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Feature - Building Strategic Partnerships

Can universities and corporations share the same vision?

By Dan McGraw

One of the most hotly debated topics among college and university administrators and professors these days has nothing to do with muticulturalism or whether the school should build a new football stadium. The debate has to do with who is driving the major research departments of the modern university: private industry or the university itself?

With more and more universities developing partnerships with industry, there is a feeling among some in academia that their basic research function may become little more than a "body shop" for private companies looking for a cheap way to invest in new technology. The late Bill Readings writes in his book, The University in Ruins that these partnerships are based "on the assumption that the missions of the university and the corporation are not all that different." The emphasis on these partnerships, Readings continues, underscores the relatively new concept that "the university is not just 'like' a corporation; it 'is' a corporation." And to academics like Readings, the thought of the university becoming concerned with the solubility of research in the private sector undermines the basic function of research as an educational pursuit.

The problem with such arguments is that there is a certain denial about the recent changes in both the way research is conducted and the speed at which technology needs to be developed in a high-tech world. With federal budgets shrinking in the Cold War post-era, the university must develop these private partnerships, not only to stay relevant and competitive, but also to bridge the gap in funding that the government is becoming less and less willing to fill.

In his 1998 testimony before the U.S. House of Representatives Committee on Science, Massachusetts Institute of Technology President Charles Vest summed up the debate. "Over the long term, (private) collaborations can have a transforming effect on the ability of institutions to attract high-quality faculty [members], to encourage faculty [members] and their students to interact more closely with industry, and to design curricula and academic programs better attuned to the needs of industry and the challenges we face as a nation," Vest explained. But he cautioned that "universities should work synergistically with industry, they must not be private industry. Unless universities retain their culture, base of fundamental research, and educational mission, they will not have value to bring to the partnership."

Lori Pressman, assistant director of the MIT Technology Licensing Office, says MIT and other educational institutions aren't in danger of being blindsided by private industry to do research piecework. "Universities aren't in a great position to do strict contract research," she explains. "Private research firms are better at doing that, because our overhead costs are three times as high as a private research company. Still, to have our faculty and graduate researchers being aware of the important industrial problems of our time is a very good thing. We are a big believer in bridges between academia and industry. It is bad to have extremely isolated academics."

The cautionary view when entering into these partnerships is crucial for any university looking to leverage the private research into something that can serve both the university and private industry on a number of levels. When Ford Motor Company, Texas Instruments, or Proctor & Gamble contract with a university to perform research, each company and each university comes to the partnerships with different expectations. Some companies are looking for universities that have specific capabilities in specific fields. Others may have more open-ended agendas, perhaps looking to discover new technologies that have as-yet undiscovered importance. Universities, too, have different missions. Some want to expand their basic in-house research programs; others want practical research experience for their graduate students.

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New Funding Sources

University-industry partnerships are growing in popularity at a time when financial constraints on universities and a growing concern that future federal funding may decline are propelling a new dynamic for academic research.

Still, the federal government does spend almost $40 billion on research and development (not counting Department of Defense weapons development accounts), and non-defense R&D funding has fared well recently on Capitol Hill. But there is still the perception that federal money is-or will soon be-ebbing and concern about future resources have led unversities to look for new relationships. The current trend separates university research into two major areas: that which has an applied nature, and that which has no guarantee of practical application. In the past, government funded both. Now, more and more, private industry is expected to take the lead on research with practical applications.

For the university, the issue of partnership is one that contains hill after hill of slippery slopes. Who will own the intellectual property that comes from such research? Will universities actively court companies, offering them financial incentives much like municipalities chase after businesses with armloads of tax abatements and other subsidies? Will graduate students find that their education consists of merely developing new circuit boards for the latest generation of computers? Will university presidents and boards of regents demand that certain departments show a "profit" when determining budgetary spending?

Although all of these are genuine concerns, one reason private industry will have a hard time driving the research departments at major universities is that the missions of private industry and universities are still very different. Joel Schulman, manager of external relations for consumer giant Proctor & Gamble, says that private industry cannot become wholly dependent on university research because universities still operate in what he calls a "false economy." The major difficulty is the relatively slow pace at which university research proceeds. "Monetarily it may be cheaper," Shulman says, "but when you factor the time element in, it may in fact cost a private company more. It may cost you less dollars, but you lose much of the control.

Proctor & Gamble spends about $20 million a year funding research at about 15 educational institutions. This pales in comparison to the $1.5 billion the company spends on its own in-house research and the amount contracted out to private research firms. P&G partners with specific universities for, say, some biotech research or to develop catalysts in organic chemistry. "We see these partnerships working if we are using resources we don't have or don't want to have," Schulman says. "But academic researchers often want to pursue offshoots, and industry is less patient with those kind of things. For example, in the pharmaceutical industry, you want to develop a drug that will have sales of $300 million a year. If the university partner is doing the primary research, and they are slow even by a day, you've lost a million dollars."

But the return for private industry can be enough to consider doing more research in academic institutions. Although the rate of return is often less than what a private company achieves on in-house research, the return rate can still be high. A 1993 study by the Congressional Budget Office in 1993 found that private firms' return rate for investments in research ranged from 20 to 30 percent. The public rate of return from research ranged from 30 to 80 percent. A 1992 study from the Progressive Policy Institute indicated that 49 percent of the economic growth in the country could be attributed to technological progress. The point of all these numbers is not that companies and universities can make a killing from their partnerships; instead it indicates that a balance between federal funding and private investment is needed to maximize the benefits from university research.

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Who Owns the Research?

One of the thorny issues involving university-industry partnerships is who owns the intellectual property rights from any discoveries. In most cases, the university retains the rights and the school and the researcher share any licensing profits. With an exclusive licensing agreement, the researcher may get up to 28 percent of the profits; in nonexclusive contracts, the percentages varies. But any university official who hopes to fund a department with licensing profits had better think again. MIT, which with $700 million in public and private contracts conducts more research than most schools, only sees about $9 million a year in revenue associated with licensing activities.

"The reason for this," Pressman says, "is that most of the stuff we license is very embryonic. We can't charge very much in the present because its value really has yet to be determined. This is a business for the patient, and private industry isn't very patient."

The licensing funds are important to the school even if the amount is tiny in comparison to its research funding because the university uses it as discretionary income in the general fund. With so many grants and donations tied to specific spending, licensing rights help universities pay for more mundane expenses like snow removal and facility maintenance-hardly glamorous programs, but still very necessary to a modern, functioning university trying to rein in spending.

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Pooling Resources

Private research done for a host of companies all involved in the same industry showcases university/private industry partnerships at their best. The University of California, San Diego works with a consortium of companies for research in magnetic recording innovations, and another program is funded by a consortium of wireless communication companies. The result is programs that have long-term goals and  practical applications for students, and research that will have lasting benefits for both consumers and private companies. "The student brings back topics that leaven the classroom, and the faculty members become better teachers and counselors," says Edward Furtek, UCSD's vice chancellor for science and technology policy and projects.

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Evolving Relationships

Furtek says there are still a number of legal and ethical minefields to negotiate as universities step up their pursuit of private research money. Profits and licensing aside, peer review studies and publication must still be the focus of any university research. The amount of private investment will differ from discipline to discipline, he says, with biotechnology and artificial intelligence research commanding more than simple consumer product research and marketing studies. The issues of licensing must also work in favor of the university. "The universities must look at any conflict and the commitment of their partners," Furtek says. "We all have to be concerned about the job shop, and with second- and third-tier research institutions trying to use private money to cut corners in building their research departments quickly."

The key question is whether the pendulum has swung too quickly toward  reliance on private money to fund university research. If private companies look at research from a short-term perspective, and universities oblige them with their hands out in search of money, the great university research programs will lose sight of their larger missions and may end up reacting to the whims of consumers. But if universities are careful in their pursuit of contracts, and private industry continues to see educational institutions as a unique niche in the broader research environment, the naysayers may have little to worry about.

Dan McGraw is a senior editor at U.S. News and World Report.

When Business Reality Intervenes

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VCU_MotorolaThree years ago, Virginia Commonwealth University, state politicians, and Motorola devised a landmark plan to transform Richmond into a center for engineering talent. With the aid of state and corporate funds, VCU built a $40 million, state-of-the-art engineering school, which admitted its first students in 1996. A new $3 billion Motorola manufacturing facility would complement the deal, and the company would offer the school internships and technical assistance as well as employ 5,000 people, many of whom would be VCU graduates.

However, after a downturn in the global semiconductor market, Motorola decided to halt its construction indefinitely. "We're disappointed they've had to delay," says Henry McGee, the school's founding dean.

Fortunately for VCU, a $6.5 million Motorola pledge to the new school was not affected. Those funds supplied VCU with advanced high-tech gear like electron microscopes and photolithography equipment. But the full benefits of the partnership won't likely be realized until Motorola resumes its plans. "The employment opportunities for new engineers in the microelectronics business locally is not as bullish as one might have imagined a year ago," says McGee.

-Warren Cohen

Keeping Partnerships in Perspective

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Rice_TIWhen Rice University's Engineering Dean Sid Burrus thinks about his school's strategic partnership with Texas Instruments, he rarely thinks in strict terms about what Rice "gets" and what TI "gives," and vice versa. "We have a relationship," Burrus explains, "and the money for equipment and intellectual property may flow from the relationship, but it doesn't go the other way around. It is a bad philosophy to develop a relationship strictly on money."

Rice and TI have been collaborating on research for more than two decades, and their relationship is a good example of how partnerships between universities and private companies can benefit both parties. TI helps Rice fund research and education in digital signal processing (DSP) computer chips, paying for lab equipment and the writing of textbooks as well as research projects. The goal is to promote engineers' familiarity and work with the versatile chips, which end up in everything from complicated missile components to humdrum consumer goods like refrigerators.

In any given year, TI might put up around $100,000 to help Rice's engineering programs. But there is no specific quid pro quo about specific research. "The university must do the long-range research," Burrus says. "If the university turns into a sweatshop for private industry, it's not going to be good for either." And TI is obviously happy with the relationship. In 1996, it gave Rice $7 million to build a new engineering building endow several research chairs.

The best partnerships tend to avoid the specific contract-for-hire relationships, and instead focus on meeting the joint needs of students and industry. Some are as simple as changing course structure to meet the evolving needs of companies who will hire engineering graduates. Two years ago, the Center for Innovation in Product Development at the Massachusetts Institute of Technology began accepting its first students. The program came about when executives from Ford, General Motors, ITT Industries, Polaroid, and Xerox came to MIT and told the engineering faculty that although 80 percent of U.S. engineers go into product development, no school offered courses on the subject. Because of that industry interest and subsequent funding from private companies and the National Science Foundation, MIT now offers a product development degree. The program is multidisciplinary, combining hard engineering science with courses in marketing, finance, and management.

A recent agreement between the University of Texas at Austin and Lockheed Martin Energy Research Corporation (LMER) is another good example of this symbiosis. The agreement covers research, education, and technology transfer related to applications of separations and chemical processing technologies. This separation research is important to industries such as petroleum refining, pharmaceuticals, and mining. UT-Austin's research will be part of the Oak Ridge National Laboratory, which LMER manages for the Department of Energy. Furthermore, UT-Austin's separation research program in its College of Engineering has 35 other industrial sponsors supporting research in separations and chemical processing technology.

It is when all three groups-private industry, universities, and federally supported research-come together that these partnerships realize their optimum benefits. And in some respects, this tenet has held true for decades. "We've had private partnerships in universities for more than 50 years," says Burrus. "And we've learned that it works when everyone benefits from the outcome of the research."

-Dan McGraw

Photo Illustrations by Jay Montgomery



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