Context
Entrepreneurship, as expressed in the formation and growth of new companies, seems less prevalent in the crop agriculture segment of the life sciences (agricultural biotechnology) than it does in biomedical segments such as therapeutic and diagnostic pharmaceuticals and medical devices.
It is generally believed that technology entrepreneurship depends upon, and is driven by, a critical mass of leading edge research. There has been a large, mainly public, investment over several decades at Land Grant Universities in research in plant science that underpins crop agriculture. By all accounts, many plant science research programs at Mid-Western Land Grant Universities are world class in stature. Why then has entrepreneurship and traditional technology transfer been so modest, particularly when compared with commercialization of university technologies in biomedical fields?
Following the opportunities created by the Bayh-Dole Act, universities are intensifying their interest in new venture creation as an additional pathway to commercialize university generated intellectual property, i.e., in addition to out-licensing. New venture creation requires capital investment and agricultural biotechnology appears to face biases in the investment community towards biomedical rather than agricultural opportunities. It would be useful to know: (1) how much latent plant sciences intellectual property suited to entrepreneurial exploitation resides at representative Land Grant universities; (2) what the factors are that have constrained entrepreneurship in agricultural biotechnology (locally, regionally and nationally); and (3) what changes can be affected or what processes put in place, that would favor increased entrepreneurship and venture formation in agricultural biotechnology.
Entrepreneurship and company formation as an alternative to technology transfer by out-licensing.
Public investment in research generates returns on that investment when research outcomes, (technologies) are transferred into the market place. Indeed it is a requirement of the Bayh-Dole Act that, in exchange for granting of ownership rights to universities for technology generated using Federal funding, the institution must commit to engage in technology commercialization. Licensing to established corporations has been the most common technology transfer pathway. In general this leads to a very modest (and long delayed) revenue stream back to the originating institution. The larger economic development impacts (wealth creation; higher paid, higher skilled jobs; and capital investment attracted) then accrue to the usually distant and urban home of the corporation that in-licensed the technology.
Rural regions stand to reap larger economic development gains if emerging technologies are used as a nucleus for company formation locally. An argument can be made that the "highest-and-best-use" for certain university-generated technology from an economic development stand point is home-grown company formation.
Within the life sciences, institutional investors have favored pharmaceutical and biomedical technology over agricultural biotechnology opportunities.
The statement in the heading above notwithstanding, Midwestern Land Grant universities have likely seen as much research expenditure in agriculture as in medical research. Why then has there been so much more enterprise creation in the biomedical sector than in agricultural biotechnology? Is the premise of the preceding question, which is largely anecdotal, in fact true? Have the benefits in agricultural biotechnology actually been commensurate with those in medicine, but accrued to established major corporations in agriculture versus entrepreneurial firms in the biomedical arena? There has been an upswing in the amount of scholarly research on technology transfer with a view to understanding factors that affect success (e.g., Audretsch, et al., 2005; Link and Scott, 2005; Markman et al., 2005; O'Shea et al., 2005; Powers and McDougall, 2005). We are not aware of research that looks specifically at issues surrounding technology transfer in agricultural biotechnology. Answering these questions is key to efforts to advance entrepreneurship and new venture creation in agricultural biotechnology.
Expected outcomes
(1) A basis for policy recommendations with respect to the (geographic) alignment of the nation's venture capital apparatus with its centers of innovation in agricultural biotechnology.
(2) Some level of redefinition of entrepreneurship in agriculture to take account of its uniqueness relative to other segments of life sciences enterprise.
Contribution to IMBA's Mission and Objectives
This project furthers IMBA's mission and objectives by seeking to understand constraints to entrepreneurship and new venture creation in corn and soybean related biotechnology and recommend mechanisms to overcome those constraints. Increased entrepreneurship, manifested most typically as newly formed companies, results in additional markets for corn and soybean farmers in Missouri and Illinois as well as other regions producing those crops and results also in economic impacts associated with company formation and wealth creation in rural locations of the Midwest. The applied dimension of the project tackles the hypothesis that there is an untapped reservoir of intellectual property as a result of prior research investments and that careful inventory, rigorous assessment, and an improved understanding of success factors will yield opportunities to form and nurture new companies with significant benefits for rural economies. Thus the project seeks a pathway to liberate an incremental return on research investments already made in agricultural biotechnology.
Research Objective
We will address the following hypothesis and publish our findings in appropriate research journals:
Centers of substantial research expenditure and significant innovation are located in the Midwest and are uncoupled from (investing preferences of) the large concentrations of investment capital for technology ventures that are located on the coasts.
Procedures
We will begin our analysis by compiling local data on venture funding to illustrate the level and allocation of such funds to various life sciences sectors across the US. This will allow for the nationwide analysis of the availability of capital, patterns of its deployment in ventures on a geographic basis and comparison of investment levels in agricultural biotechnology ventures with that in other lines of life science, such as therapeutic pharmaceutical products, medical devices, and diagnostics.
Capital investment data will be collected mostly from secondary sources. Specifically, detailed information will be obtained and synthesized from such sources as PricewaterhouseCoopers, National Venture Capital Association MoneyTree, and individual fund reports and will be organized by geography, fund scope, fund size, project type, and other relevant factors.
Next, we will compile data on public life sciences research and will organize it by geography and life sciences sector. Relevant data will be collected from secondary sources such as the National Sciences Foundation and the USPTO and will include life sciences R&D expenditures, life sciences patents, and life sciences SBIR grants. Again, the data will be organized by geography and life sciences sector.
Finally, the data will be synthesized and regression analysis will be used to test the hypothesis that the marginal investment of venture capital to research expenditures and innovation located in the Midwest is significantly lower than in the coasts.
Additional perspective on the research hypothesis will be sought through personal interviews of fund managers based on semi-structured questionnaires which will seek to evaluate the preferences of fund managers towards specific geographies and life sciences sectors and to identify relevant factors that drive such preferences.
References
Audretsch, D., E. Lehmann and S. Warning. (2005) University spillovers and new firm location Research Policy. Volume 34, Issue 7:1113-1122
Link A., and J. Scott. (2005) Opening the ivory tower's door: An analysis of the determinants of the formation of U.S. university spin-off companies Research Policy. Volume 34, Issue 7:1106-1112
Markman, G., P. Gianiodis, P. Phan and D. Balkin. (2005) Innovation speed: Transferring university technology to market Research Policy. Volume 34, Issue 7: 1058-1075
O'Shea, R.,T. Allen, A. Chevalier and F. Roche. (2005) Entrepreneurial orientation, technology transfer and spinoff performance of U.S. universities Research Policy. Volume 34, Issue 7:994-1009
Powers J., and P. McDougall "University Start-up Formation and Technology Licensing with Firms that Go Public: A Resource-based View of Academic Entrepreneurship." Journal of Business Venturing, Volume 20, Number 3, May 2005
