Brains and Bucks, Part 3: Hard Numbers

[Part 3 of a series on Universities, Research, and Economic Development, based on presentations by Dr. Douglas Knowlton, President of Dakota State University, and Dr. David Chicoine, President of South Dakota State University, at a forum on the role of universities in commercialization, held on the DSU campus Tuesday, July 24, 2007.]

Part 1: South Dakota as Community
Part 2: Audience Statistics
Part 3: Hard Numbers
Part 4: Main Street
Part 5: The Ivory Tower

Drs. Knowlton and Chicoine both argued forcefully that world-class research is the foundation for any university's contribution to economic development. Knowlton, Chicoine, and the other leaders of South Dakota's public universities are operating under mandates from the Board of Regents to expand South Dakota's research profile and connect that research with entrepreneurs who can turn that research into economic growth. Both administrators are pushing those goals on their campuses.

Dr. Chicoine provided some data on the investment that goes into turning research into business. He analyzed data from FY1995 to FY2004 on research grants and expenditures, patents, and business agreements, and arrived at the following numbers for those ten years:

1. Amount invested in university research: $257 billion.
2. Number of "invention disclosures" (a researcher presents a new device, process, etc. to her university technology management office to see if the invention is worth pursuing a patent for): 105,378.
3. Number of patent applications from this university research: 51,893.
4. Number of patents granted: 27,078.
5. Number of active licensing agreements (university patent holder makes a deal with an entrepreneur who wants to try commercializing the invention): 21,151.
6. Number of start-up businesses arising from these agreements: 2,981.

Dr. Chicoine crunches these numbers and says that nationwide, the average research investment per disclosure is $2.4 million. Just 2.8% of those disclosures ultimately produce start-up businesses.

Dr. Chicoine asked us to imagine that South Dakota could pump $100 million into university research each year (or over 80% of our lottery revenue). If our university researchers translated those dollars into disclosures, patents, and business opportunities at a rate equal to the national average, that $100 million would produce 40 disclosures, 8 licenses, and 1 start-up. For perspective, Dr. Chicoine pointed out that SDSU has been fortunate to be able to triple its research funding recently... to $30 million a year.

Chicoine and Knowlton agreed that South Dakota is nowhere near having $100 million for university research. These seemingly daunting numbers prompted MDL publisher Jon Hunter to ask whether investing taxpayer money in research in hopes of promoting new business is just a "fool's errand." Indeed, it would seem that if the state were to come up with an extra $100 million, it could spend that money in ways much more likely to produce results than gambling on strokes of genius in our university laboratories.

However, investment in research can do more for local economic development than the above numbers suggest. First off, Chicoine and Knowlton agree that South Dakota's universities can outperform that national average of $2.4 million per invention disclosure. We can't afford not to, given our tight budgets. But Chicoine's numbers come from a nationwide survey, which includes numerous universities where commercialization and economic development aren't even on researchers' radar screens. Just by making economic development a priority, by helping professors and graduate students see opportunities in their research for commercialization and creating administrative support for things like applying for patents and seeking entrepreneurs and venture capital, South Dakota's universities can improve on those averages.

We must also remember that we don't have to come up with that $100 million (or whatever magic number we set as our goal) ourselves. A big part of the push for research is the push for federal grants to support that research. The more our public universities invest time and resources in applying for grants, the more they will see that investment pay off. That doesn't mean simply ordering professors to apply for more grants (at least this potential professor hopes not!). It means helping profs fill out those applications, hiring more faculty members to spread out the workload so profs have more time to write applications and focus on research, and perhaps creating a position or two in administration to help coordinate those application efforts.

Even if research money doesn't translate immediately into an explosion of start-ups and new jobs, increasing the public universities' focus on research still provides benefits for the schools and the state. Remember, the first goal of research is to solve scientific problems, to expand human knowledge, and that's a worthy goal in itself. Such research also builds a university's reputation and draws more world-class professors and students (i.e., from the local economy perspective, more residents, consumers, and potential workers and entrepreneurs). Those professors and students, all working on interesting scientific problems, also make the community more interesting, and according to Chicoine, "interesting, vibrant communities" are one of the key elements necessary for economic development. Finally, Research itself generates economic activity: when a university gets $100,000 from the federal government to study something, that money gets pumped into the local economy to buy more notepads, computers, test tubes, gas for field trips, and whatever else the researchers need the money for. So even if a research grant doesn't produce patentable or marketable results, the university still benefits its community by bringing conducting that research.

Dr. Chicoine's numbers do provide good benchmarks our universities can use to measure their performance with the research dollars they have. And our university presidents will face plenty of questions from the Board of Regents and legislators, many of whom do think purely in dollar terms. University administrators and researchers alike thus need to know these numbers and be ready to defend their work in terms of them. Nonetheless, we should also remember that scientific pursuits don't have to literally pay for themselves to be worth the investment.