Accelerating the Economic Impact of Basic Research Lynne G. Zucker & Michael R. Darby, UCLA & NBER

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1 Accelerating the Economic Impact of Basic Research Lynne G. Zucker & Michael R. Darby, UCLA & NBER Making the Best Use of Academic Knowledge in Innovation Systems, AAAS, Chicago IL, February 15, 2014 NIH Grants, NSF Grants, and Firm Patents by US Regions, Lynne G. Zucker and Michael R. Darby L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 1

2 Start by Looking at Bottom Line: Economic Success Patent & Publish Private Firm Financial Success Venture capital Fig 1 Going public (IPO) Fig 2 Patents alone bigger impact than articles alone 1 or more article (non-patent reference): Jumps from 13% in 1976 to 61% in Fig 3 But 1 or more patent citations highly stable From 97% in 1976 to 99% in 2012 Fig 4 L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 2

3 Fig. 1 Percentage of Private Firms with No Prior Venture Capital Funding Receiving First Venture Capital Round in Year 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% High-Tech Firms Receiving First Venture Capital Round by Patenting & Publishing as Percentage of Private Firms with Same Status and No Prior Venture Capital Both Published and Patented All Private High-Tech Firms with No VC Only Patented Only Published Neither Published Nor Patented All Private High-Tech Firms With No Venture Capital Funding High-Tech Firms That Have Only Published High-Tech Firms That Have Neither Published nor Patented High-Tech Firms That Have Both Published and Patented High-Tech Firms That Have Only Patented L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 3

4 Fig. 2 Percentage of Private Firms Making Initial Public Offering in Year 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% US High-Tech Firms Making Initial Public Offering (IPO) by Patenting & Publishing as Percentage of Private Firms with Same Status Both Published and Patented All Private High-Tech Firms Only Patented Only Published Neither Published Nor Patented All Private High-Tech Firms High-Tech Firms That Have Both Published and Patented High-Tech Firms That Have Only Patented High-Tech Firms That Have Only Published High-Tech Firms That Have Neither Published nor Patented L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 4

5 Fig. 3 80% % Patents with 1 or More Non-Patent References, By S&T Area, Percentage of Patents with 1 or More Non-Patent References 70% 60% 50% 40% 30% 20% 10% Semiconductors All S&E Nano Bio/Chem/Med Other Science Comp & IT 0% Other Engineering L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 5

6 Fig % % Patents with 1 or More Patent References, By S&T Area, % Comp & IT Other Engineering Percentage of Patents with 1 or More Patent References 98% 96% 94% 92% 90% Other Science Bio/Chem/Med Semiconductors All S&E Nano 88% 86% L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 6

7 Patent and Publish Yields Higher Commercial Entry In New S&T Area Both private & public companies enter Nascent field, here nanobiotechnology Risk reduction thru skill acquisition both: Financial success & growth of companies that publish Gradual wide adoption of strategy to publish For entering new S&T area Having both patents and articles has a much bigger impact than either alone L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 7

8 Table 1: Firms with both science articles and patents are far more likely to enter nascent scientific field How many % of firms that # of firms enter nanobio? enter nanobio Firm has.. Article Only % Patent Only % Both % Firms that have both scientific research and patenting activities are far more likely to enter nascent field such as nano-biotechnology L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 8

9 Fig. 5: Firms with both science articles and patents are far more likely to enter nascent scientific field Kaplan-Meier survival estimates Analysis Time Article Only Article & Patent Patent Only Kaplan-Meier estimates show how the subjects are susceptible to failure here nanobio entry during analysis time ( ) L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 9

10 Fig. 6: Firms that ever worked with Star scientists are more likely to enter nascent scientific field Kaplan-Meier survival estimates Analysis Time Firm with no Star Scientist Firm ever worked with Star Scientist Kaplan-Meier estimates show how the subjects are susceptible to failure here nanobio entry during analysis time ( ) L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 10

11 Role of star scientist in firm entry into new S&T area Existing firm work with STAR enter nanobio Fig 6 Stars are most likely to be working in bio, nano, semi Stars in same geo area effects firm entry in 6 S&T areas: Nanotech Semiconductors Bio/chem/medicine Other science Computing/IT Other engineering Entry is first article or patent by that firm in a given region/nation and S&T area Control for high-impact articles, university articles, university patenting, total employment, average wages (US) Regression results (Zucker & Darby 2014) summarized in Fig. 7 Poisson with robust standard errors & location fixed effects Appendix: detailed regression examples & star scientist information L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 11

12 Fig. 7: Star Scientists Drive Firm Entry into S&T Relative Probabilities Varying # Active Stars, All Other Variables = Mean Values Active Stars = 1 Active Stars = Mean Active Stars = Mean + 1 Standard Deviation Active Stars = Mean + 2 Standard Deviations 3 Probaility of Firm Entry Relative to That for All Variables = Mean Values Estimates based on 179 U.S. functional economic regions Estimates based on top-24 S&T nations excluding U.S.A L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 12

13 University Involvement in Commercialization: Effects on Success and Collateral Damage Universities work more with firms post Bayh-Dole Diverts them from publishing scientists run 2 labs Commercial vs. scientifically important topics win Higher secrecy, less contributed to common pool Evidence for virtuous circles work in progress University citation-weighted output increases with: Increases in university patenting publications up Fig 8 Increases in co-publishing with firms patents up Fig 9 L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 13

14 Fig. 8: Citation-Weighted Articles per Doctoral Degree Awarded in Universities that Have Patented vs. Universities that Have Not Patented 120 Number of Citation-Weighted Articles Per Doctoral Degree Awarded Universities that Have Patented Universities that Have Not Patented Have Patented No Patent Yet L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 14

15 Fig Citation-Weighted Patents per Doctoral Degree Awarded in Universities that Have Co-Published with a Firm vs. Universities that Have Not Co-Published Number of Citation-Weighted Patents Per Doctoral Degree Awarded Universities that Have Published with a Firm Universities that Have Not Published with a Firm Have Co-Published with a Firm Have Not Co-Published with a Firm Yet L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 15

16 Enabling Resources: Research on Economic Impact What enables detailed & comprehensive studies? Current and planned data releases Micro-data on individual firms & universities can come from large data bases: COMETSandSTARS COMETS, on-line at kauffman.org/comets Patents, NSF & NIH grants, U.S. University data that includes integrated IPEDS/HEGIS files Nanobank.org with articles, patents & grants Write intended use to No.com users - Thomson-Reuters limited use L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 16

17 Fig. 10 For use now: www1.kauffman.org/comets/ Architecture and Contents of Kauffman.org/COMETS Government Policies Government Grants* NSF, NIH, SBIR, STTR Government Labs* Research Universities* Nonprofit Institutions* IPEDS/HEGIS Ph.D. Dissertations Proquest links Discoveries new embodied knowledge New Firms* 1st appearance in S&T area** ticker/cusip, data from web Thomson Reuters Peer-reviewed articles codified knowledge Thomson Reuters [ISI] Public article databases Pre-existing Firms* 1st appearance in S&T area** ticker/cusip, data from web Thomson Reuters L.G. Zucker & M.R. Darby- Accelerating the Economic Impact of Basic Research Patents codified knowledge US Utility Patents* and Patent Applications Green = available now Red = coming in future versions Blue = COMETS & STARS only * Organization ID, matched across data clusters/types. Person name as it appears in data - inventor, principal investigator, author (NanoBank.org). ** First appearance in the patent or grant databases identifies birth in a specific S&T area. 17

18 References Arrow, Kenneth J., "Economic Welfare and the Allocation of Resources for Invention," in Richard R. Nelson, ed., The Rate and Direction of Inventive Activity: Economic and Social Factors, N.B.E.R. Special Conference Series vol. 13, Princeton, NJ: Princeton University Press, 1962 Azoulay, Pierre, Joshua Graff Zivin, and Jialan Wang, Superstar Extinction, Quarterly Journal of Economics, May 2010, 125: Jaffe, Adam B., Real Effects of Academic Research, American Economic Review, December 1989, 79: Jensen, Richard, and Marie Thursby, Proofs and Prototypes for Sale: The Tale of University Licensing, American Economic Review, March 2001, 91(1): Jones, Charles I., R&D-Based Models of Economic Growth, Journal of Political Economy, August 1995, 103(4): Lach, Saul, and Mark Schankerman, Incentives and Invention in Universities, RAND Journal of Economics, 2008, 39(2): Lerner, Joshua, Venture Capitalists and the Oversight of Private Firms, Journal of Finance, March 1995, 50(1): Nelson, Richard R., "The Economics of Invention: A Survey of the Literature," Journal of Business, April 1959, 32(2): Romer, Paul M., Endogenous Technological Change, Journal of Political Economy, 1990, 98 (5, Part 2-- Supplement): S71-S102 Solow, Robert M., "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics, February 1956, 70: U.K. Patent Office, PETER CHAMBERLEN or CHAMBERLAN, from Patent Office History material, downloaded July 18, 2010, from: Zucker, Lynne G., Michael R. Darby, and Marilynn B. Brewer, Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises, American Economic Review, March 1998, 88: Zucker, Lynne G. and Michael R. Darby, Movement of Star Scientists and Engineers and High Tech Firm Entry, Annals of Economics and Statistics, issue no , in press L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 18

19 Appendix L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 19

20 Generalizing Star Scientists 5,401 stars in ISIHighlyCited.com SM Top 250 individual researchers in terms of 20-year-rollingwindow citation counts in 19 of which are science and engineering fields Publications to locate them Problem: over third of their ISI CVs have 10 articles Person matching for stars now good & being tested Stars restricted to the first 1,838 (34%) of the ISI Highly Cited Stars positive & significant for every industry for US and 25-country results Suggests using a higher hurdle for stars L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 20

21 Table 2A. Firm Entry into New Technologies Poisson Regressions with Location-Specific Fixed Effects and Explanatory Variables Lagged One Year U.S. Functional Economic Regions, Science and Technology Areas of Firm Entry Explanatory Variables Bio/Chem/Med Computing/IT Nanotechnology Semiconductors Other Sciences Other Engineering Star Scientists & Engineers Active in Region/ *** * *** ** Country in Same S&T Area as Entry (0.0015) (0.006) (0.0167) (0.0041) (0.005) (0.0038) High Impact Articles Knowledge Stock ^ ^ * *** in Same S&T Area as Entry (hundreds) (0.058) (0.3476) (1.0847) (0.2164) (0.1006) (0.3004) University Articles Knowledge Stock * *** *** ^ *** in Same S&T Area as Entry (hundreds) (0.0009) (0.0132) (0.0419) (0.0039) (0.0085) (0.0187) University Patents Knowledge Stock ** ^ *** * in Same S&T Area as Entry (hundreds) (0.0422) (0.455) (0.1443) (0.4744) (0.1302) (0.0838) Total Employment in Region/Country *** * * (millions of persons) (0.0614) (0.0984) (0.1362) (0.057) (0.0491) (0.0732) Average Wage per Job in Region *** *** * * (thousands of year 2000 dollars) (0.0078) (0.0139) (0.0163) (0.0076) (0.0076) (0.0075) Dummy = 1 in 2003, else *** *** *** *** *** *** (0.0601) (0.1187) (0.1165) (0.078) (0.0685) (0.0688) Dummy = 1 in 2004, else *** *** *** *** *** *** (0.0748) (0.119) (0.1978) (0.102) (0.094) (0.0763) Pseudo R² Notes: Robust standard errors in parentheses below coefficient estimates. N = Significance levels: ^ 0.10, * 0.05, ** 0.01, *** The science and engineering areas are Biology/Chemistry/Medicine; Computing & Information Technology; Semiconductors, Integrated Circuits & Superconductors; Nanoscale Science & Technology; Other Sciences; and Other Engineering. Nanoscale Science & Technology articles & patents as defined for NanoBank.org are removed from the other five areas into which they would otherwise be classified. 2. Knowledge stocks are computed as a perpetual inventory of the indicated series with 20% depreciation applied to the prior year's stock. L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 21

22 Table 4A. Firm Entry into New Technologies - Poisson Regressions with Location-Specific Fixed Effects and Explanatory Variables Lagged One Year Top-24 Non-U.S. Science & Technology Countries, Science and Technology Areas of Firm Entry Explanatory Variables Bio/Chem/Med Computing/IT Nanotechnology Semiconductors Other Sciences Other Engineering Star Scientists & Engineers Active in Region/ *** *** ** *** Country in Same S&T Area as Entry (0.0012) (0.0089) (0.0176) (0.0055) (0.0064) (0.0112) High Impact Articles Knowledge Stock ^ *** in Same S&T Area as Entry (hundreds) (0.0831) (0.4236) (0.6711) (0.2114) (0.2007) (0.3278) University Articles Knowledge Stock *** *** *** in Same S&T Area as Entry (hundreds) (0.0002) (0.004) (0.0048) (0.0007) (0.0051) (0.0056) University Patents Knowledge Stock *** * ^ * in Same S&T Area as Entry (hundreds) (0.0652) (1.1518) (0.2452) (1.3833) (0.3549) (0.2177) Total Employment in Region/Country 0.012*** *** ** *** *** *** (millions of persons) (0.002) (0.0036) (0.0149) (0.0025) (0.0033) (0.0031) Dummy = 1 in 2003, else * *** *** ** *** (0.1091) (0.111) (0.169) (0.1117) (0.1672) (0.1227) Dummy = 1 in 2004, else *** * *** ^ *** *** (0.1299) (0.2909) (0.235) (0.1171) (0.2063) (0.1374) Pseudo R² Notes: Robust standard errors in parentheses below coefficient estimates. N = 552. Significance levels: ^ 0.10, * 0.05, ** 0.01, *** The science and engineering areas are Biology/Chemistry/Medicine; Computing & Information Technology; Semiconductors, Integrated Circuits & Superconductors; Nanoscale Science & Technology; Other Sciences; and Other Engineering. Nanoscale Science & Technology articles & patents as defined for NanoBank.org are removed from the other five areas into which they would otherwise be classified. 2. Knowledge stocks are computed as a perpetual inventory of the indicated series with 20% depreciation applied to the prior year's stock. L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 22

23 RobustnessChecks Entry was defined as first article or patent in region/nation and S&T area by that firm Define entry from directories & web search: gives substantially similar results for nanotechnology Eliminated entry of any firm which was found to enter due a star article or patent Results essentially unchanged from original L.G. Zucker & M.R. Darby-Accelerating the Economic Impact of Basic Research 23