Praise for Selling Out

According to a study released earlier this week, more scientists are commercializing their work that previous measures indicated. In a study funded by the pro-entrepreneurship Kauffman Foundation and performed at the University of Indiana, researchers found that a significant number of scientists funded by the National Cancer Institute (NCI) have founded start-up biotech companies, an outcome not usually measured in assessments of commercialization of university research.

The official line from the Kauffman Foundation is that this is a good thing, as laid out in the study’s web summary:

The study by Indiana University researchers reveals that cancer scientists, in addition to commercializing their research through licensing, are starting new businesses, which largely go unrecorded by existing innovation commercialization tracking systems. In fact, more than one in four patenting National Cancer Institute (NCI) scientists within the researchers’ dataset has started a new firm. These scientist-launched start-ups are the sleeping giant of university commercialization.

“This study reinforces the critical role universities play in a country’s national innovation system, not just in the training of new scientists and accessing the best talent, but in the ease of developing and licensing technology and as a launching ground for new businesses,” said Carl Schramm, president and CEO of the Kauffman Foundation….

…The economic implications of the study of approximately 1,600 NCI-funded research scientists underscores that the role universities play in the nation's innovation economy is much greater than currently understood. The study is particularly timely in relation to current federal efforts to shift funding from basic research to applied commercialization. As a result, many universities are scrambling to enhance their innovation transfer process or risk research funding cutbacks.

At present, only 20 percent of all basic research in the United States is performed by the private sector. Colleges and universities account for 60 percent of such research, with government accounting for the remaining amounts. Washington is the largest funder of basic research, paying for 57 percent of the total.

“Federal investment in university research has a much bigger impact on the nation’s economy than previously thought,” said Lesa Mitchell, vice president of Advancing Innovation at the Kauffman Foundation. “We are seeing much more commercialization coming out of universities that has not been measured.”

The report itself focuses mostly on determining the factors that lead to the commercialization of research findings and stresses the need to measure commercialization more broadly and comprehensively. The web summary focuses disproportionately on what are perceived as the broader implications of this study, namely that government funding of basic science directly benefits the economy more than originally thought, an idea that not surprisingly became the focus of the April 10th New York Times article on the study:

A new study of university scientists who received federal financing from the National Cancer Institute found that they generated patents at a rapid pace and started companies in surprisingly high numbers.

The study, the authors say, suggests that the commercial payoff for the government's support for basic research and development in the life sciences is greater than previously thought.

The paper, to be published today, comes at a time when politicians and policy makers in the United States and Europe are questioning the value of government funds invested in fundamental research. In theory, those investments should be a wise use of taxpayers' money, according to many economists, who assert that innovation must be an engine of economic growth and job creation in developed nations.

The new study, by economists at Indiana University and the Max Planck Institute of Economics in Germany, is an attempt to analyze the commercial activity of university scientists in a field where government financing of basic research has been quite generous.

Federal financing of the National Institutes of Health has not grown in the last couple of years, but it increased by two and a half times in the decade before 2005. The National Cancer Institute is the largest of the N.I.H. units, with an annual budget of $4.8 billion, and much of its spending goes to support university research.

As an added twist, The New York Times discusses the findings in the context of the stagnating budget of the National Institutes of Health (NIH). This is sensible, because the findings do demonstrate a clear economic benefit to funding basic science, although the other benefits—new treatments for medical conditions, expansion of scientific knowledge, contributing to science education—are arguably more important and more central to the mission of basic research.

Although the Times article gives lip service to the fairly obvious problems with economic-driven basic research, it essentially brushes them off instead of exploring them fully:

The entrepreneurial zeal of academics also raises concerns, like whether the direction of research is being overly influenced by the marketplace. "Are basic scientific questions being neglected because there isn't a quick path to commercialization?" said Toby E. Stuart, a professor at the Columbia Graduate School of Business. "No one really knows the answer to that question."

There is also the issue of elite scientists enriching themselves from research financed by taxpayers' dollars. But historically, that has not been a policy concern. Instead, steps have been taken to encourage federally financed research to move out of universities and into the marketplace — notably, the Bayh-Dole Act of 1980, which allowed universities to hold the patents on federally financed research and to license that intellectual property to industry.

"At the end of the day, without commercialization, these ideas don't find their way to people," said Anna D. Barker, deputy director of the National Cancer Institute. "Increasingly, we have scientific entrepreneurs. And that's a good thing. What we have to do is intelligently balance two considerations — to smooth the path to commercialization, but also guard against conflicts of interest that could undermine science."

These concerns, which are not addressed in the Kauffman Foundation report, deserve a more in-depth investigation. The idea of projects not seen as likely to yield profits in a timely manner going unfunded is disturbing on many levels. Already, many of the greatest threats to health in the developing world, which do not appear to present particularly profitable solutions, already do not get the attention they merit from the pharmaceutical industry, and federally-funded basic research is therefore likely to be a necessary precursor to the development of new treatments for these conditions.

On a deeper level, restricting the scope of science could have the effect of making the field less interesting and attractive to promising young students. Most importantly, it is often difficult to predict what scientific questions will turn out to be truly important in the long run, and science has traditionally functioned well as a broad net, catching ideas and findings that initially don’t seem important but only display their significance later, sometimes even causing paradigm shifts or spurring completely new fields of investigation.

Interestingly, this latest study also lends weight to a point I have stressed before by demonstrating a very tangible example of indirect subsidization of the pharmaceutical and biotech industries. By funding basic research, which forms the starting point for the work performed in these industries and—as demonstrated by this study—is sometimes translated directly into new start-up companies, the federal government in effect provides a large amount of support to biotech and pharmaceutical companies. I’m not saying that this is a bad thing, but rather that it’s important to keep this idea in mind in terms of determining what level of access the public deserves to these services in return for its financial support.

Although the Kauffmann Foundation report and the subsequent press coverage could have gone to greater lengths to explore the negative impacts of focusing on the profitability of science, the study should in the end be seen as a positive force for influencing a broader base of support for basic research. As the growth of federal research funding has slowed so dramatically in recent years, and as federal funding for embryonic stem cell research remains banned—two factors pushing the U.S. worryingly close to losing it edge in global science—the mounting evidence that demonstrates the multifaceted benefits of funding basic science should be embraced.