Generosity to researchers could be a profitable move

November 2, 2007

Study suggests scientists given higher royalties earn more in licensing income for universities, reports Zoë Corbyn. Universities that give a greater share of royalties to researchers whose inventions have a commercial application generate more licensing income than institutions that are less generous to their staff.

An article by Mark Schankerman, a professor of economics at the London School of Economics, argues that monetary incentives produce greater effort by scientists, and that entrepreneurial scientists gravitate towards universities offering higher royalties.

He argues in the article, published this week in the Centre for Economic Performance's magazine Centrepiece , that institutions must review how they are dividing their income in order to get the best returns. Professor Schankerman, who also directs a programme on intellectual property at the University of Arizona, urges universities to incentivise technology transfer offices, as providing bonus pay to staff generates greater income per licence.

"Incentives matter a lot both to the scientists and to technology licensing," Professor Schankerman told The Times Higher .

Professor Schankerman's conclusions are based on research conducted on US data.

A first study examined how the share of licensing royalties received by US academic inventors - on average about 40 per cent of royalties - affected the number of inventions disclosed and the licensing income generated.

Analysis showed "a very strong" correlation, with scientists responding both to cash royalties for themselves and financial support for their laboratories. However, Professor Schankerman would not be drawn on an optimal incentive level.

"If universities around the average gave more, they would earn so much more that they would keep more," he said. He said the overall conclusions could apply equally to the UK, which has "typically lower" royalty levels, peaking at 25 to 30 per cent.

A second study looked at bonus pay for technology transfer officers, awarded in about 20 per cent of US universities. "Universities that use bonus pay generate, on average, about 30 to 40 per cent more income per licence, after controlling for other factors," Professor Schankerman said.

His article follows strong words of support from the Government for the venture capital industry's ability to fund university spin-offs.

Speaking this week at a conference organised by the British Private Equity and Venture Capital Association in London, Ian Pearson, the science and innovation minister, called venture capital a "key part of the lifeblood of the UK's innovation ecosystem" that had been "unfairly maligned".

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