Privatizing the intellectual commons: Universities and the commercialization of biotechnology Nicholas S. Argyres and Julia Porter Liebeskind Journal of Economic Behavior & Organization (1998) Eva Herbolzheimer

Motivation and Background Emergence of Biotech with very different aspects of value of basic research, in contrast with traditional ‘intellectual commons’ produced by universities Organizational boundaries  Challenge for universities to engage in commercializing activities Social-contractual commitment to create ‘intellectual commons’ vs incentives and contracting policies for biotechnology Income from technology transfer from universities to industry have not had a significant impact on budgets

Mission and Standards of Universities ‘Open science’: disclosure, replication (versus secrecy in firms, competitive advantage) University governance: incentives for academic research, self-governance, autonomy, separation of hiring and promotion from budgetary processes and prohibitions to enter into private contracts. Enforcement by external parties (e.g., alumni and donors), prestige

The case of biotech Highly patentable Pressures to re-contract for property rights because of relative prices and preferences Regulatory changes  Who owns rights to IP funded by federal sources? Shift in national priorities: Universities to help USA with competitiveness (1970s)

Adaptive Efforts: Privatization of IP Task of establishing, allocating and administering IP rights in biotechnology was significant deviation from universities' historic mission Privatization (patenting and licensing): concern about erosion of standards of open science, decisions by administrators, how well can knowledge be transferred to benefit the public? Ownership: faculty ownership  conflict of interest, standard agency problem Licensing: ‘bench rights’ instead of exclusive licensing, restrictions to firms’ sponsorships, narrowly-based rights (so firms can’t ‘choke-off’ research) Royalties as incentive. Effects of envy and inequities

Adaptive Efforts: Commercialization New organizational arrangement: technology transfer offices, responsible for patenting and marketing of inventions (MIT, Stanford…), long-term contracts with better incentives, but also criticism (introducing commercial goals) University-owned ventures: potential envy problems, problem of judging tenure-cases University-based research institutes: selective intervention, privileged access to information (e.g. Whitehead Institute), only minor organizational differentiation

Reactive Adaptation: Controlling Faculty Behavior More vigorous organizational standards Conflicts of interest due to faculty members holding management positions / equity ownership in firms that also fund their research Faculty consulting that diverts attention from teaching and research, disclosure rules

Conclusion and Discussion Historical mission of U can create barriers to the commercialization of technologies Universities are discrete governance structures, difficult to support multiple social goals simultaneously, institutional mechanisms have been designed to develop and protect the intellectual commons, not to exploit them. Discussion: As Universities get more dependent on third-party funding, what can be done to prevent conflicts of interest or unethical behavior? (e.g., Wei-Hock Soon funding controversy).