Everyone surely owns an innovative product that has its roots in a university lab, or knows someone that has benefited from the presence of start-ups that formed through the dissemination of knowledge and technologies from the university to the marketplace. Universities have been the lifeblood of many vibrant economies, such as Silicon Valley, whose engine is Stanford University. A key question, therefore, is whether we are maximizing the positive economy-wide impact of these engines for knowledge, innovation, jobs and competitiveness. 
Several testimonies and studies suggest the answer to that question is negative. For example, Krisztina Holly, vice provost for innovation at the University of Southern California and former founding executive director of MIT’s Deshpande Center for Technological Innovation, recently wrote for CNN: “Currently, the federal government is investing nearly $50 billion a year on university research — yet barely a dime on university programs to help translate the most promising ideas into new businesses and employment opportunities. That’s like turning up the water pressure but never opening up the faucet.”

Some policymakers recognize this sub-optimal outcome from investment in research at universities. Secretary of Commerce Gary Locke announced that the new Office of Innovation and Entrepreneurship will host on February 24 a forum with university leaders and key stakeholders on the roles of universities in innovation, economic development, job creation, and commercialization of federally funded research. Rep. Bart Gordon in turn vowed to “develop updated policies for encouraging federally-supported research at labs and universities to be brought into the marketplace” in the 2010 legislative agenda of the House Committee on Science and Technology, which he leads.

Robert Litan, vice president for research and policy at the Kauffman Foundation, and Lesa Mitchell, vice president for advancing innovation at the same organization, have developed an idea which has been named one of Harvard Business Review’s “Ten Breakthrough Ideas for 2010.” In HBR’s January-February 2010 edition, they call for creating an open, competitive licensing system for university technology. Most universities channel commercialization through centralized technology licensing offices (TLOs) established in the wake of the passage of the Bayh-Dole Act of 1980. This system allowed universities to gain organizational benefits and economies of scale, but over time it has slowed the process of commercialization by monopolizing the process. Many TLOs are short-staffed and inefficient. So the breakthrough idea consists of freeing up the market in technology licensing. This would only require an amendment to the rules of the Bayh Dole act to condition federal research dollars to allowing faculty members to choose their own licensing agents, something that the Commerce Department could do. As Carl Schramm put it in his State of Entrepreneurship address, it is time to “allow a free market in the licensing of technology developed by university faculty to flourish, which would bring consumers the benefits of new technologies much more quickly.”

I hope that the participants of the February 24 forum of Office of Innovation and Entrepreneurship will consider these ideas. The federal government should encourage universities to maximize the commercialization of innovations, especially since it has funded around two-thirds of their R&D performed in recent years. In the face of declining competitiveness, a jobs crisis and economic slowdown, the optimal commercialization of university innovations could not be more important.