Culture clash

UK universities are failing to capitalize on the creation of spin-outs, according to research by Mike Wright of Nottingham University Business School. In recent years, universities have spun out increasing numbers of companies, but too few succeed. “Universities are tending to focus on creating businesses rather than creating wealth,” says Wright. “The proportion of spin-out companies that succeed is tiny.”

Wright questioned 12 university spin-outs and 98 institutions on their spin-out record. His research indicates five main impediments to successful spin-outs. The first, not surprisingly, is a lack of finance, particularly seed funding from universities. This could prove a tricky problem to tackle as universities typically view spin-outs as a way to bring in cash, rather than the converse. It may take a change in attitudes to persuade those in charge of the purse strings that you have to spend cash to make cash. The second hindering factor is the lack of time that researchers have to devote to spin-outs. A simple strategy would be to grant entrepreneurial academics a sabbatical from teaching and/or research. The availability of suitable space in science parks is also crucial to the success of spin-outs, providing market credibility as well as much needed resources and infrastructure. Coming surprisingly low down on the list is the lack of incentives and rewards. But this issue is now more pertinent in the UK, where tax law changed in 2003 to limit incentives to executives of new companies. Wright believes the most important factor in a spin-out's success is the personal commitment of those involved. Universities must reward entrepreneurial academics, with significant equity stakes in the spin-out for example, if they truly want to reap the benefits. Universities also need to have clear procedures if they don't want to become an impediment themselves.

Wright identifies a culture clash in universities. “Our research clearly indicates that successful spin-out activity is not about the quantity of ventures initiated, but the commitment shown by universities to achieving successful technology transfer outcomes,” he says. “At present there is a mismatch between the aims espoused and universities' abilities to deliver.”

There are examples of good practice in the UK, however. One innovative scheme has been employed by the University of Oxford's Department of Chemistry to raise capital for a new $110 million state-of-the-art building. In additional to government and benefactor contributions, the department received $36 million from the bank IP2IPO Ltd. (formerly Beeson Gregory) toward building costs in return for half of the university's equity in spin-offs from the department for 15 years. The partnership seems to have benefited both sides: the department now has a spanking new building and six new companies have been formed since the deal began.

The UK provides examples of both good and not so good practice in technology transfer in the university sector. It is a picture that may be familiar elsewhere. If done well, the technology generated by universities can be revolutionary, as Don Braben highlights on page 64 of this issue, but the opportunities can be easily missed if we get it wrong.