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7 The Contributions and Impact of Academic Research Significant contributions have been made by academic researchers in all five of the industries examined in this study. Each industry illustrates a unique pattern of industry-university research collaboration and different ways academic contri- butions are used. The study also reveals some crosscutting areas of academic research that are important to overall industrial performance. In addition, the mechanisms by which academia contributes have changed as traditional patterns of industry-university interaction such as contract research, cooperative re- search, and personnel exchanges have been augmented by new modes of inter- action. Industry provides more than financial support for academic research, and academic research contributes more than technological advances to industry, although some contributions are difficult to measure in dollars. A comparison of patterns of interaction reveals a number of ways industry, academia, and govern- ment could realize even greater benefits through university-industry interaction. PATTERNS OF UNIVERSITY-INDUSTRY INTERACTION Finding 7-1. The nature of university-industry interactions varies from industry to industry as well as among companies within a given industry and individual academic institutions. Each of the industries studied has a distinctive environment and poses differ- ent challenges for university researchers. In building infrastructure for network systems, universities have historically been test beds for new concepts and capa- bilities. For the medical devices and equipment industry, fundamental 205
206 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE multidisciplinary research involving physical sciences and engineering, com- bined with academic medical centers, provides a critical environment for re- searching, developing, testing, and improving devices and for conducting the clinical trials necessary to obtaining regulatory approval, all in an atmosphere of close industry-university collaboration. In the aerospace industry, the mature, highly concentrated airframe, propulsion, and launch-vehicle sectors have a fairly narrow range of interactions with academic research, often using consulting agree- ments and contract research to develop better process methodologies and tools. By contrast, the less mature unmanned aerial vehicles sector of the industry looks to academic research for technical support, as well as for new concepts and understanding. In the transportation, distribution, and logistics services industry and the financial services industry, a sizeable cultural gap remains between in- dustry and R&D in general, and academic research in particular. As a result, although academic research has had a significant impact on both, neither industry has developed interfaces with academic research comparable to those of the medical devices and equipment industry or the network systems and commu- nications industry. The wide variety of university-industry research interactions in these five industries makes it difficult to make generalizations. With the notable exception of multicompany research centers at universities, most financial support by industry is negotiated company by company. Companies have different needs and abilities to interact with academic researchers, and universities have differ- ent resources to devote to research of value to industry. Generalizations about what works best for all industries and universities should, therefore, be made very cautiously. THE NATIONAL INNOVATION SYSTEM Finding 7-2. The academic research enterprise is a major component of the national innovation system in the United States. The core competencies of aca- demic research help sustain and leverage innovation to the benefit of industry. Box 7-1 summarizes the innovation systems) for the five industries, which are innovative to varying degrees and in different ways that tend to change over time. R&D is only one element of their innovation systems but can be very important. Overall, the U.S. innovation system has many strengths: · Open labor markets allow technically trained and educated people to move relatively freely between and among universities and industry. · Reasonably robust review processes, coupled with a variety of support mechanisms ranging from peer-reviewed government grants to venture capital decisions, help to maintain high-quality research.
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH 207 . A large number of research structures and mechanisms, both internal and external to the university (e.g., academic departments, research centers, industry laboratories, start-up companies), provide multiple pathways for the commercialization of new ideas. A strong market and consumer demand for new technologies provides strong commercial incentives for introducing new technologies and, there- fore, strong incentives for funding research to create them. The research culture in the United States fosters innovation by supporting the movement of ideas and people among a broad range of diverse research
208 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE sectors and structures. Even though research is often essential to innovation, there is rarely a linear progression from a research result to advanced development to product development to economic return. Ideas and people tend to bounce around, and new ideas are sometimes stymied by political or business impediments and forced to find alternative routes to implementation. CONTRIBUTIONS OF ACADEMIC RESEARCH Contributions of academic research to the five industries studied include: graduates trained in modern research techniques; fundamental concepts and "key ideas" resulting from basic and applied research; and the development and testing of tools, prototypes, and marketable products, processes, and services. The sources of these contributions include engineering, the natural sciences, com- puter sciences, mathematics, social sciences, behavioral sciences, management studies, and policy sciences. Graduates Trained in Research Finding 7-3. University-based research provides an education/training ground for entrants into the industrial workforce. Integrated research and education helps maintain the flow of human resources from universities that contributes to an educated, trained industrial workforce. University graduates and faculty are also involved in many technology-based, start-up companies. Students trained in research are a major component of academia's contribu- tion to industrial performance. U.S. universities are the primary source of people with research training and experience, including undergraduates, graduate stu- dents, postdoctoral researchers, and faculty. Individuals with research training are highly valued by industry, whether or not they are involved in research for the companies that hire them. In addition to the specific body of knowledge acquired through academic research, industry values research experience because it re- quires abilities that are prized in any technical endeavor: self-motivation, prob- lem solving, teamwork, an understanding of related research, contacts with other researchers and colleagues, the ability to organize material, and the ability to overcome setbacks. Research-trained industry employees also enhance a company's capacity to absorb new ideas, including the results of research, even if the company does not conduct its own research. Academic researchers also participate in new companies. Many technology- based start-up companies emerge from academic research and continue to attract research graduates as they grow. Many high-technology clusters around the coun- try have developed around one or more research university.
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH Contributions from Basic, Long-Term Research 209 Finding 7-4. Contributions from basic, long-term academic research in a broad spectrum of disciplines have figured prominently in industry performance. Portfolio theory, linear programming, derivative-pricing theory, and pros- pect theory, all of academic origin, have laid the foundation for whole new families of financial products and services. Academic contributions to linear and integer programming and queue theory are the building blocks of the information-management and decision-support technologies at the heart of the integrated-logistics revolution. Medical devices, such as magnetic resonance imaging machines and pacemakers, are based on the contributions of fundamen- tal research from multiple disciplines in the natural sciences and engineering. In the network systems and communications industry, universities have made im- portant research contributions to the development of digital subscriber-line tech- nology, third-generation wireless communication, computer graphics, databases, search engines, generalized processor sharing, parallel processing, traffic man- agement, and stable broadcast networking. In aerospace, contributions of basic research include: the theoretical basis for flight controls for unmanned aerial vehicles; Shannon's information theory (e.g., as applies to communication with aircraft, spacecraft, and satellites); electromagnetic antenna theory; linearized unsteady-flow analysis; composite-laminate theory; improved understanding of fiber-matrix interactions in composite materials; superplasticity; and real-time decision systems using artificial intelligence. Basic, long-term research is essential to the university's role as creator of new knowledge and understanding. The committee's review of these five indus- tries confirms that the results of basic research in a wide range of disciplines eventually find their way by diverse paths into many aspects of commercial life. Contributions from Applied Research Finding 7-5. Academic researchers in applied research and the academic re- search infrastructure are directly involved in the development of industrial tools, prototypes, products, and production processes, as well as the delivery of prod- ucts and services. The five industries in this study provide a variety of examples of the contribu- tions of applied research (see Box 7-2~. Sometimes applied research is protracted and has cumulative, incremental results. An example might be continued improve- ments in computational fluid dynamics as a tool for modeling airflow. Another would be the long-term contributions of academic researchers to improved produc- tion processes and product performance in electronic storage devices.
210 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE The ability to solve discrete practical problems is also valuable in countless projects performed for individual companies. Short-term research projects, stu- dent projects, and consulting projects to solve specific, important problems in industry are based on formal and informal relationships between companies and faculty. Many companies nurture relationships with multiple universities, often relying on local institutions to solve technical problems or to advise the company's engineering staff on potential solutions. Examples include assistance in produc- tion scheduling in logistics, simulations of airflow and nondestructive evaluation of materials in aerospace, and models for pricing derivatives and securities in
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH 211 financial services. Most universities consider this an important aspect of the service role of the university and encourage these interactions. Research centers, especially those with industrial participation, are another avenue by which universities perform both "directed" basic research and applied research that helps industry. In 1993, almost 70 percent of industry's financial support for university research flowed through some 1,100 university-industry research centers, which have become the dominant form of industry support for academic R&D (Cohen et al., 1998~. The best known examples are the engineer- ing research centers (ERCs) funded by the National Science Foundation (NSF) since the mid-1980s. NSF currently funds 20 ERCs in four broad categories: bioengineering; design, manufacturing, and product development systems; earth- quake engineering; and microelectronic systems and information technology (NSF, 2001~. Industry participation and industry's help in defining problems that are of interest to many companies, have greatly increased the impact of academic research centers.2 Key Ideas Finding 7-6. Sustained interactions between academic research and industry have been a source of "key ideas" that have generated significant technological opportunities through a fusion of knowledge of the possible and knowledge of what needs to be done. Specific contributions of academic research basic and applied represent key ideas derived from sustained interaction between academic research and industry. Key ideas and the major technological opportunities or breakthroughs that result from key ideas are often the product of cumulative research inter- actions and advances involving the flow of ideas and people back and forth across the boundaries between universities and industry. Examples of key ideas include: the TCP/IP Internet protocol, the web browser, routers, index funds and deriva- tives, decision-support technologies, pacemakers, and magnetic-resonance imag- ing. (For a graphic illustration of the interaction between academic and industry research on key ideas leading to major technological advances in information technology see Figure 2-1.) Contributions from Multi-industry, Indirect, and Complementary Research Finding 7-7. Academic research in a given field or discipline may contribute directly or indirectly to more than one industry; and many innovations result from complementary advances in more than one field of research. Many contributions of academic research to an industry are mediated through other disciplines or embedded in technologies, products, and services derived
212 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE from other industries. Basic research in physics, biology, and chemistry has led to new knowledge and capabilities in microelectronics, genetic engineering, and other fields that have directly contributed to the creation of high-value, high- technology products and services. Contributions from academic research to major cross-sector technologies, such as information technology, have directly benefited many industries. For example, information technology is critical to the technical and market performance of aircraft and has profoundly changed the structure and performance of the financial services, as well as the transportation, distribution, and logistics services industries. Similarly, intelligent sensors, computer-aided diagnosis, and robotics are the basis for many new medical de- vices. Research in materials science and bioengineering has enabled advances in products and processes in many industries. The five industry studies have also underscored the multidisciplinary char- acter of many innovations in products and services. For example, the develop- ment of new medical devices relies heavily on advances not only in the life sciences, but also in the physical sciences and engineering. Many service inno- vations in the network systems and communications industry have depended on complementary progress in engineering and physical, social, and behav- · 1 ora1 sciences. Contributions from the Social Sciences Finding 7-8. Many valuable contributions to industry have resulted from aca- demic research in the social, behavioral, management, and policy sciences. Network Systems and Communications Industry Academic business schools have long been concerned with making the ben- efits of information technology available to businesses. Through research, a num- ber of approaches and techniques have been developed, including decision- support systems, the implementation of information technology for strategic ad- vantage, computer-supported cooperation, productivity research, and software development methodologies. Deregulation, partly a response to academic re- search in economics, has affected all five of the industries in this study to varying degrees. Economics research on network externalities and Internet economics has helped to define business strategies for electronic businesses and Internet service providers. Organizational aspects of communications service companies are the focus of attention in new information-management schools and programs. Re- search by psychologists and social scientists has explored how people use com- puter and communication systems and the effects of these systems on people and organizations. An excellent example is a classic study by Card et al. (1983) showing how cognitive psychology can be used to estimate human performance when interacting with a computer.
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH Medical Devices and Equipment Industry 213 Research in engineering, the natural sciences, the social sciences, risk analysis, and business are likely to be of increasing importance to medical information systems. In addition, clinical research studies that help determine the acceptance or rejection of new medical devices require a broad-based approach that incorporates a variety of disciplines. Aerospace Industry In a broad sense, academic research on production and management systems, typically performed by business faculty, has had an enormous impact on all manufacturing industries. Concepts that have contributed to recent increases in productivity in manufacturing, such as total quality management, workforce em- powerment, supply-chain integration, and just-in-time production, were identi- fied and disseminated by academic researchers. The Lean Aerospace Initiative (LAI) at the Massachusetts Institute of Technology is an example of multidisciplinary research with strong industry participation. Focused on strate- gies for applying lean manufacturing and management concepts to aerospace, LAI includes research in several engineering disciplines, economics, behavioral science, computer science, marketing, management, and other disciplines. Transportation, Distribution, and Logistics Services Industry The research most relevant to integrated logistics is in operations research, an area associated with engineering schools, applied mathematics departments, and business or management programs. Human factors research and consumer research are also important to the industry. Financial Services Industry The financial services industry has a history of benefiting from economics and business research rather than research in natural sciences and engineering. Leading examples are the Nobel prize-winning work in economics by Markowitz and Sharpe on portfolio theory, by Scholes and Merton on pricing derivative securities, and by Koopmans and Kantrovich on linear pricing models. Academic research in the social sciences has contributed to an understanding of large data sets and consumer behavior. In addition, academic researchers have been instru- mental in analyzing legal and regulatory restraints on financial services. VECTORS OF CONTRIBUTION Finding 7-9. Numerous diverse, robust, and often mutually reinforcing vectors link academic research to the five industries.
214 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE The traditional idea of universities as places that educate students and con- duct basic research is, at best, incomplete. Ideas and people are carried by mul- tiple vectors between academia and industry. These vectors include the direct hiring of students, graduates, and faculty by industry; temporary exchanges of researchers; faculty consulting arrangements; sabbaticals; research grants and contracts; institutional mechanisms at universities (e.g., research centers, consor- tia, industrial liaison programs); technology licensing; spin-off companies; publi- cations; conferences; and short courses. The modes or pathways are summarized in Box 7-3. IMPACT OF CONTRIBUTIONS Measuring the quantitative impact of specific innovations on the perfor- mance of a firm or an industry is extremely difficult because performance in the market is determined by synergies between multiple innovations and other fac- tors, both internal and external. Isolating the contribution of academic research is at best an inexact science. Therefore, this study was designed from the outset to provide a qualitative assessment. Panels for each industry relied on informed opinion, informal surveys of industry and academic leaders, workshop discus- sions, and expert judgment to assess the impact of academic research on in- dustry performance. Network Systems and Communications Industry Academic research has had a substantial impact on this industry. The flow of researchers, ideas, and entrepreneurial activity between universities and industry, coupled with government support for research and test beds for infrastructure development, have been instrumental in the creation of new companies, services, and modes of business. As emphasis shifts to the deployment and maintenance of large-scale systems and the economical provision of services, the impact of uni- versity research may be moderated somewhat because research relevant to opera- tional networks is expensive and often proprietary. Many firms opt to hire ca- pable university researchers, rather than fund research at universities. However, the federal government continues to invest heavily in academic research on infor- mation technology, which is expected to generate results with long-term com- mercial impacts. Medical Devices and Equipment Industry Academic research has had a substantial impact on performance in this in- dustry. In addition to science- and technology-based research and innovation in universities, academic medical centers (AMCs) play a unique role. Industry and academia depend on each other for product development, testing, introduction,
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH 215
216 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE and modification of medical devices at AMCs. Nevertheless, the impact could be even greater if there were a more systematic approach to educational partnerships between industry and universities. These partnerships might include the sharing of large, expensive medical research facilities and joint research and train- . . . . sing activities. Aerospace Industry Although many basic concepts and a good deal of the fundamental knowl- edge of aerodynamics were developed by academics, the impact of academic research on performance in the mature sectors of the aerospace industry has been relatively modest in recent years. The combination of aerospace corporations' strong research capabilities, concerns about intellectual property rights, an em- phasis on incremental improvements in products with long life cycles, and com- petitive pressures that demand improvements in production processes has limited the current value of academic research. However, industry and government labo- ratories that support the mature aspects of the industry continue to depend on graduates educated and trained at universities, and aerospace continues to be one of the most research-intensive industries. Less mature sectors, such as unmanned aerial vehicles and space-based information systems, where innovation is pro- ceeding rapidly, depend heavily on universities for research and innovation. Transportation, Distribution, and Logistics Services Industry The impact of academic research on performance in transportation, distribu- tion, and logistics services as a whole has been relatively modest. Basic re- search, some of it done in the 1950s with no logistics applications in mind, has had the greatest impact on the industry. Linear and integer programming and queueing theory are the building blocks of the information-management and decision-support technologies at the heart of the integrated-logistics revolution. Applied research in these fields has also made important contributions, such as large-scale optimization modeling, decomposition methods, network optimiza- tion, and advances in other areas of operations research. These successes not- withstanding, a large gap remains between technologies that could have a tre- mendous impact and technologies that actually have had an impact. Overall, there is not enough demand from the industry or capacity in the industry to take advantage of research results. Financial Services Industry Academic research has had a substantial impact on certain aspects of the financial services industry, especially on novel financial products and services. The financial instruments, investment management, and decision-support tools
THE CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH 217 created in academia or through public-private partnerships have been critical to new products, business lines, and more efficient transactions, and hence to the success of the industry. Furthermore, a significant component of modern finan- cial services would not be possible without the fundamental mathematical tools developed for or adapted to financial problems by academia. Research has fo- cused on linear programming models in economics, portfolio theory, and pricing derivative securities. University research has greatly impacted financial services despite the lack of a well developed, organized R&D system focused directly on problems and issues related to financial services. NOTES 1Drawing on Lundvall's (1992) definition of national innovation systems, the committee defines an industry's system of innovation as "constituted by elements (people, capital, organizations, et al.) and relationships that interact in the production, diffusion and use of new, and economically useful, knowledge" within a given industry. 2At the end of the funding period for NSF-supported engineering research centers, most ERCs will become self-sustaining. Currently there are 16 self-sustaining ERCs. REFERENCES AUTM (Association of University Technology Managers). 2002. AUTM Licensing Survey, FY 2001. Northbrook, Ill.: AUTM. Card, S.K., T.P. Moran, and A. Newell. 1983. The Psychology of Human-Computer Interaction. Hillsdale, N.J.: Lawrence Erlbaum Associates. Cohen, W.M., R. Florida, L.P. Randazzese, and J. Walsh. 1998. Industry and the Academy: Uneasy Partners in the Cause of Technological Advance. Pp. 171-199 in Challenges to Research Uni- versities, R. Noll, ed. Washington, D.C.: The Brookings Institution. Lundvall, B.L. 1992. National Systems of Innovation: Towards a Theory of Innovation and Inter- active Learning. London: Pinter Publishers. Nelson, L. 2000. Many Forms of Technology Transfer from Universities. Viewgraph presented at the AAAS Science and Technology Policy Colloquium, Washington, D.C., April 2000. NSB (National Science Board). 2000. Science and Engineering Indicators 2000. Washington, D.C.: U.S. Government Printing Office. NSF (National Science Foundation). 2001. Engineering Research Centers: Partnerships for Competi- tiveness. Arlington, Va.: National Science Foundation.