Establishing University-Industry Joint Ventures

Richard Cyert, Sixth President of Carnegie-Mellon University (1977-1990)
Richard Cyert, Sixth President of Carnegie-Mellon University (1972-1990)

Agreements like that between Westinghouse and Carnegie-Mellon can help surmount the obstacles to significant research cooperation between corporations and universities.

Richard M. Cyert, President, Carnegie-Mellon University (#TBT article originally published in 1985)

In talking with corporate executives, I find that most of them see the importance of an environment in which corporations and universities are cooperating much more closely. This attitude has developed in part from an increased appreciation for basic research, stemming from the recognition that the United States no longer has a technological lead on the rest of the world.

In any event, the increased level of cooperation between universities and corporations in research must overcome two major hurdles. The first one comes from the corporation and represents the need for the corporation to have something tangible to show for tis research expenditures when justifying such expenditures to stock holders. This tangible item is a patent. Corporations must be in a position to receive patents for significant expenditures of funds. Traditionally, universities have coveted the patent rights for any research undertaken in the university. Most universities have strict patent policies in which the university retains some rights from the patent. This policy is motivated by the dream that someday a patent will enrich the university beyond its wildest expectations. The fact that one or two schools have had such experiences stimulates the desire for patents on the part of others.

The obstacle to cooperative research at the university is the need for publication. A major mission of a research university is the development of new knowledge and the obligation to make this new knowledge available to other researchers. This obligation, for example, is so strong at Carnegie-Mellon University that there has been a policy forbidding undertaking secret research that goes back to the early 1950s.

These two obstacles, then, would seem to be so great that significant cooperation on research between universities and corporations would be impossible. Universities want both the patents and the right to publish. Corporations want the patent rights and have difficulty with publications since it might well endanger the attainment of patent rights. Obviously, a change in attitude on both sides is critical, and I believe the type of agreement that has been developed between Westinghouse Corporation and Carnegie-Mellon to stimulate research in robotics represents a model that is possible in this area.

The agreement I refer to gives Westinghouse the patent rights to any discoveries that are made in the course of the research—whether by Westinghouse employees or Carnegie-Mellon University faculty. If  Westinghouse licenses these patents, then Carnegie-Mellon receives a percentage of the royalties. On the other hand, Carnegie-Mellon University has the right to publish although it agrees to withhold publication for a limited period of time if such publication would endanger the patent. This arrangement, a relatively simple one, opens the road to a free interchange between universities and corporations. Under this system universities can develop research relationships with corporations that can benefit both organizations. The corporation gains considerably by an association with outstanding researchers whom it probably could not hire. The university also gains by this arrangement since it gets some funding for basic research. In addition, the academic researchers get a flow of problems from the real world that can be important. One of the defects of any discipline is the tendency to work on problems in the literature that may not have any meaningful counterpart in the real world. Almost every well-developed discipline suffers from this characteristic.

The mutual advantages available to the corporation and the university enable me to classify this type of agreement as a joint venture in the same sense as a joint venture between two industrial firms. It is incumbent upon the university administration to treat this joint venture in a business-like way. The university and the corporation must have frequent meetings to review the research project, and it is vital that both parties get the desired returns from this arrangement.

Developing Commercial Products Faster

The NSF [National Science Foundation] on occasion has sponsored research to determine the time required to develop an idea in the laboratory to a commercial product. These studies have established a range of approximately 13 to 18 years.

One of the objectives of greater cooperation between universities and corporations should be to shorten this period. At Carnegie-Mellon, we have attempted to structure some of our joint research with industry to facilitate the movement of products to the market. The format is one in which industry employees will work on the project in Carnegie-Mellon labs at least part of the time. Conversely, faculty members at CMU will work in company facilities and visit the relevant factories.

The members of each group, corporate and university, must develop an understanding of the other’s attitudes, goals, and work habits. Mutual understanding must be established by each side working closely together and participating in activities that are not part of the regular routine. Academics must be willing to get their hands “dirty,” and industry people must be prepared to appreciate abstract reasoning and attempts to generalize.

The end results can be worth the effort. In one joint project between Carnegie-Mellon and Westinghouse, a completely automated cell for the production of turbine blades was successfully installed and working in approximately 2 ½ years. The cell was designed and developed from scratch. New machinery had to be designed and fabricated and much software written. The successful completion of the project required the kind of mutual understanding described above.

Developing Consortia

Other arrangements are also possible and desirable. I believe that universities can play a vital role in developing consortia of firms in the same industry who are interested in research.

The progress which the Japanese have made in many industries has become one of the marvels of the seventies and promises to continue in the eighties. The Ministry of International Trade and Industry, (MITI), has played a significant role in Japan’s progress by organizing consortia of firms to d joint research in various fields.

In the United States we have viewed research in industry as another aspect of the competitive system. Firms have not been allowed to work together on research since cooperative ventures are threatened by anti-trust laws. The aim of each firm is to find a breakthrough that will give its product a comparative advantage over the others in the field.

If one looks at the research process closely, however, a valid inference to draw is that research is a cooperative venture. Each researcher literally “stands on the shoulders” of his or her predecessors in the field. A strong argument can be made that there are advantages from cooperation in research. On an a priori basis it would seem highly desirable and beneficial to have researchers from a variety of organizations working cooperatively. The ability to assimilate a variety of ideas and approaches could have a beneficial approach to research. In Japan the consortia organized by MITI function in just this way. The firms work together on research, and each company that participates in the consortium is able to get royalty-free licenses on any of the patented discoveries. The consortium at some point is disbanded, and the firms return to competing with each other in all aspects of their activities. In the United States we have not had the opportunity to try research in this fashion. Currently, there are some attempts by industry to move in this direction.

However, the greatest potential by far for organizing cooperation in research lies with universities. The possibility that various universities individually can function in the way that MITI does holds great promise for the United States. I envisage a situation in which the university, after analyzing its capabilities, focuses on those areas in which it has research strengths. It then organizes the firms that have a stake in these fields. A consortium is then organized in a particular field. The industries supply the funds needed to do the research, and the university contributes its fair share through the use of its space, equipment, supplies, and faculty. The consortium should operate in a way that gives the industrial members an advisory role in developing a relevant research program with the university retaining veto power on the research. Some firms would send researchers to the university laboratories for a certain time, and the university would hold periodic conferences to report results of the research. In the interim, working papers and progress reports by the research director would keep firms up-to-date. The university would take out all patents, with the members of the consortium receiving royalty-free licenses.

Clearly, the research can be done only when there are faculty members within the university interested in the research. Some of the research will have to provide relatively quick payoffs to satisfy management and stakeholders of firms. It is also clear that much of the research has to be basic if the United States is going to maintain a position that is on the cutting edge of world competition.

This type of cooperative research could be made significantly stronger if the National Science foundation were to start a program to grant funds directly to the university for those consortia that pass the NSF peer-review system. The university then would be in as powerful a position as MITI to leverage the dollars of the individual firms.

In conclusion, The United States has a potentially large comparative advantage, in that industries and universities can and do cooperate. No other country has this kind of relationship to the degree present here. Universities can take the leadership in this matter and make a major contribution to our society.

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Reference: Cyert, R.M. (1985). “Establishing University-Industry Joint Ventures,” Research Management, Vol. 28, No. 1 (January-February), pp. 27-28.

The article above comes from the archives of IRI’s award-winning journal, Research-Technology Management (RTM), and was first published in 1985 when the journal was still called by its original name: Research Management. Richard M. Cyert was the sixth president of Carnegie-Mellon University (from 1972-1990) and passed away in 1998. His writing in this piece reflects the thoughts of many in industry and universities at the time and foretell of key management terms such as “open innovation” being coined and put into use.

At IRI’s 2015 Annual Meeting, the ninth president of Carnegie-Mellon University, Dr. Subra Suresh, was honored with the IRI Medal for his commitment to innovation and his outstanding work towards eliminating barriers to collaboration around the world. From the official press release:

“His contributions include working to reduce barriers to collaboration among research enterprises around the world; helping to ensure that the American people benefit from U.S. innovation; and, opening up new opportunities in science and engineering for women and underrepresented minorities.”

See a clip from his talk:

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