

156
NOTES

When the Research Corporation refused to relent, MIT severed its relationship with
the Corporation and assumed direct responsibility for managing its patents.
25 Anonymous, “Statement of Patent Policy,” 15 April 1932, MIT Archives,
Collection AC 64, Box 2, Folder 3.
26 “For the Information of MIT Patent Committees,” 1945, MIT Archives, Collection
AC 64, Box 2, Folder 3.
27 “Minutes of Patent Management Committee,” 11 January 1945, MIT Archives,
Collection AC 64, Box 2, Folder 1.
28 Ibid.
29 “Letter from Karl Compton to Ralph Flanders, President, The American Research
and Development Corporation,” 19 December 1946, MIT Archives, Collection AC
64, Box 2, Folder 3.
30 Anonymous, “Industrial Office,” n.d., MIT Archives, Collection AC 64, Box 2,
Folder 3.
31 “Letter from Karl Compton to Ralph Flanders, President, The American Research
and Development Corporation,” 10 December 1946, MIT Archives, Collection AC
64, Box 2, Folder 3.
32 Ibid.
33 Memo for File Re: Forrester Patent Meeting in MIT President’s Office, 7 September
1962, MIT Archives, Collection AC 35, Box 2.
34 “Letter from President Stratton to J. William Hinkley, President, Research
Corporation,” 28 August 1962, MIT Archives, Collection AC 35, Box 2.
35 “Letter from R.J. Horn, Institute attorney to Julius Stratton, President of
Massachusetts Institute of Technology,” 5 September 1962, MIT Archives,
Collection AC 35, Box 2.
36 “Letter from Institute Counsel R.J. Horn to President Stratton,” 19 November 1962,
MIT Archives, Collection AC 35, Box 2.
37 “Memo for File Re: Forrester Patent Meeting in MIT President’s office,” 7 September
1962, MIT Archives, Collection AC 35, Box 2.

7 ENTERPRISES FROM SCIENCE: THE ORIGINS OF SCIENCE-


BASED ECONOMIC DEVELOPMENT
1 Bush, Vannevar. 1970. Pieces of the Action. New York: Morrow.
2 See Israel, Paul. 1998. Edison, a Life of Invention. New York: John Wiley; and
Josephson, Matthew. 1954. Edison: A Biography. New York: McGraw-Hill.
3 See Wade, Richard. 1964. The Urban Frontier. Chicago: University of Chicago Press.
4 Jones, Lawrence. 1960. “Legislative Activities of the Greater Boston Chamber of
Commerce,” PhD Dissertation, Harvard University Graduate School of Business
Administration.
5 The New England Council, Inc. “60 Years of Leadership.” circa 1985.
6 Leman, Albert N. 1940. “Research for small business,” Forbes, 1 February: 17.
7 “Proposal of the Massachusetts Institute of Technology to the New England Council
for the establishment of an Institute of Industrial Cooperation and Research,” MIT
Archives, Collection AC 4, Box 216, Folder 13.
8 Ibid.
9 “Letter from Karl Compton to Mr Ray M. Hudson, Technical Advisor, The New
England Council,” 12 December 1930, MIT Archives, Collection AC AC4, Box
217, Folder 2.
10 “Letter to Dr Karl Compton, President of the Massachussetts Institute of Technology
from Mr Ray M. Hudson, Technical Advisor, The New England Council,” 18
December 1930, MIT Archives, Collection AC 4, Box 217, Folder 2.

157
NOTES

11 “Letter from C.F. Weed, President, New England Council to Paul Cloke, Director,
Maine Experiment Station, Orono, Maine,” September 1939, MIT Archives,
Collection AC 4, Box 235, Folder 3.
12 Karl Compton. “Industrial Development in New England,” an address prepared for
delivery before the 75th anniversary of the University of New Hampshire in the
Joint meeting of the New England Council and the American Association for the
Advancement of Science at Durham, New Hampshire, 24 June 1941, MIT Archives,
Collection AC 4, Box 235, Folder 11.
13 Ibid.
14 Ibid.
15 “Memorandum to Dr Karl T. Compton from Richard B. Cross, ‘Agenda for
November 3rd Meeting of New Products Committee,’ ” 24 October 1939, MIT
Archives, Collection AC 4, Box 235, Folder 3.
16 Ibid.
17 “Letter from A.F. Kingsbury to Richard B. Cross,” 21 March 1940, MIT Archives,
Collection AC 4, Box 235, Folder 5.
18 Ibid.
19 “Letter from Richard B. Cross to A.F. Kingsbury,” 27 March 1940, MIT Archives,
Collection AC 4, Box 235, Folder 5.
20 Ibid.
21 Ibid.
22 “Memorandum: New Products for New England,” n.d., MIT Archives, Collection
AC 4, Box 235, Folder 2.
23 “Memorandum from Richard Cross to Karl Compton, ‘Appointment of
Subcommittee Members,’ ” 29 November 1939, MIT Archives, Collection AC 4,
Box 235, Folder 4.
24 “Memorandum to Dr Karl T. Compton from Richard B. Cross,” 3 October, 1939,
MIT Archives, Collection AC 4, Box 235, Folder 3.
25 “New England Industries, Inc.,” unpublished manuscript, 29 December 1940; MIT
Archives, Collection AC 4, Box 235, Folder 5.
26 Ibid.
27 Ibid.
28 “Memorandum to Ralph Flanders from Richard Cross,” 16 October 1940, MIT
Archives, Collection AC 4, Box 235, Folder 6.
29 “New England Industrial Research Foundation, Inc.,” MIT Archives, Collection AC
4, Box 235, Folder 11.
30 “Letter from Richard B. Cross to David Prince, Vice President, General Electric
Company,” 12 January 1942, MIT Archives, Collection AC 4, Box 235, Folder 14.
31 Ibid.
32 “Letter from Karl T. Compton to L.C. Bird, President, Phipps Bird Inc.,” 10 March
1943, MIT Archives, Collection AC 4, Box 235, Folder 15.
33 “Letter from Earl Stevenson, President, Arthur D. Little Co. to Karl T. Compton,”
26 September 1942; MIT Archives, Collection AC 4, Box 235, Folder 12.
34 “Letter to Mr Norman Klivens from Karl T. Compton,” 23 April, 1941; MIT
Archives, Collection AC 4, Box 14, Folder 14.

8 THE INVENTION OF THE VENTURE CAPITAL FIRM:


AMERICAN RESEARCH AND DEVELOPMENT (ARD)
1 “New England Industries, Inc.,” unpublished manuscript, 29 December 1940; MIT
Archives, Collection AC 4, Box 235, Folder 5.
2 Karl Compton. “Industrial Development in New England,” an address prepared for
delivery before the 75th anniversary of the University of New Hampshire in the

158
NOTES

Joint meeting of the New England Council and the American Association for the
Advancement of Science at Durham, New Hampshire, 24 June 1941, MIT Archives,
Collection AC 4, Box 235, Folder 11.
3 Letter from President Karl T. Compton to Richard B. Cross, 19 October, 1939, MIT
Archives, Collection AC 4, Box 235, Folder 3.
4 Grow, Natalie. 1977. “The ‘Boston Type’ open end fund: development of a national
financial instrument,” PhD Dissertation, Harvard Business School, pp. 284–5.
5 Aguren, W. 1965. “Large nonfinancial corporations as venture capital sources,” SM
thesis, Massachussetts Institute of Technology, Sloan School of Management, p. 10.
6 “The Prudent Boston Gamble,” Fortune November, 1952
7 The Saturday Evening Post, 31 July 1954.
8 “Aims of the the American Research and Development Corporation,” unpublished
manuscript, 1 January 1947.
9 William Congleton, Interview with Henry Etzkowitz, July 1986.
10 “Something ventured,” Time Magazine, 19 August 1946.
11 “A plan for the formation of a company to encourage and facilitate the development
of new inventions , products, processes and industries,” n.d., Dubridge papers 121.8,
California Institute of Technology Archives.
12 Interview with Longstreet Hinton, Retired Director, Morgan Guaranty Trust
Department, April, 1989.
13 Hinton, Longstreet, John Meyer and Thomas Rodd. 1979. Some Comments About the
Morgan Bank. New York: Morgan Guaranty Trust Company. The head of the Trust
department at Morgan had earlier served with Doriot on the board of directors of a
corporation and his personal confidence in Doriot’s abilities carried over to the new
venture.
14 “Letter to Georges Doriot from Robert Lehman, Lehman Bros,” 11 October 1965;
“Letter to Georges Doriot from Joseph Ripley, Harriman, Ripley,” 21 March 1967,
Box 4, Doriot Papers, Manuscript Division, Library of Congress.
15 “Letter from Karl Compton to Horace Ford,” 22 March 1946, MIT Archives,
Collection AC 4, Box 46, Folder 9.
16 Charles Coulter, President of American Research and Development, Interview with
Henry Etzkowitz, June 1986.
17 King, Frank. 1946. “Investment Banking Accepts a Challenge,” Investment Dealers
Digest, 26 August.
18 Georges F. Doriot. 1947. “American Research and Development Corporation,”
founding statement, 1 January.
19 Ibid.
20 William Congleton, American Research and Development Technical Director,
quoted in “Boston and the ‘Science’ Industry,” Investor’s Reader, 6 February 1957,
28(3): 5.
21 “Confidential Memorandum of Conference of certain Members of the Board of
Directors of Tracerlab Inc.,” 8 December 1952, Leahy Business Archives, American
Research and Development File 294.
22 “Letter from Georges Doriot, American Research and Development to Charles
Cotting, Lee Higginson Corporation,” 12 December 1952, Leahy Business Archives,
American Research and Development File 294.
23 “Personal and Confidential Letter from Georges Doriot to Denis Robinson,” 28
April 1950, Leahy Business Archives, American Research and Development File
287.
24 Bylinsky, Gene. 1967. “General Doriot’s dream factory,” Fortune August: 132.
25 William Congleton, retired American Research and Development staff member,
Interview with Henry Etzkowitz, July 1986.
26 Ibid.

159
NOTES

27 Ibid.
28 Robert J. Van de Graaff, MIT Archives, AC 4, Box 274, Folder 1.
29 “Memorandum: Van de Graaff Patent: Non-Development,” n.d., MIT Archives AC
4, Box 241, Folder 18.
30 Redmond, Kent and Thomas Smith. 1980. Project Whirlwind. Maynard, MA: Digital
Equipment Press.
31 William Congleton, Interview with Henry Etzkowitz, July 1986.
32 Aguren, W. 1965. “Large Nonfinancial Corporations as Venture Capital Sources,”
SM thesis, Massachussetts Institute of Technology, Sloan School of Management, p.
10.
33 Ibid., p. 33.
34 Anonymous, 1969. “In on the ground floor,” Newsweek February.
35 Anonymous, 1970. “There’s lots more fun in venturing,” Financial Times 24
December.
36 National Venture Capital Association. 1980. The Guide To Venture Capital Sources.
Arlington, VA: National Venture Capital Association.
37 Armitage, W. 1979. “The role of the venture capitalist in new ventures,” SM thesis,
Massachussetts Institute of Technology, Sloan School of Management.
38 Charles Coulter, President of American Research and Development, Interview with
Henry Etzkowitz, February 1989.
39 Kloess, Michael. 2001. “Chad Brownstein, Cofounder, Managing Partner, ITU
Ventures,” Technology Access Report 14(2): 15–16.

9 STANFORD AND SILICON VALLEY: ENHANCEMENT OF THE


MIT MODEL
1 Norberg, Arthur. 1976. “The origins of the electronics industry on the Pacific
Coast,” Proceedings of the IEEE 64(9).
2 Braun, Ernest and Stuart Macdonald. 1983. Revolution in Miniature. Cambridge:
Cambridge University Press, p. 126.
3 Ginzton, Edward L. 1975. “The $100 idea,” IEEE Spectrum, February 30–39.
4 Israel, Paul. 1998. Edison: A Life of Invention. New York: John Wiley.
5 “Letter to Paul Davis, General Secretary, Stanford University,” 29 December 1943,
Terman Papers, Stanford University Archives.
6 Ibid.
7 Ibid.
8 Ibid.
9 Ibid.
10 “Memorandum to Dean Hilgard from E.L. Ginzton, Microwave Lab,” 9 April 1953,
Terman Papers, Stanford University Archives, p. 7.
11 “To: File From FET Re Shopping Center #SC – 160 III 32–10 1/20/65,” Terman
Papers, Stanford University Archives.
12 “Letter from Terman to J.E. Wallace Sterling,” 9 November 1951, Terman Papers,
Stanford University Archives.
13 Saxenian, Annalee. 1994. Regional Advantage: Culture and Competition in Silicon
Valley and Route 128. Cambridge: Harvard University Press.
14 Kidder, Tracy. 1981. The Soul of a New Machine. Boston: Little, Brown.
15 Hamel, Gary. 1999. “Bringing Silicon Valley inside,” Harvard Business Review
September–October: 71–84.

160
NOTES

10 TECHNOLOGY TRANSFER UNIVERSALIZED: THE BAYH-


DOLE REGIME
1 Some of the materials for this chapter are drawn from Etzkowitz, Henry and Ashley
J. Stevens. 1995. “Inching toward industrial policy: the university’s role in govern-
ment initiatives to assist small, innovative companies in the U.S.,” Science Studies
8(2): 13–31.
2 See Peters, Lois and Herbert Fusfeld. 1982. “Current U.S. University–Industry
Research Connections,” in National Science Board, University–Industry Research
Relationships: Selected Studies. Washington, DC: US Government Printing Office.
3 Pursell, Carroll. 1979. “Science agencies in World War II: the OSRD and its chal-
lengers,” in Nathan Reingold (ed.), The Sciences in the American Context: New
Perspectives. Washington, DC: The Smithsonian Institution.
4 Norman Latker, Former Patent Counsel, National Institutes of Health, Interview
with Henry Etzkowitz, 1998.
5 Approximately a year later, Latker was restored to his position at NIH through an
appeal process. Since he had earned more from private legal practice than his
government salary during this period, he was not entitled to back salary.
6 Personal communication from Howard Bremer, Wisconsin Alumni Research
Foundation to Ashley Stevens.
7 Norman Latker, Former Patent Counsel, National Institutes of Health, Interview
with Henry Etzkowitz, 1998.
8 Niels Reimers, Interview with Henry Etzkowitz, August 2001.
9 Jesse Lasken, Assistant General Counsel, National Science Foundation, Interview
with Henry Etzkowitz, 1998.
10 Fraser, John. 2001. “Membership needs task-force results,” Association of University
Technology Managers Inc. Newsletter August: 1.
11 Government laboratories were placed under a licensing regime similar to Bayh-Dole
through the Stevenson-Wydler Act of 1986.

11 THE MAKING OF ENTREPRENEURIAL SCIENTISTS


1 Kornberg, Arthur. 1996. The Golden Helix: Inside Biotech Ventures. Sausalito, CA:
University Science Books.
2 See Aborn, Timothy. 1996. “The business of induction: industry and genius in the
language of British scientific reform”, History of Science 31(103): 91–121.
3 See Latour, Bruno and Steve Woolgar. 1979. Laboratory Life. Beverly Hills: Sage.
4 Mark Ptashne, Interview with Henry Etzkowitz, Cambridge, MA, 1986.
5 Ibid.
6 Denning, Peter J. 1990. “Patent or perish,” Communications of the ACM 33(9):
15–16.
7 Ibid.
8 Ibid., p. 16.
9 Ibid., p. 16.
10 Lofti Zadeh, Interview with Henry Etzkowitz, Berkeley, CA, 1989.

12 INNOVATION: THE ENDLESS TRANSITION


1 Agres, Ted. 2001. “Cloning capsized?” The Scientist 15(16).
2 Stolberg, Sheryl. 2001. “Patent laws may determine shape of stem cell research,”
New York Times, 17 August, pp. A1, 15.
3 Quoted in Stolberg, op. cit.

161
NOTES

4 When WARF was founded in the 1930s, academic research as the basis of industrial
development was a nascent phenomenon. WARF was established to commercialize
discoveries at arm’s length from the University of Wisconsin’s academic activities.
Proceeds from Vitamin B-12 and other discoveries enabled the University of
Wisconsin to become a research powerhouse in the biological sciences during the
depths of the Depression. See Apple, Rima. 1989. “Patenting university research:
Harry Steenbock and the Wisconsin Alumni Research Foundation,” ISIS 30
(September): 375–94.
5 WARF was central to an earlier controversy over the commercialization of research.
Decades earlier, margarine producers had charged WARF with using its control of
patent rights to protect Wisconsin dairy farmers from competition.
6 Merton, Robert K. 1973 [1942]. “The normative structure of science,” in Norman
Storer (ed.), The Sociology of Science. Chicago: University of Chicago Press.
7 See Mills, C. Wright. 1957. The Power Elite. New York: Oxford; and 1958, The
Causes of World War III. New York: Ballantine.
8 See Storr, Richard J. 1953. The Beginnings of Graduate Education in America. Chicago:
University of Chicago Press; Geiger, Roger. 1986. To Advance Knowledge: The
Growth of American Research Universities, 1900–1940. Oxford: Oxford University
Press; and Altbach, Philip, Robnert Berdahl and Patricia Gumport (eds). 1999.
American Higher Education in the Twenty-first Century. Baltimore: Johns Hopkins
University Press.
9 Kevles, Daniel. 1978. The Physicists: The History of a Scientific Community in Modern
America. New York: Knopf.
10 Gibbons, Michael, Camille Limoges, Helga Nowotny, Simon Schwartzman, Peter
Scott and Martin Trow. 1994. The New Production of Knowledge. Beverly Hills: Sage.
11 Merton, Robert K. 1970 [1938]. Science, Technology and Society in Seventeenth-
Century England. New York: Harper & Row.
12 Storr, Richard J. 1968. Harper’s University. Chicago: University of Chicago Press.
13 US Office of Scientific Research and Development. 1945. Science: The Endless
Frontier, A Report to the President on a Program for Post-war Scientific Research.
Washington, DC: US Government Printing Office.
14 Ben-David, Joseph. 1980. “The ethos of science: the last half-century,” in Silver
Jubilee Symposium, Volume I. Canberra: Australian Academy of Sciences.
15 Aitken, Hugh. 1976. Syntony and Spark: The Origins of Radio. New York: Wiley.
16 Etzkowitz, Henry. 1983. “Entrepreneurial scientists and entrepreneurial Universities
in American academic science,” Minerva 21 (Autumn): 198–233.
17 Slaughter, Sheila and Larry Leslie. 1997. Academic Capitalism. Baltimore: Johns
Hopkins University Press.
18 Guston, David. 1999. Between Politics and Science: Assuring the Productivity and
Integrity of Research. Cambridge: Cambridge University Press.

162
INDEX

academia: conflicts of interest 39; USA 18, 23; nineteenth-century


decision-making process 38; researchers 11; see also farmers; land
nineteenth-century US scientific grant system
institutions 20; post-war symbolic Air Force: and Whirlwind project 97
contract with government 53–4, 116; American Association for the
recent trends in intellectual property Advancement of Science (AAAS) 11,
58; relationship with industry 2, 33, 28, 145
33–5, 102, 103–4, 112, 113, 141; role American Research and Development
and influence of MIT 1, 21; Corporation (ARD): Compton and
transformation of role in World War II role of MIT 74–5, 89, 90–1, 93–6, 94,
46–7 100, 101; and firm formation 96–8,
academic consultation see consultation 111; foundation and early years 4, 74,
academic formats: amalgamated in 90–2, 99, 100, 101
nineteenth-century USA 23–4; Amgen 9
synthesized in entrepreneurial Amrad 2
university 18–19, 20 Anderson, Harlan 98
academic scientists: commercialization of ARD see American Research and
research 127–8, 137, 149; as Development Corporation
entrepreneurs 28, 122; expertise armed forces see the military
needed by firms 135–6; and firm Arthur D. Little Company (ADL) 3, 30,
formation 127–8, 131–3; liaison with 36–7, 86, 94–5
military during World War I 42, 46; artificial intelligence: research 6, 148
opportunities to apply discoveries 17; Association of Computing Machinery
peer review system 146, 147; (ACM) 136–7
polytechnic movement 26; problems Association of University Technology
with patenting 56–7, 63; research Managers (AUTM) 121, 124
teams and groups 50–1, 129–30, 131; At&T Corporation 47
Rogers’ vision of training 23; Atomic Energy Commission 70, 117
traditional view of role 60, 137; in atomic science: research facilities at
triple helix era 147–8, 149; war-related Chicago 52; Stanford research in 1939
projects during World War II 12, 27, 104
46–7, 53–4; see also entrepreneurial Axel, Richard 9
science
academic technology transfer see Babcock, Stephen 66–7
technology transfer Banting, Frederick 66
Academies of Science 144 Bayh, Birch 118–19, 119
ADL see Arthur D. Little Company Bayh-Dole Act (1980) 8, 16, 57, 112, 113,
agriculture: innovation system created in 115; as framework for technology

163
INDEX

transfer 4–5, 114–15, 118–21, 122, capital: formation and transformation 143
124, 125, 125–6, 140 capitalism: classical model 131
Beadle, George 25 Carnegie, Andrew 43
Ben-David, Joseph 147 Carnegie Institute of Washington 29, 46,
Berkeley University (California) 12, 47, 47
50, 106, 137 Center for Integrated Systems 112
Best, Charles 66 Chandler, George Frederick 11, 27, 34, 35
Bible: quoted at 1904 MIT alumni reunion chemical engineering: MIT 30, 40
43 chemical industry: links with engineering
biochemistry 139 schools 13
bio-informatics 139, 147 chemistry: emergence of research at MIT
biology: molecular 139; Wisconsin as 29, 30; and Liebig’s development of
research center 13 artificial fertilizer 10; organic 11
biotechnology 127, 148; firms 16, 32, 110, Chicago University 11, 24, 28, 47, 48, 52,
143, 148; and patent rights 9, 55; 109
SUNY creation of industry 105 Clark University 28
Bok, Derek 15 classical learning: eighteenth-century
Boston: Bush’s connections 3, 107; teaching colleges 27; and emergence of
business and industry in nineteenth- research 10–11
century 2, 22, 80; and Edison 79; classical teaching colleges: academic
financial community’s involvement in format 18, 20, 21; expansion of into
ARD 4, 90, 91, 93, 101; post-war universities 24, 27–8
technology corridor 78, 103, 110; ring Cohen-Boyer patents 9, 119
road 111; and Rogers’ vision for MIT 2, Cold War 54, 142, 145
21–2, 23; significance of MIT 6, 26, 52, Colorado University 9
72, 103 Columbia University 12, 27, 34, 35, 47,
Britain: post-war funding of academic 132, 146; early initiatives and
science 145–6; scientists’ work with the expansion 11, 24; patents and
military 50–1 intellectual property rights 9, 123–4;
Bunker, John 62–4, 67, 97 “seed” venture capital fund 100
Bush, Vannevar: Compton’s tribute 64–5; communications: Edison’s solution for
consulting and entrepreneurial New York 102, 107
activities 3, 37, 38, 78, 104, 107; companies see corporations; firm
“Endless Frontier” report (1945) 2, 87, formation; firms; small firms
145–6; initiatives for working with the Compton, Karl: early work for New
military 42, 46, 47–8, 48–9, 116; and England revival 2, 4, 79, 80, 82–3, 86,
origination of university-based high- 87, 87–8, 101; and formulation of
tech firm 2–3, 110; position on patents policy 61, 74; MIT and ARD
patenting 62, 64, 71–2, 78; work on 42, 49, 70, 89, 90, 91, 94, 96, 97, 98,
inventions 50, 70 111; tribute to Bush 64–5
computer science 137, 139, 147, 148
Cal Tech 14 computers: ARD’s focus on 97–8; Bush
California: informality of style 111; and Wiener’s research 50; early firms 5;
Institute of Technology 20, 30; and magnetic core memory 76–7, 125;
Stanford’s initiatives 102, 103–4, 108; Silicon Valley 112
technology push model of innovation Conant, James 42, 46, 47
107; University see University of conflict of interest 39, 136; scientists’
California at Los Angeles; see also entrepreneurial ventures 127–8, 133–5
Berkeley University Congleton, William 98
Cambridge (Mass.): biotechnology firms Connecticut: agricultural experiment
32, 110; Ptashne’s entrepreneurship station 24–5; changing of securities
132, 133 laws 90

164
INDEX

consultation 7, 14, 21, 30, 33–5, 34–5, 107–8, 110–11, 143, 147; see also
131; Bush’s approach 3, 37; controversy regional economic development
and resolution at MIT 31, 32–3, 35–7, economy: impact of technology transfer
38, 39, 40, 67 124–5, 134; increasing importance of
Cornell University 28 intellectual property 150; and science
corporations: attracting branch plants in 1, 9, 129–30, 137, 147, 150; see also
New England 85–6; debate about regional economic development
patenting 58; Harvard Business Edgerton, Grier and Germeshausen
School’s links with 92; multi-national (EGG) 70
143–4; research labs 29, 81; sponsoring Edgerton, Harold 69–70
of labs in Latin America 142; and start- Edinburgh: research leading to cloned
up firms 139; see also firms sheep 16
Cottrell, Frederick G. 73 Edison, Thomas Alva 79, 102, 107
Cross, Richard 83, 85 electrical engineering: Edgerton’s research
Curie, Marie and Pierre 149 69–70; MIT teachers from industry 40;
at Stanford 104, 108–9
Data General 111 electrical industry: development in San
David, Donald 91 Francisco 103; and early engineering
defense: MIT research projects 49; schools 13; emergence in New England
Stanford University research 110 79
Delaware: Bush’s idea for patents office electromagnetics: Maxwell’s theory 17
71–2 electronics: early firms 5, 70; research
Denning, Peter: Communications of the build-up during World War II 47, 108;
ACM 136–7 Stanford and emerging industry 103,
depression: academics’ refusal of federal 104, 106, 108, 109, 110; see also
funding 48; effects on university– Raytheon Corporation; Research
industry relationships 13, 36–7; New Laboratory for Electronics (RLE)
England’s economic problems 78, 112; electrostatics: Cottrell’s device 73; Van de
Stanford’s academic–industrial Graaff’s generators 59, 96–7, 111
development 102, 104 Eli Lilly Company 66
developing countries: transfer of Ely, Richard 28
innovations 144 employment: generated by technology
Digital Equipment Corporation 96, 97–8, transfer 124; recruiting of graduates
99, 111 from institutes 45, 53
disciplines: recent trend towards engineering: Rogers’ vision of training 23;
collaboration 139, 147 scientists in war-related projects 12,
DNA 17, 139 54; at Stanford 102, 103–4, 108–9,
Dole, Robert 119 110, see also polytechnic engineering
Doriot, Georges 4, 86, 92, 94–5 schools
Duncan, Louis 33 engineers: consulting practices at MIT 30,
Dupont Corporation 43, 47 33, 36, 38; role according to
polytechnic movement 26; Silicon
Eastern Europe: socialist model of research Valley 103; traditional view of role 60
contracts 125 entrepreneurial science: academic
Eastman, George 43, 45 participation in 127–8, 137; causes
Eckert-Mauchly 97 16–18; dynamics 5–8, 140–1, 149–50;
e-commerce: late 1990s ventures 100 and firm formation 127, 131–3;
economic development: increasing role of impetus to 129–30; MIT as model 2,
universities 1, 8, 12, 15, 18, 19, 39, 77, 21, 113; precursors 10, 17; Silicon
133, 134, 150; and research and Valley 103, 150
education 5–8, 133; role of patents 56, entrepreneurial university 16, 18–19, 149;
59; science-based 17, 79, 82, 89, 101, and firm formation 131–3; importance

165
INDEX

of relations with industry 9, 140, 141; Germany: development of pharmaceutical


introduction of model into Stanford 7, industry 146–7; model of chemical
21, 102; MIT as model 1, 2, 4, 7, research laboratory 11; precursors of
18–19, 21, 40, 62, 102; and research 8, entrepreneurial science 10, 17
148 Giessen University 11, 34
ethics: rules on patents 66; university– Gilbert, Walter 132, 133
industry interface 15 Gilliland, Edwin Richard 94
Europe: ARD as inspiration for venturers globalization 143–4
99; informal university–industry government: early use of academic
relationships 41; move towards endless consulting 34; effect of Bayh-Dole Act
transition model 146; origins of patents 115, 120–1, 124–5; new role in
in early Renaissance 56; ownership of industrial development 149; post-war
intellectual property 59; technical funding for research 7, 13–14, 48–9,
schools 6, 24; triple helix development 50, 53, 77, 113, 115, 116–18; post-war
141; see also Britain; Germany; small business development programs
Portugal; Sweden 99; relations with universities 7, 8, 15,
41, 42, 48, 53–4, 113; wartime
farmers: scientific experiments in contracts dealt with by MIT 41, 42, 45,
nineteenth-century USA 24–5, 34; see 48, 49; World War II model for
also agriculture relations with universities 47–9, 141;
fertilizer: Liebig’s development of 10; New see also triple helix
England firm’s attempt to specialize in Griswold, Merrill 91, 92
84–5
financial industry: recent revival of New Hansen, W.W. 106
York model 107 Harper, William Rainey 28
firm formation: assisted by ARD 91, 92, Harvard Business School 4, 7, 43, 86,
97; involvement of academic scientists 90–1, 92, 93, 101, 110
92, 127–8, 131–3; role of universities 5, Harvard teaching college 24, 28, 80
9, 77, 102, 110, 143, 144, 148; strategy Harvard University 1, 42, 108;
for New England 78, 86–8; and venture controversies over relations to industry
capital 4, 100, 112 15; Corporation 9, 15; emergence of
firms: issue of exclusive licenses 74–5; technology firms 3, 4, 132; initiation of
MIT’s development of close links with research 11; Lowell Scientific School
4, 21, 36–7, 43, 67; and patent rights 27; and Mark Ptashne 132–3; MIT’s
from discoveries 56–7, 76, 118; rejection of affiliation offer 24, 27, 43,
professors’ consulting links with 3, 14, 64
21, 40, 43–4; survey on sponsoring Health, Education and Welfare (HEW)
academic research (1980) 114; 117, 118
universities’ similarities with 148; see health-related sciences: current research
also corporations; firm formation; funding 147, 150; post-war government
industry small firms; venture capital funding 53
firm Hewlett, William 104
Flanders, Ralph 86, 92 Hewlett-Packard 4, 111
Ford, Horace 3–4, 98 High Voltage Engineering Corporation 75,
Forrester, Jay 76, 98 96–7, 111
high-tech industry 140; Bush’s origination
Genentech 143 of university base for 2–3; Compton’s
General Electric Company 29, 47, 75 initiatives 61, 87; Doriot’s interest 92;
General Motors (GM) 142 in New England today 80; New York
genetic engineering 9, 17, 119 model and Silicon Alley 107; regional
Genetics Institute 132–3 policies 111–12, 124; Stanford’s
Georgia Tech 26 generation of 7, 102, 103–4; studies

166
INDEX

111; venture capital firms 100 federal funding 59–60, 77, 116–18; and
human resources: New England’s patenting 16, 55, 57, 58, 106, 116,
advantage 83, 86; as tool in venture 123–4; receipts from licensing 5, 58–9,
capital firm 93 60, 123–4; university–industry
Hunsaker, Jerome Clarke 94 collaboration 136, 143, 144, 149; see
Hutchins, Robert 52 also knowledge
Internet 55, 107, 112, 143, 144
IBM (International Business Machines) inventions: Bush’s experience and
74, 76–7, 142 activities 2, 3, 64–5, 70, 71;
incubator facilities 10, 14, 124, 126, 141, intellectual property and patenting 55,
143 56, 57, 59, 60, 66–7, 68, 113, 117, 120,
industrial scientists: role during World 123–4, 127; MIT’s policies and
War II 47 controversies 67, 68, 72; proposals to
industry: and academic research prior to ARD 93; and Research Corporation
Bayh-Dole 114, 117; administration of 72–3; Rogers’ vision of training 22;
technology transfer 10; breaking down Stanford graduates in 1930s 103, 106;
of separation with science 9, 149, 150; and technology transfer 122–3; from
Bush’s experience 3; controversy over universities 6
universities’ relations to 14–16, 133–4, investment: in ARD 92, 93, 93–4, 94; and
136; emergence of closer relationship “seed” venture capital funds 100–1; and
with research 17, 102, 109; emergence venture capital 91, 100–1
of relationship with academia and
universities 2, 6–7, 13–14, 30, 33–5, Jackson, Dugald 33
39, 40–1, 78–9, 102, 103–4, 105–6, Japan 41, 59, 125, 137
112, 125–6, 135–6; MIT’s close links Jefferson, Thomas 25
with 1, 9, 21, 26, 30, 33, 35, 36–7, 40, Jewett, Frank 47
41, 53, 54, 62, 103, 113; New England’s Johns Hopkins University 11, 16, 24, 28,
decline and efforts to revive 79–80, 47, 48, 109
81–2, 83–5, 89; primacy of Boston 22; Joint Venture Silicon Valley 81, 140
recent trend towards collaboration 139, Jones and Lamson Machine Tool
148; traffic with university and the Company 86, 91
military 42, 52; translation from
agriculture to 23; see also corporations; Kerr, Clark 12
firms; small firms; triple helix Keyes, F.G. 35
information: firms’ need for availability of Kidder, Tracy: study of high-tech 111
15, 16; release of required for Klystron tube: invention 106
innovation 57, 123 knowledge: capitalization of 1, 55, 60, 133,
innovation: interactive model 112, 143; 140–1, 149, 150; debates about
“market pull” model 102, 106–7, 112; patenting 56–7, 59; and development
“science or technology push” model of research 10–11; triple helix model
102, 107, 107–8, 112; triple helix for management of 140–1, 143; and
dynamic 140, 141, 142, 143–4, 148; see universities’ new entrepreneurial role
also technical innovations 1, 5, 9, 10, 40; and venture capital firm
institutions: academic elite 1, 146; triple 93; see also intellectual property
helix model 139–40, 143 Knowledge Circle of Amsterdam 81, 140
intellectual property: Bush’s capturing of Kornberg, Arthur 127
78, 116; controversy 7–8; debates and
considerations at MIT 59, 60, 68, 69, laboratories: collaboration with
70–2; differences in different countries production in corporations 142; and
59–60; economic value 14, 137–8, 150; start-up firms 139; see also Radiation
effect of Bayh-Dole Act 4–5, 8, 16, Laboratory (Rad Lab); research
112, 113, 114, 123–4; generated under laboratories

167
INDEX

Land, Edwin 4 electronics devices developed at


land grant system: equivalent in Bayh- Stanford 108; Mills’ societal model
Dole Act 16, 126; origins 24–6, 126; 142; post-war support of research 7,
and status of MIT 23, 26, 53, 64, 145; 116, 146, 147; science’s role in wartime
tradition of economic development 1, 42, 46, 47, 51–2; and universities
5, 118 during wartime 45, 46–7, 53
land grant universities 25–6, 118, 146; Mills, C. Wright 142
academic model 18, 19, 20, 24, 25, 145 MIT (Massachusetts Institute of
Lasken, Jesse 119, 121 Technology): Bush’s work and
Latin America 141–1, 146 influence 2–5, 107, 110, 116; close
Latker, Norman 117, 118 relationship with industry 9, 21, 26, 30,
Lawrence, Ernesto Orlando 47, 50 33, 35, 40, 41, 53, 54;
laws: legitimization of venture capital commercialization of research 59–60;
concept 93; origination of ideas for 118 Compton’s achievements 79, 96, 111;
Leshowitz, Barry 119–20 controversy over consultation 31,
Lewis Report (1949) 49 32–3, 35–7, 38, 39, 40, 67; as
liberal arts 20, 26, 27, 43 development model for Stanford 103,
Liebig, Justus 10, 34 107–8, 109, 110; development of
Little, Arthur D. see Arthur D. Little research 29–30, 32–3, 40; development
Company of technological base 20, 21, 30;
Litton, Charles: and patent for high dynamics of this study 5–8; effect of
frequency oscillations 106 depression 36–7; as entrepreneurial
Lodge, Oliver 72–3 university 1, 2, 4, 7, 18–19, 40, 62, 102,
London University 15 113; financial crisis after World War I
Los Angeles see University of California at 42, 43–5; founding of 21–3, 80, 110,
Los Angeles 145; involvement in ARD 74–5, 90–1,
Lowell: manufacturing industries 22, 81 94, 95–6, 98, 100, 101; as land grant
Lowell Institute 23 academic model 23, 26, 53, 64, 145;
military research and liaison 42, 53;
manufacturing: Harvard Business School and New England’s industry 28, 78, 79,
92; industries of New England 22, 81–2, 86; patenting controversies and
80–1, 83, 86; Rad Lab 51 management 55, 59, 60–5, 67–77, 97,
Marconi, Guglielmo: patent application 125; rejection of Harvard’s affiliation
17 offer 24, 27, 43, 64; research teams
Marx, Karl 146–7 50–1, 63; Rogers’ vision 20, 110; role
Massachusetts 9, 22, 23, 71–2, 119; see also in invention of venture capital firm 89,
Boston 90–1, 93, 95–6, 101; synthesis of
Massachusetts Institute of Technology see academic formats 24; Technology Plan
MIT 44–5; technology transfer initiatives
Massachusetts Investment Trust 90, 91 98, 113, 119, 121–2; and Van de Graaff
Maxwell, James Clerk: theory of 59, 75, 96–7, 111; World War II
electromagnetic field 17 government contracts 41, 42, 45, 48,
media industries: recent revival in New 49, 50, 74, 97; World War II’s impact
York 107, 111 51–2, 73–4; see also Radiation
medical device technology: Purdue Laboratory (Rad Lab)
University 118–19 molecular biology: research 6
Mellon Institute 82 Monsanto Corporation 32
Mersenne, Marin 144 Monticello: Jefferson’s estate 25
Merton, Robert K. 144–5, 145 Morill Act (1864) 23, 25, 126
metalworking industry: decline of firms in
New England 5, 22, 79 National Institute for Standards and
military, the: British work with 50–1; and Technology 141

168
INDEX

National Institutes of Health (NIH) 52, biotechnology firms 9, 55; Bush’s


117, 118, 121–2, 129, 134, 135, 146 experience and position 2, 3, 62, 78,
National Research Council 96 116; controversies 7, 59–60, 66–7,
National Science Foundation (NSF) 16, 74–5, 117–18; increase in awards from
52, 117, 121, 129, 131, 146 1980s 5, 115; issue of exclusive licenses
National Technical and Information 74–5; legislative debate and tensions
Service (NTIS) 116–17 56–7; MIT’s policies and controversies
networks 143–4, 144–5 40, 55, 59, 60–5, 67–77, 97, 125;
New England 28; economic decline origins 56; prior to World War II 116;
79–80, 81, 83, 84–5, 112; economic and publication 16, 55, 57, 60; released
growth strategy 7, 78–9, 82–8, 89, 101; for use by Stanford 106; role in
see also Boston; Connecticut; economic development 56, 59;
Massachusetts royalties 124, 125; and universities
New England Council 78, 80–2, 86, 140; 12–13, 54, 57–9, 66, 122, 123–4; Van
New Products committee 83–5, 86–7, de Graaff generators 59, 75, 97, 111;
92 Zadeh’s involvement 137; see also
New Enterprises 90 Bayh-Dole Act
New London: submarine research center Pennsylvania University: technical school
46 26
New Scientist 15 Perkins, William Henry: research on
New York: Edison’s communications dyestuffs 146–7
solutions 102, 107; legitimation of pharmaceutical industry: early
ARD 92; missing links for high-tech development of in Germany 146–7;
projects 112; recent revival of business government-owned patents 117;
and industries 106; see also Research licensing of product to firm 66
Corporation of New York; Silicon Philadelphia: initiative for technical
Alley; State University of New York at school 26
Stony Brook physics: development of research at
New York Medical College 122 Stanford 104, 106; see also nuclear
New York Times 15, 16 physics
New York University 28, 100 Pittsburgh see Mellon Institute
North Carolina State University 105 Polaroid Corporation 4
Northwestern University 100 polytechnic engineering schools 18, 20,
Noyes, A.A. 29, 30 21, 26, 113
nuclear physics: research build-up during polytechnic movement 24, 26–7, 43
World War II 47; Stanford research in Portugal: controversy over consulting 39
1939 104; use of electrostatic Princeton University 59, 96, 111
generators for research 97 production: New England’s focus on
natural resources 85–6; Rogers’ vision
Office of Naval Research 52, 110 22; scientists’ rates of 129; universities
Ohio State University 105 as factors of 78
Olsen, Kenneth 98 products: development 139; and links
OSRD (Office of Scientific Research and between firms and academic scientists
Development) 47, 48, 49–50, 50, 97, 135–6; marketing of scientific
116 discoveries 127, 128, 131
Oxford University: Van de Graaff 96 professors: assuming of multiple roles 31;
consultation practices at MIT 7, 30,
Packard, David 104 31, 32–3, 37, 38; consulting links with
Pasteur, Louis 149 firms 14, 21, 37, 43–4; as entrepreneurs
Patent and Trademark Act: amended by 131, 148; industrial engineers at MIT
Bayh-Dole Act 4–5, 8, 120, 140 6–7; nineteenth-century initiation of
patents and patenting 55, 123; and research 11; organizational and PR

169
INDEX

tasks 129–30; position in intellectual 113, 114–15, 123, 125–6; “endless


property regime 60; post-war expansion frontier” thesis 1, 2, 87, 139; “endless
of research 53, 109; Terman’s transition” era 139, 146, 147;
expansion of Stanford 109, 110 entrepreneurial dynamic 8, 18, 131,
Ptashne, Mark 132–3 148; and firm formation 4, 78; first
publication: and patents 16, 55, 57, 60 academic revolution 10–12, 28;
Purdue University 118, 119 funding pressures 130–1, 133–4, 135;
and industry prior to Bayh-Dole 114,
radar: electronics inventions at Stanford 117; interdisciplinary 54, 139, 144;
106, 108; MIT’s wartime laboratory 42, New England initiatives 81–2, 83–4,
50; projects during World War II 12 88, 101; in nineteenth-century 23;
Radar Counter-Measures Lab (Harvard) post-war federal funding 42, 48, 50,
107–8 52–3, 54, 113, 115, 116, 116–18,
Radiation Laboratory (Rad Lab): as model 145–6; Rowland’s “pure” research
for Stanford 106, 108, 109; wartime model 11, 28, 35, 145; Terman’s ideas
work at MIT 48, 50–1, 52, 74, 97 105, 107; triple helix dynamic 143; and
radio astronomy 12 universities’ new self-generating role
Radio Corporation of America 76–7 149–51
radio technology: Bush’s venture 2–3; research and development (R&D): before
Marconi’s patent 17; Terman’s plans for and after Bayh-Dole 115, 119, 120;
Stanford 108 experience during World War II 47, 89,
Raytheon Corporation 3, 107 141; MIT’s Technology Plan 44; post-
regional economic development: war federal funding 42, 116; Sweden
Compton’s work 2, 4, 79, 80, 82–3, 87, 146; targeting of by government 125;
87–8, 101; land grant movement 1, triple helix dynamic 140, 142
25–6; MIT’s goal 75–6; New England’s research centers 10, 12; Stanford
dilemma and strategy 79–80, 81, 83; University 108, 109–10; World War II
policies for high-tech 111–12, 124; 47, 52
Rogers’ vision 2; Stanford’s assistance Research Construction Corporation
for 102 (RCC) 50
religious knowledge: classical teaching Research Corporation of New York 51, 55,
colleges 27, 80 58, 67, 71, 72–3, 96, 121; patents
Renaissance: origins of patents in Europe dispute with IBM 74, 76–7
56 research groups and teams: growth of
Rensselaer Polytechnic Institute 21 50–1, 63, 109–10, 128, 139; as quasi-
research: applied and basic 1, 17, 27, 145; firms 128–9, 131, 149
Bush’s approach 3, 37, 107; combined research institutes 53, 125, 131
with teaching 1, 19, 147; research laboratories: in chemistry 11,
commercialization of 9, 12–13, 55, 29–30; development of 29–30, 56; early
59–60, 67, 96–7, 122, 127–8, 132–3, industrial 13; funding pressures 130–1;
137, 149; conflict between “pure” and MIT’s proposals in 1930 82; wartime
practical 27, 29, 30, 35; conflict with 42, 48, 50, 52; see also Radiation Lab
teaching 1, 14, 32–3, 39, 133; (Rad Lab)
controversies over relations to industry Research Laboratory for Electronics (RLE)
14–16, 29, 30, 62–3; Denning’s view of 52
136–7; development of at MIT 29–30, research universities: academic format 18,
32–3, 40; development of firms from 19, 20, 23–4, 24; early relations with
89, 102, 105–6, 110; during World War industry 13; evolution 28–9; “ivory
I 46; during World War II 47–8, 51–2, tower” model 102, 137, 145; new
116; early US agricultural universities entrepreneurial characteristics 150;
25; and economic development 5–8, Stanford as model 102; and technology
133; effect of Bayh-Dole Act 4–5, 16, transfer 114–15, 121; transformation of

170
INDEX

relations with government 54 scientists see academic scientists; industrial


Research-Cottrell 73 scientists
Rice Institute (Houston) 92, 100 Securities and Exchange Commission 90
Riemers, Neils 119, 122 semi-conductor industry 106, 112
risk management: research 6 seminar: origin of 11
Robinson, Dennis 95, 97 shoe industry: New England 79–80, 81
Rockefeller, John D. 28 Silicon Alley 107, 111
Rockefeller University 9 Silicon Graphics 5
Rogers, Henry 21–2 Silicon Valley 7, 107, 110, 111, 143, 150;
Rogers, William Barton: vision and common origin with Route 128 107,
founding of MIT 2, 5, 20, 21–3, 26, 140; from early 1990s 112; inter-firm
110, 113 collaboration 105, 112; origins 103–4;
Roosevelt, Franklin D. 145 university–industry relations 105–6; see
Route 128 4, 7, 78, 107, 111, 140, 150 also Joint Venture Silicon Valley
Rowland, Henry: “pure” research model Sillimans, father and son 12, 27, 34–5
11, 28, 35, 145 Small Business Innovation Research
Program (SBIR) 115
Small Business Investment Corporation 99
St Louis University 9
small firms: effect of Bayh-Dole Act 115,
San Francisco: biotech firms 110; see also
119, 120; founded for new genetic
Silicon Valley
technology 17; recent shift towards
Saxenian, Annalee: study of high-tech
148; similarities with academic science
111
departments 128; support of in New
Say, Jean Baptiste 18
England 81–2, 84–5
science: breaking down of separation with
Smith, Charles E. 26
industry 9, 135; change in role and Smithsonian Institution 29
social norms 137–8; and economic social sciences: post-war government
development 17, 79, 82, 89, 101, funding 53
107–8, 110–11, 143, 147; as economic software firms 55, 107
endeavor 1, 9, 129–30, 137, 147, 150; Soviet Union 145; former states of 146
“endless frontier” thesis 2, 54, 145–6; Spencer Thermostat Company 3
interrelation with technology 21, 26; Stanford University: Cohen-Boyer patents
“modes 1 and 2” 144–7, 145, 148; 9, 119; commercializing of research 9,
nineteenth-century farmers’ 122; effect of World War II 108–11;
experiments 24–5; original initiatives in technology transfer 116,
seventeenth-century format 144–5; 119, 121–2; introduction of MIT’s
post-war government funding 13–14, development model 7, 21, 101, 102,
53; pure 12, 21, 55; Rogers’ vision for 107–8, 109, 110; joint venture with
application of 22–3; Terman’s strategy Silicon Valley 102, 105–6; origins and
for Stanford 104, 108–9, 110; triple academic development 103–5; post-war
helix dynamic 140–1; typical university development of research 109–10;
departments 128; see also research for study 5; Science Park 111,
entrepreneurial science 112; Terman’s creative expansion of 4,
science parks 111, 112, 114, 124, 126, 143 104–5, 106, 107–8, 108–9
scientific discoveries: access through State University of New York at Stony
publication 55; change from “ivory Brook 105
tower” view 137; integration with students: inventions and rights 6, 69, 123;
research 144; as marketable products MIT graduates’ employment 37, 45;
127, 128; patenting and intellectual MIT’s industry placement schemes 40;
property rights 56–7, 67, 71, 73, 113, post-war research support for graduates
117; practical impetus in seventeenth 53, 54
century 145 SUN 5

171
INDEX

Sweden 141, 146 textile industry: decline of firms in New


England 5, 80, 81; New England 22,
teaching: combined with research 1, 19, 79–80, 86
147; conflict with research 1, 14, 32–3, Time Magazine 91
39, 133; and economic development 6; Toronto University: management of
interactive approach of Bush 3, 37; see patent on insulin 66, 67
also classical teaching colleges training: MIT’s ideals 20; programs for
technical innovations: base created by entrepreneurship 10, 141; programs for
Stanford 103–4; and need for business research 11, 129; Rogers’ vision 22; US
advice 93; and patenting 55, 57, 59; agricultural research institutions 25
problems of New England small firms triple helix 8, 139–44, 147–51
85, 101; see also innovation Tufts College 2
technology: cross-fertilization between
different areas 139; and industry in United States of America (USA): building
development of MIT 4, 20, 21, 26, 30, of university–government relations 41;
113; New England in early nineteenth concerns about competitiveness
century 81; in new model of higher 118–19; endless transition model of
education 26–7; new triple helix model science 146, 147; entrepreneurial mode
for 140–1; and origins of patent law 56; of research 8, 131, 148; entrepreneurial
selling of by universities 10; Stanford role of government 18; establishment
and university–industry relations of patent rights 56; first academic
105–6, 110; see also high-tech industry revolution 11–12; influence of MIT on
technology development: firms and educational development 21;
academic scientists 135–6; and issue of intellectual property rights 59–60;
patenting research 66, 113; post-war Mills’ idea of “power elite” 142;
military funding 54 nineteenth-century separation of
technology firms: building from university- scientific institutions 20; processes of
originated ideas 100; development triple helix development 141, 148–9
from research at Stanford 102; North United Water Cooler Service Company
Carolina State University initiative 70
105; San Francisco 103; Silicon Alley universities: academic decision-making
107 process 38; and the Bayh-Dole Act 57,
Technology Plan (MIT) 44–5, 49, 82 112, 113, 114–15, 119–120, 123–4;
technology transfer: attitudes towards controversies over relations to industry
134–5; and Bayh-Dole Act 4–5, 112, 14–16, 62–3, 133–4, 136; as core
114–15, 118–21, 122, 124, 125, 125–6, institution of society 1, 8, 39–40, 52,
140; Denning’s view of research 136–7; 140, 150; development of close
economic impact 124–5, 134; relations with industry 6–7, 8, 9, 10,
expansion of universities’ activities 10, 13–14, 39, 40–1, 44, 78–9, 103, 105–6,
14, 113, 124–5, 136, 140; and 125–6, 135–6, 143; equity in firms 5, 9;
innovation 143, 146; Latker’s first academic revolution 10–12;
invention of bureaucratic process 117; government contracts during World
MIT’s administrative initiative 98, 113, War II 7, 45, 47, 48, 53–4; and
116; origins of potential for 115–16; intellectual property rights 60, 70–2,
university offices 41, 114–15, 121–2, 77, 112, 114, 123–4, 137–8; new role
124–5, 126, 134, 140; and university’s in economic development 1, 8, 12, 18,
mission 66, 121–2, 125–6, 133 39, 77, 133, 134, 150; new role as self-
Terman, Frederick 2; creative expansion of generating 149–50, 150–1; old and new
Stanford 4, 100, 104–5, 106, 107–8, roles 5–6, 39, 66; original purpose and
108–9, 110 development of research 10–11;
Terman, Lewis 105 patenting policies and controversies
Texas Instruments 3 55, 57–9, 60, 66–7, 74, 122; post-war

172
INDEX

federal funding for research 42, 48, 50, Research and Development
52–3, 54, 113, 145–6; relations with Corporation (ARD)
government 7, 8, 15, 41, 53, 54, 113; Virginia Polytechnic Institute 16
relations with the military during vitamin D: discovery of 119
World War I 45, 46, 53; second
academic revolution 12–13; “seed” Walker, William H. 29–30
venture capital funds 100–1; warfarin: discovery of 119
similarities with firms 148; and wars see World War I; World War II
technology transfer 41, 114–15, Washington University 9
117–18, 121–2, 124–5, 125–6, 133, West Point engineering school 21
136, 140; Terman’s view of Westchester: medical school 122
administration 109; typical Westinghouse corporation 97
organization of science 128; World War Whewell, William 18
II model for relations with government Whitney, Josiah 30
42, 47–9, 53, 141; see also Whitney, Willis 29
entrepreneurial university; land grant Wiener, Norbert 50
universities; research universities; triple Wilson, Caroll L. 71–2
helix Wisconsin University 16, 55, 60–1, 66–7,
University of California at Los Angeles 71, 116, 119; Alumni Foundation
12–13, 67
48, 100, 122
World War I: academic scientists’ liaison
with the military 42, 46; relationship
Van de Graaff, Robert J.: and research on between universities and the military
high voltage 59, 75, 96–7, 111 45, 46, 53
Varian, brothers 106 World War II: academic scientists in war-
Venetian state: origins of patent law 56 related projects 12, 27, 46–7, 51–2,
venture capital: creating role for 93–6; 53–4, 145; disruption of New England
creation of sources by technological Foundation plan 87–8; effect on
innovation 144; government’s role in Stanford University 108–11; ideology
extending research funding 115; of basic research 145; impact on MIT
pioneering role of Compton and MIT 51–2, 73–4; MIT’s government
colleagues 2, 4, 90, 101; realization of contracts 41, 42, 45, 48, 50, 74, 97;
New England’s need for 86; recent role of government in innovation
focus of Research Corporation 58; 115–16; Stanford’s electronics
Silicon Valley 103; trajectory of inventions 106; university–government
99–101; universities’ role 9, 100–1 links 7, 47–9, 53–4, 141
venture capital firm 2, 4, 74, 86, 88, 112;
e-commerce 100; invention of by Yale teaching college 28
Compton and MIT colleagues 74–5, Yale University 12, 27, 34; Sheffield
89, 91, 98; precursors 90; “seed” funds School of Technology 20, 27
100–1; transplantation of mechanism
to Stanford 107; see also American Zadeh, Lofti 137

173

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