Which way to globalization? R&D from overseas corporations, innovations in local universities and academic spinoffs.

Transcription

1 Manuel Lobato, Ph.D. and José Vega, Ph.D. Which way to globalization? R&D from overseas corporations, innovations in local universities and academic spinoffs in Puerto Rico Abstract R&D investments in Puerto Rico mostly come from overseas. Literature emphasizes the relevance of collaborations of foreign companies with R&D investments with domestic enterprises and local universities as a key element for the spill-over dynamics. This paper focuses on the development of innovations in local universities and how those innovations reach global markets. Are they somehow related or promoted by R&D activities from multinational corporations in Puerto Rico? Findings reveal that local academic researchers currently generate innovations with potential to reach global markets and that they are increasingly considering the commercial aspects of their innovative activities. Nevertheless, their partnerships with private business and the number of academic spin-offs seem negligible in the context of the level of R&D investments. Institutional factors are perceived by researchers as significant barriers. Accordingly, the present model of technology transfer must be revised to become more centered on the academic researcher as the key actor for the commercialization of his innovations. Introduction Research and Development (R&D) expenditures were estimated in $449 million in Puerto Rico in fiscal year The main investors in R&D are multinational companies with subsidiaries in Puerto Rico: 82% of corporate R&D expenditures and 54% of all R&D expenditures are in those companies. Universities are also a very relevant actor, with $143 million in R&D activities, mainly from federal agencies of the government of the United States. Altogether, two thirds of all funds invested in R&D in Puerto Rico come from overseas, 45% from the parent companies of the subsidiaries in Puerto Rico and 22% from the federal government (Instituto de Estadísticas, 2014). These numbers suggest that Puerto Rico is recipient of R&D funds in the dynamics of what has been called R&D globalization or internationalization (UNCTAD 2005) 1. In fact, the weight of overseas funds on all R&D funds in Puerto Rico is much higher than in other economies 2 : in Latin American countries as Argentina, Chile or Mexico funds from abroad 1 Data from 1990s and 2000s showed an increasing investment of foreign companies in emergent economies and other countries, what was called the internationalization or globalization of R&D. However, data from 2010s in OECD shows slower growth or no increase in overseas funds for R&D in China, Singapur or United Kingdom, if measured in constant prices; other countries, such as Russia, Australia, Mexico or Argentina, show irregular movements or even a decrease in foreign funds (source of data: OECD StatExtracts, available in A further analysis and detailed surveys are needed to understand the complexity and diversity of national experiences with overseas funds for R&D. 2 OECD recognizes methodological problems and difficulties to correctly identify when R&D activities are funded by foreign sources. This issue is to be addressed by the National Experts on Science and Technology Indicators (NESTI) (OECD, 2011). 1

2 represent less than 1% of all corporate R&D investments, in the United States is 5%, in Singapur, 6% and in the European Union, 10%, with only Austria, Ireland, Slovak Republic and the United Kingdom above 20% 3. The benefits for Puerto Rico of this R&D investment from abroad can be high and may contribute to improve the participation of the domestic actors in global markets. Dachs et al (2013) point out that foreign investment in R&D can lead to an increase in R&D investment from local companies, in order to keep pace with the competitive position of foreign firms. In second place, there can be substantial knowledge spillovers, and as a result an upgrade in the innovative and technological capacities of local companies, and therefore of their competitiveness at a global level. Third, employment opportunities may arise for local researchers and other personnel related to R&D activities, and this may result in an improvement of the absorptive capacity of the local economy. Finally, it can produce structural changes in the local economy, leading it to technology-intensive industries, as well as cluster creation and technology-intensive supply chains. Some of these advantages were already recognized by the United Nations Conference on Trade and Development (UNCTAD), from the United Nations, in a thematic conference on this issue in But this conference also raised concerns about the possibility of a reduced impact on the local economy of R&D investments from multinational companies, if diffusion dynamics and participation of domestic companies and local universities didn t happen. ( ) the benefits from attracting R&D activities are far from automatic. In fact, in many situations, they may be limited if the foreign affiliates create too few or no local linkages to domestic actors. TNCs R&D units sometimes create high-technology enclaves with little diffusion of knowledge into the economy. Moreover, with the fragmentation of R&D and the increasing specialization of individual units, the scope for transferring broad knowledge may be narrowing, reinforcing the enclave nature of R&D units (UNCTAD, 2005: 15). In fact, the same Dachs et al (2013) confirm in their econometric study on European countries that the level of foreign R&D expenditures is not significantly associated with the level of R&D expenditure of domestic firms, although they observe a correlation between R&D intensity in domestic firms and that of foreign firms. This finding would mean that no quantitative leap in R&D investments from domestic companies should be expected as a result of an increase in R&D investments from foreign companies in their economy, although other dynamics might happen, such as an increase in the intensity of the R&D activities of local companies and the cross-fertilization by transfers of knowledge between domestic and foreign companies. 3 Last data available (2012, 2011 or 2010). Source: OECD StatExtracts, available at 2

3 UNCTAD (2005) emphasizes the relevance of partnerships and collaborations of foreign companies with R&D investments with domestic companies and local universities, as a key element for positive effects and spill-over dynamics of these investments. According to the second Survey on Science and Technology ( ): Research and Development, 19% of business with R&D investments in Puerto Rico hire R&D services from other entities (private companies or universities), although the average expense is just $81 thousand annually (Instituto de Estadísticas de Puerto Rico, 2014). On the other hand, 11% of these companies answered in the survey that they cooperate in joint ventures with other companies, mainly from abroad. In general terms, the first and second surveys on R&D in Puerto Rico (corresponding to natural year 2009 and fiscal year ) show few links between multinational companies with R&D activities in Puerto Rico and domestic companies or local universities (Instituto de Estadísticas de Puerto Rico, 2011 y 2014). Using microdata from the 2009 survey, Lobato (2013) concludes that there is no broad strategy of investment in R&D activities in the Puerto Rican economy, but only recent strategies in specific subsectors, with a high presence of subsidiaries of companies from the United States. In fact, manufacturing and services in pharmaceutical areas and agricultural biotechnology subsectors invest $140 million and $96 million, respectively, in R&D activities, that is, 80% of all corporate investment in R&D in Puerto Rico (Instituto de Estadísticas de Puerto Rico, 2014). Table 1: Higher education R&D expenditures, by institution and source of funds: FY 2011 Institution and campus All R&D expenditures Source of funds: Business % Total R&D expenditures, per institution Public university (University of Puerto Rico) UPR, Medical Sciences Campus 64,017 2, % UPR, Mayaguez 34,424 1, % UPR, Rio Piedras 32, % UPR, Humacao 1, % UPR, Cayey 1, % UPR, Ponce % Private universities Polytechnic University of Puerto Rico % Ponce School of Medicine 10, % Universidad Central del Caribe 7, % SUAGM, Universidad del Turabo 7, % SUAGM, Universidad Metropolitana 2, % SUAGM, Universidad del Este 1, % Public university 134,633 4, % Private universities 29, % Total, Puerto Rico 163,853 4,436 SOURCE: National Science Foundation/National Center for Science and Engineering Statistics, Higher Education Research and Development Survey, FY

4 Data summarized in Table 1 above shows that partnerships with universities are also scarce. According to National Science Foundation, in 2011 only four institutional units in Puerto Rico received funds for R&D activities from private businesses: three campuses of the University of Puerto Rico (Medical Sciences, $2.5 million; Mayagüez: $1.9 million; and Río Piedras: $0.05 million) and the Polytechnic University ($0.05 million). These are the last detailed statistics available on higher education R&D expenditures by source of funds. All this data from National Science Foundation and Instituto de Estadísticas de Puerto Rico suggest that Puerto Rico might be an example of what UNCTAD (2005) warned, enclaves of multinational companies from abroad with high investments in R&D activities but with few or no local linkages to domestic actors. In fact, since the 1950s Puerto Rico has implemented economic development policies based on investments from multinational companies, oriented to accelerate the industrialization process and the global competitiveness of the economy. Contrary to initial expectations, these investments from abroad didn t help much to build-up a domestic business base, nor a wide number of local companies that participate in international markets. With this experience, it seems urgent to find out if R&D investments from multinational companies in Puerto Rico are effectively opening the possibilities of local actors to participate in global markets and improving the competitiveness of the economy, or if other ways to insert local actors in global markets must be find. This paper focuses on the development of commercial innovations in local universities and the emergence of academic spinoffs, that is, entrepreneurial initiatives built from new knowledge or innovations developed in academic research projects. Are those innovations brought to global markets? How do academic researchers collaborate or partner with private businesses? Are they somehow related or promoted by R&D activities from multinational corporations in Puerto Rico? Collaborations with academia and sponsorships of academic research where considered by the UNCTAD (2005) among the potential benefits of R&D investments from abroad. Most important, these collaborations might help to develop an entrepreneurial culture or business minds in scientists and engineers, which should lead them to build their own entrepreneurial projects based on their innovations. The objective of this work is to find out if this cultural change is in the making, if scientists and academic researchers with a commercial vision of their innovations can be traced, if they are benefiting from R&D investments from multinational companies in Puerto Rico and what factors are helping or hindering these processes. A total of 25 academic researchers with innovations and 15 business managers were interviewed. These were complemented with other 40 interviews with other participants of the innovation ecosystem in Puerto Rico (students, deans and directors of research centers, venture capitalists, among others). Also, statistical analysis was done on data available about R&D and innovation activities in Puerto Rico, as well as on data collected from the United States Patent and Trademark Office (USPTO) archives. 4

5 Academic R&D, local economic development and absorptive capacity of corporations Universities are considered a key player in modern economies, as knowledge generators and diffusors. Etzkowitz proposed a third mission for the universities, adding local economic and social development to their traditional objectives of teaching and doing research (Etzkowitz, 1983; Etzkowitz, 2003). In fact, the Bayh-Dole Act of 1980, which defines the legal and institutional framework for knowledge and technology transfer from the academic researchers to the industry, assigns the universities the center place in this technology transfer system. From a theoretical perspective, the economic impact of new knowledge and innovations through R&D activities will be especially intense at local level. The cost of information transmission is not affected by distance, but often new knowledge has an important tacit component, and this reduces the possibilities of its diffusion and increases the costs of doing it (Polanyi, 1966, Audretsch y Feldman, 1996). Information of economic relevance is often sticky, as denominated by Von Hippel (1994), it is difficult to transfer it in a form usable by a given information seeker. This is due to different factors: the characteristics of the information itself (its tacit nature) and its amount, the efficiency and attributes of the information provider, the efficiency and attributes of the information seeker, and the characteristics of their relationship. Tacit knowledge and sticky information imply that physical and cultural proximity to the sources of new knowledge and innovations is an asset for the corporations. The development of business clusters in specific geographical areas is a consequence of this effect, and it also explains why academic spin-offs usually remain located in buildings and areas next to their stem university, and keep strong ties with the academic community (Etkowitz, 2003; Kenney y Patton, 2011). Knowledge spillovers from the universities to their business neighbors and their positive economic impact have been studied in diverse contexts (Audretsch y Feldman, 1996; Zhang, 2009; Acs et al, 2010), and knowledge transfer is considered a basic instrument for local economic development policies (Muscio y Geuna, 2009). But effective technology transfer is not a simple task. Investing in the generation of knowledge and promoting technology transfer are not enough, by themselves. Colombo et al (2010) conducted a longitudinal analysis of Italian businesses and concluded that the quality of research undertaken by the universities is not correlated to the potential transfer of knowledge to the businesses or their regions. Even more paradoxical, the commercial orientation of the universities is not correlated with the development of a business sector around them. Acs et al (2010) point out that even when R&D investment is important for the competitive advantages of any corporation, there is no clear relationship between R&D investments in a country and its Gross Domestic Product growth. 5

6 Aldridge and Audretsch (2011) developed the concept of knowledge filter in order to explain these sort of observations. They give emphasis to the difficulties ahead of any knowledge generated by R&D activities before it is translated into a commercialized innovation. The Bayh-Dole Act already recognized bureaucracy as a delayer for the commercialization of innovations and tried to avoid it, but it is now clear that there are additional and more complex obstacles. The same issue is viewed from the information seekers perspective (the corporation perspective) by Cohen and Levinthal (1990). For them, it is not that relevant how much information is available, but the absorptive capacity of a business, that is, its ability to identify which information is valuable for its objectives, to integrate this information in its processes and to develop new commercial applications using that information. Businesses absorptive capacity is therefore essential for the economic impact of the knowledge transfer processes. Cohen and Levinthal argue that the ability to evaluate and utilize outside knowledge is largely a function of the level of prior related knowledge (1990: 128). Therefore, R&D investments by corporations not only can lead them to new knowledge and the development of innovations, but also multiplies their capacity to absorb external knowledge, and this capacity has a cumulative effect (Cohen y Levinthal, 1989). From this perspective, the feasibility of knowledge transfer and its economic impact depends on the establishment of effective links between universities, local enterprises and subsidiaries of multinational corporations, especially when they are all active in R&D. In this context, it should be noticed that many corporations have adopted an open innovation model, seeking for ideas and innovations generated outside the corporation (Perkman y Walsh, 2007; PSAC, 2008). Nevertheless, Geiger (2012) points out that this change of approach has not produce an increase in collaborations between universities and corporations, this last are still focused on the results of R&D activities of their own laboratories. In fact, National Science Foundation (NSF) statistics show that funding for R&D academic activities by the private sector is not only low in Puerto Rico, but also in the United States, were it represents just 5% of the academic R&D funds. Scope of the survey and methodology We adopted the definitions or research and development (R&D) and innovation proposed by the Organisation for Economic Co-operation and Development (OECD), which are widely accepted and used in most of the surveys and studies in this area. Research and experimental development (R&D) comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications (OECD, 2002: 30). This definition includes three types of activities: basic research, applied research and experimental development. Basic research refers to experimental or theoretical work undertaken primarily to 6

7 acquire new knowledge of the underlying foundation of phenomena and observable facts, without any particular application or use in view. Applied research is also work undertaken to acquiring new knowledge, but it is focused on a specific practical aim. Experimental development uses knowledge already created (from research or practical experience). It consist on systematic work directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed (OECD, 2002: 30). Any activities that don t aim to the resolution of scientific and/or technological uncertainty and that don t have an appreciable element of novelty won t be considered. This definition also excludes education and training activities, routine testing, specialized medical care, market surveys, industrial design, and acquisition of technology, among others. Innovation is defined as the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations (OECD, 2005: 46). Innovation activities are those intended to lead to the implementation of innovations. R&D activities are included among innovation activities. The survey focused on two specific subjects: academic researchers involved in the commercialization of innovations and managers of private companies involved in R&D activities. We considered those academic researchers who (a) create innovations as a result of their academic research, and (b) have the intention to find commercial applications of that innovation; they can pursue the commercialization of their innovation in different ways: building up their own business, selling or giving away the intellectual property of their innovation, or collaborating with local or foreign businesses. Therefore, the object of this survey are academic researchers that are not only innovators, but also proactive in their efforts to transfer their knowledge and inventions to the market. Among the managers of private companies, we considered managers of spin-offs companies and managers of corporations that invest in R&D activities in Puerto Rico. We adopted the definition of spin-off proposed by Pirnay et al.: new firms created to exploit commercially some knowledge, technology or research results developed within a university (2003: 356). The core of this definition is the academic research, not the founder of the business. Business created by professors, academic researchers or students to exploit their research findings and developments are included, but also other business created by third persons, not directly related to universities, in order to commercialize an innovation developed by academic researchers. According to their relationship with the academic researchers, Nicolau and Birley (2003) classify the spin-offs companies as (a) orthodox, when both the technology and the academic innovator leave the university, (b) hybrid, when the technology comes out of the university but the academic innovator remains in the university, working part-time in the company, and (c) 7

8 technological, when the technology departs from the university and the academic researcher has no connection with the company created to commercialize it, even when he might be owner of stocks of the company. The survey has been developed using quantitative and qualitative techniques. Statistical databases from official sources were used to understand the scope and characteristics of academic R&D in Puerto Rico and the different components of the innovation ecosystem. The digital archives of the United States Patent and Trademark Office and the European Patent Office were explored to identify not only all patents granted whose assignee is a local university, but also all patents granted where a researcher or professor from a local university stands as assignee or first inventor. The research team analyzed all patents granted from 1990 to Statistical and archives analysis were important, but this survey has mainly focused on semi-structured interviews to both groups of academic innovators and managers of companies involved in R&D activities. We considered this qualitative methodology as the best technique to understand the perceptions and experiences around the commercialization of innovations, as well as to identify the factors helping or hindering this process, the relationship between academic R&D projects and the private companies, the challenges ahead and the opportunities to explore. A total of 25 interviews were conducted with professors or academic researchers of the public university of Puerto Rico (University of Puerto Rico, in four campuses: Río Piedras, Mayagüez, Medical Sciences and Humacao) and four private universities: Ponce School of Medicine, Ana G. Méndez University System (two campuses: Metropolitan University and Universidad del Este), Polytechnic University and Universidad Central del Caribe. Three of the professors or academic researchers interviewed had their own spin-off company. On the other hand, 15 interviews were conducted with managers of private companies: 3 of them were managers of other spin offs, 7 were managers of subsidiaries of multinational corporations involved in R&D activities in Puerto Rico, and 5 were managers of local companies involved in R&D activities. In sum, 40 interviews were made to representatives of our two groups of analysis. Academic researchers were identified as potential interviewees through databases of patent applications and patents granted by the United States Patent and Trademark Office, research grants of federal agencies and references from other interviewees. The methodology was designed to gather information from all sorts of researchers and experiences, therefore the selection of potential interviewees was made based on their university, campus and faculty, trying to have at least one interview of each university and campus with a relevant and regular investment in R&D projects. When more than one academic researched met the selection criteria in the same academic department, the potential interviewees were randomly selected. 8

9 On the other hand, business managers were selected from companies of the subsectors where investment in R&D activities is most common and important in Puerto Rico: pharmaceutical production, technical and scientific services (including agricultural biotechnology), and software development. These subsectors were identified from the results of the Survey on Science and Technology (2009): Research and Development (Instituto de Estadísticas de Puerto Rico, 2011). The academic researchers interviewed have been granted 21 academic patents altogether. These patents represent 48% of all patents granted to academic researchers in Puerto Rico since In fact, interviewees have been granted with 57 % of all academic patents granted since Some business managers interviewed have also been granted with patents by the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO) and other international patent offices. The principal investigator also conducted 40 interviews to representatives of other components of the ecosystem were innovations are commercialized: 6 interviews with research assistants or students involved in research projects with business potential, 11 interviews to deans or directors of academic research centers, 3 interviews to directors of business development centers at universities, 4 interviews to managers of venture capital funds, investing companies or business angels, and 12 interviews to persons who make public policy decisions around R&D activities and the promotion of entrepreneurial activities in universities, public agencies or non-profit companies. Potential participants were identified as a result of bibliographic and documents review, as well as from references from other interviewees. All the 80 interviews were conducted by the principal investigator himself, 74 in person and 6 by phone (as requested by the participant). They lasted between 45 minutes and 2.5 hours. The methodology selected to conduct the survey impose some limitations to its findings. The selection process of potential participants was based on the inclusion of participants of different campuses and economic subsectors, regions, personal profiles and experiences. There must be taken into consideration that the group selected might not be representative of all academic innovators and business managers of companies with R&D activities. Due to the complexity of the innovation processes and the commercialization, there might be additional experiences and opinions not considered in this survey. Students who are academic researchers and potential innovators were underrepresented among the group of interviewees. Adding to that, the profile of academic researchers who accepted to be participant might not be representative of the average academic innovator. A total of 121 persons were contacted by and invited to be interviewed in the survey, and 34% did not answer or declined to participate. Participation acceptance was especially difficult among business managers (48% did not answer the invitation). Finally, USPTO archives and other databases used for secondary data analysis have also their own limitations. 9

10 Patents per year, Puerto Rico Patents per yera, academic researchers Findings The research team identified 52 patents granted by USPTO to innovations created by academic researchers of universities of Puerto Rico (between 1990 and 2013). Most of the patents (46) are from researchers of the University of Puerto Rico, but there are also patents granted to researchers from private local universities. An interesting finding is that 10 patents don t include the university as assignee, although the inventor is an academic researcher or professor. The universities of Puerto Rico are relatively newcomers to the world of patents. The first patent assigned to the University of Puerto Rico was granted in 1991, and there was no patent assigned to a private local university until 2010, although there are patents assigned to academic researchers of private universities since Most of the patents granted to local universities or their academic researchers have been granted after The pattern of patents granted show no clear trends, years with 7 or 8 patents (2003, 2012) alternate with years with very few or even null (2005). Figure 1 - Patents granted per year in Puerto Rico Academic researchers and total, Patents from academic researchers, Puerto Rico All patents, Puerto Rico Source of data: United States Patent and Trademark Office (USPTO) patents archive 0 Patents granted to universities or academic researchers represent 6.5% of all patents granted in Puerto Rico before 2013, and 12.8% of all patents granted between 2001 and This rate is much higher than the observed in the United States, where only 3.6% of all utility patents have been granted to universities (according to USPTO own statistics). The meaning of these rates is confusing: Are the universities in Puerto Rico especially active in patent generation? In fact, it seems to be the opposite. Patents are the result of inventions developed in R&D activities; therefore, it could be expected that larger investments in R&D activities should lead to larger amounts of inventions, and finally of patents granted. But if we compare the investments in R&D activities of Puerto Rican universities and the number of patents granted with those of the United States universities, local universities don t seem to be very effective. Investments in academic R&D in Puerto Rico reach an 10

11 Patents per year, Puerto Rico Patents per year, Estados Unidos average of $52.1 million per patent granted (based on a five year period analysis: ), while in the United States the rate is $11 million per patent granted. If local universities and academic researchers are responsible of 12.8% of all patents granted in Puerto Rico, it is probably because patenting is not that usual among private business and individuals in Puerto Rico. As the following figure shows, the number of patents granted in Puerto Rico (this includes academic and non-academic patents) has a long-term growth trend, but not as high as in the United States. In fact, the growth trend in the number of patents in Puerto Rico seems to follow an arithmetic function, while in the United States looks more as an exponential function. This is an important fact to understand the context of academic innovations in Puerto Rico: private companies and individuals in Puerto Rico don t seem to be as engaged in an innovation culture as in the United States or other countries. Both from a cultural and economic perspectives, a more proactive approach to the commercialization of innovations is still to be developed in Puerto Rico Figure 2 - Patents granted per year in Puerto Rico and the United States, Puerto Rico Estados Unidos Source of data: United States Patent and Trademark Office (USPTO) 160, , , ,000 80,000 60,000 40,000 20,000 0 It also must be noted that the economy of Puerto Rico has been in a long recession period that already last 8 years and the number of local companies has declined accordingly. Most industrial and services sectors are in process of structural change. In sum, academic R&D activities and patents applications from academic researchers in Puerto Rico take place in a local context of a staggering economy but in a process of structural change, of slow patent activity from local actors but a relatively intense R&D activity from multinational companies. Have the academic researchers found opportunities to commercialize their innovations in this context? The information gathered in the interviews has been our primary source of information to answer this question. The Offices of Technology Transfer (OTTs) from the universities are perceived by interviewees of all groups as the main responsible for the commercialization of academic innovations, through patent licensing. It is expected that earnings from licensing will be 11

12 distributed between the academic inventor and his laboratory, and the corresponding university administrative office, as specified in the universities norms and regulations. But the licensing activity seems to be very low or absent in the universities of Puerto Rico. No specific number could be obtained from official sources, although the website of the University of Puerto Rico identifies seven patents that have been or are in process of being licensed. In any case, none of the academic researchers interviewed could identify any researcher or laboratory that has received earnings from licenses. Business managers and venture capitalists interviewed express another aspect of this issue. From their perspective, the patent portfolio of the University of Puerto Rico has little value, due to two factors: they understand that most of the academic inventions patented are far from being commercially feasible, and they have the perception that the university s bureaucracy makes it difficult to reach commercial agreements. But the scarce licensing activity observed doesn t mean that the academic inventions cannot reach the markets. In fact, 16% of the academic researchers interviewed in this survey could name specific companies (multinational or foreign companies) that have already developed commercial applications of their inventions, and even provide evidence of this, although as it was previously said, neither them nor their laboratories have received funds from these companies. It seems that private companies have gone around or could avoid the process of licensing the intellectual property of these inventions using different mechanisms. For example, the patent granted by USPTO doesn t provide similar protection in other countries and the product can be manufactured in China or Europe. In other cases, the academic researcher was unaware or misguided about the information that could be released in each stage of the application process, and has made a public disclosure of too many details of his invention in academic conferences or publications before the patent protection was properly granted. There are also cases in which companies have used inventions with the consent of the academic researcher, as part of a wider collaboration that benefits his academic research projects. No matter the cause, this situation leads us to conclude that local academic researchers generate innovations that can reach the markets, and in fact they already have been commercialized. Interviewees could also name specific companies, including multinational companies, that they say have approached the University of Puerto Rico in the past, interested in specific inventions or patents, but no agreement was reached or the outcomes of this approaches are confusing for the academic researchers. Adding to that, some academic researchers understand that there has been mismanagement of patent application processes by the respective OTT. In general terms, institutional factors have been often mentioned as hurdles for the collaboration with private companies who express interest in an innovation. On the other hand, 40% of the academic researchers interviewed with patents granted indicated that they have registered their own corporations at the Puerto Rico Department of State or are planning to do that in the short term. Most of the times their 12

13 intention in the short term is to apply for funds to SBIR or STTR federal programs 4, but it is usually enough to envision the building of a spin-off company to develop and sell commercial applications of their innovations. This finding and the growth in the number of patents granted to academic researchers are the best evidence that these researchers are increasingly considering the commercial aspects of their innovative activities. Anyhow, the number of academic spin-offs in Puerto Rico that are already doing business is low. We could identify six companies that would match the definition of spin-off previously explained, although one of them is in a very early stage and another one operates as a non-profit and from the university. Probably there are other companies registered by academic researchers, professors or students, focusing on the development of commercial applications of innovations, but they were not mentioned by any interviewee nor identified in our searches in companies databases or specialized publications. Some relevant factors that contributed to the development of this six spin-off companies were identified. First of all, support services and business promotion initiatives have been very important in most of the cases. Three spin-offs are located in a business incubator of the University of Puerto Rico and two of them have received wide support from Innovación Colegial, a two year project launched in 2011 to promote entrepreneurial activities in the academic community of the Mayagüez Campus of the University of Puerto Rico. Adding to that, two of them have participated and won prices in competitions of business ideas organized by local non-profit organizations, and at least three of them have received grants from the Puerto Rico Science and Technology Trust, a local government agency. All the spin-offs are involved in the commercialization of innovations born in academic projects, but surprisingly just two of the six spin-offs under analysis were founded after a patent was granted, and in one of those two cases the university is not assignee of the patent, it was granted only to the academic researcher. Patents are a component of the business model of almost all these spin-offs, but they apply for patents or are looking forward to do it in the short term to protect new developments of their original invention or new inventions obtained within the business activities. Another important factor, common to at least three of the spin-offs, is that their founders had previous experience launching business initiatives. Finally, a very relevant factor related to the subject of this paper: four of the six spin-offs have developed strong collaborations with foreign start-up companies or multinational corporations, and three of them have joint-ventures with them. This collaborations stem from the participation of their founders in international academic and business circuits, and the focus of the spin-off in global markets. Only in one case the spin-off is linked to R&D activities of multinational companies in Puerto Rico. In other words, local academic spin-off companies are natural participants of the global markets and interact with international peers, and they approach the global markets through their own channels. 4 SBIR: Small Business Innovation Research; STTR: Small Business Technology Transfer. 13

14 Spin-off founders consider themselves pioneers. Other interviewees emphasize the difficulties that have faced academic researchers with entrepreneurial initiatives, especially those who work for the University of Puerto Rico. Apart from cultural factors, commercialization of innovations by the academic researchers themselves has been hindered by the norms concerning conflict of interest and the regulatory framework of the University of Puerto Rico. Although the university and other local authorities have addressed this issue recently, most of the interviewees could name specific cases negatively affected by deficiencies in the regulatory framework or delays in clarifying the interpretation of norms. There are also academic researchers who pursue the commercialization of their innovations through different channels. Instead of founding their own company, they look forward to develop collaborations with existing companies. In fact, interviewees identified collaborations with private companies in different areas, especially among academic researchers of private universities, as part of their teaching activities, regular courses and internship programs. Knowledge transfer activities that don t involve the transfer of intellectual property were also mentioned (these are sometimes referred as informal mechanisms of knowledge transfer). Most of the times these knowledge transfer and research for private companies occur outside the university, but they also happen through schemes such as the University of Puerto Rico s Intramural Practice Plan. Among the academic researchers and professors interviewed, 40% provide or have provided consultancy services or assessment to private companies or other entities, 20% have been hired by a private company to conduct a research project, 16% have co-authored with private-sector professionals articles in scientific journals or conferences in a congress, and 8% have done research projects together with private-sector professionals. Adding to that, 48% have collaborated with private companies in professional training (they have been resources in seminars or courses for scientific or technical private-sector professionals, or they have organized formal internships in private companies for their students); and 56% have maintained informal contacts with private companies to explore possible collaborations. What all these numbers show is that at least half of the academic researchers who have been active in the development of innovations as part of their academic research projects (the selection criteria for our survey), have also been quite active in approaching private companies and looking for collaborations. But these collaborations don t seem to erode their sense of belonging to the academia or their academic interests. The publication of articles in peer-reviewed journals is considered by them as the most important form of knowledge transfer, and they publish an average of 2.4 articles per year. But above all, when asked about what makes a research project successful, 64% of the academic researchers interviewed link success to publication in peer-reviewed journals. Even when nine of every ten academic researchers interviewed have at least applied for at least one patent, only 8% visualized patents as evidence of success. 14

15 Among the factors hindering knowledge transfer activities, the most mentioned by the academic researchers interviewed were the incentives system and the lack of support from the university, especially in the public university (University of Puerto Rico). Lack of time was the factor mentioned most often by researchers of private universities. Students, deans, directors of research centers and directors of business promotion programs at the University of Puerto Rico also included among the obstacles that they identified the lack of support of the university to knowledge transfer activities. By lack of support the interviewees usually refer to a passive attitude of the university towards this issue, but not to a boycott. Other factors mentioned by deans, directors of research centers and directors of business promotion programs were the lack of access to external funds, the absence of mentors, lack of knowledge or training on business administration or on development of innovations, a recruitment process that is not focused on this type of researchers, low wages of researchers when comparing to the United States, universities bureaucracy and its lack of flexibility in negotiations with private companies, and finally the type of manufacturing industries and declining business R&D activities. Conclusions Puerto Rico is host to a significant amount of R&D investments of multinational corporations. The proportion of funds provided by multinational corporations to R&D activities in relation to all R&D expenses in Puerto Rico, is among the highest in the world. In principle, these investments should benefit the local economy and have important spill-over effects including a global business perspective. Nevertheless, international experts warn about a potentially opposite result with the possible development of enclaves of foreign R&D, with little impact on local economic actors. In this work we assessed the impact of such investments by focusing on one specific local actor: academic researchers that develop innovations. They are key players of local R&D activities, and their activities and perceptions should reflect the cultural and economic transformations of the local sectors involved in the commercialization of innovations. Academic R&D in Puerto Rico is primarily funded by federal agencies, as it happens also in the United States. With the purpose of easing the way to the market for the innovations developed with these funds, the U.S. Congress approved in 1980 the Bayh-Dole Act. The universities of Puerto Rico are late-comers to this scenario, the first patent to the public university (University of Puerto Rico) was granted in 1991 and the private universities didn t have any patent assigned until the 2000s. As a case in point, the Office of Intellectual Property and Commercialization of the University of Puerto Rico, the first OTT in a local university, was established in

16 In general terms, the commercial dimension of the innovation activity is present in the minds of the academic researchers with innovations, even if they don t actively pursue this commercialization. We could identify different types of collaborations with private companies, and two of every five academic researchers with a patent granted have registered their own corporations. There are at least six spin-off companies related to academic research. They are small companies, with only a few employees, but in most cases are focused on global markets. Moreover, their business model is based on collaborations and joint ventures with foreign start-ups or multinational companies although only one of them actively collaborates with R&D efforts of subsidiaries of multinational companies in Puerto Rico. R&D investments of multinational companies at the present time rarely contribute to accelerate the generation of innovations in local universities or their commercialization, and in this sense, the spill-over effects are not sensible, at least to this sector. As an alternate route local actors are becoming part of the global markets, using their contacts on academic or professional networks to find international collaborators. Hopefully, this is only a conclusion in this specific stage of the process. In fact, both the academic researchers and the managers of subsidiaries or local entrepreneurs speak of mutually beneficial opportunities for collaborations, but specific efforts and appropriate policies must be addressed to close the existing gap. At the university level, business promotion programs must be strengthened and new programs, inside and outside the academia, might help to improve the entrepreneurial abilities of the academic community and to promote the commercialization of academic innovations. Also, its seems reasonable to conclude based on researchers accounts reported through the survey conducted that the present model centered on the OTT must be revised to become more centered on the academic researcher as the key actor for the commercialization of his innovation, as suggested by Litan et al (2007) and Kenney and Patton (2009). From our perspective, new strategies must be addressed to develop medium and long term collaborations between academia and private business. Knowledge transfer is not unidirectional, instead knowledge can flow from universities to private companies and vice versa. On the other hand, collaboration between the innovator and the company who brings an innovation to the market is crucial when tacit new knowledge or sticky information are relevant for the implementation of an innovative process or the manufacturing of a new product. Patents and other forms of intellectual property should not be goals by themselves, but only vehicles to attract collaborations and bring beneficial partnerships to universities. Even when thinking on R&D investments by multinational companies, patents and effectiveness of patent rights in emerging markets seem to be no longer such an important factor (Kennedy, 2013). The experience of local spin-offs show that collaboration with private companies can be developed before any patent is granted, and the business processes will show new opportunities for innovation to the academic researchers. 16

17 Findings suggest that policies that bring together local actors and multinational companies with R&D investments in Puerto Rico should be reinforced, in order to multiply the spill-over effects. A well-functioning ecosystem around innovation must include strong collaborations and multiple links between academia and private companies of all kinds, and among other things must produce the emergence of academic spin-off companies built to bring innovations of academic researchers to the market. From a theoretical perspective, policy should also promote the emergence of local initiatives to commercialize innovations, because these take more advantage of the sticky characteristics of information and new knowledge. The findings of this work also suggest that efforts must be made to strengthen the support system for academic researchers who want to build joint ventures or their own companies to commercialize their innovations; also, the institutional structure and protocols should be updated. If local actors find their own ways to reach global markets, the impact on the local economy could be exponentially expanded. 17