1 In Search of Performance Effects of (in)direct Industry Science Links Bruno Cassiman IESE Business School, Universidad de Navarra Reinhilde Veugelers European Commission (BEPA), K. U. Leuven and CEPR Pluvia Zuniga Katholieke Universiteit Leuven and OECD

2 1. INDUSTRY SCIENCE LINKS Growing science-industry connections:  University-industry collaboration (Darby and Zucker; 2001; Zucker et al, 2001; 2002);  Start-ups and university spin-offs and licensing (Jansen and Thursby, 2001; Thursby and Thursby, 2002);  Increased linkage to science in patents (Narin et al (1997); Branstetter and Ogura, 2005): Threefold increase in the no. of academic citations in industrial patents (USA) through the mid 1990s. 73% percent of the papers cited by industry patents are scientific, authored at academic, governmental, and other public institutions. How important is science to explain technological progress?

3 2. INNOVATION PERFORMANCE AND SCIENCE LINKAGES At the macro level:  Positive impact of public research on industrial innovation and economic growth; and geographical effects (Jaffe (1989) and Adams,1990; Acs, et al (1992) ). At the micro level:  Mansfield (1998): 5% of total sales in major firms in US could not have been developed in the absence of academic research. Others: Yale Survey and Carnegie Mellon Survey.  Henderson and Cockburn(1998): R&D productivity by pharmaceutical firms (international patents)  Star scientists associated to firm entry, location new product development; : Zucker et al (1998) and Zucker et al (2005): biotech and nanotech  Recruitment of university scientists increases research productivity: Kim et al (2005)  …

4 3. WHY WOULD SCIENCE LINKAGE MATTER FOR INNOVATING FIRMS? By providing a map for research and codified forms of problem solving science helps firms :  to avoid wasteful experimentation (Nelson; 1959; Evenson and Kislev, 1976)  Screening of information, overcome difficulties when working with coupling technologies (Fleming and Sorenson (2005)  Allow firms to better identify and absorb external knowledge, e.g. cutting edge; identify most promising technological opportunities (Gambardella, 1995; Henderson and Cockburn, 1998).  Internal Spillovers; cross-projects fertilization of basic knowledge (Cockburn and Henderson, 1994)

5 4. ARE PATENTS BASED ON SCIENCE MORE VALUABLE?  Past evidence on quality patenting by Universities:  Higher citation rates among patents from university labs: university patents tackle more fundamental problems/wider range of applications (Henderson et al, 199; Mowery and Ziedonis, 2002)  Inconclusive findings for private assignees  Higher citation rate for patents citing science in highly coupled technologies (Fleming and Sorenson; 2004)  No significant effect of scientific references to explain patent opposition (Markus and Harhoff, 2003; Reitzig, 2002; 2003) in European Patents.  High impact science negatively associated to highly cited patents (Gittelman and Kogut, 2003)

6 5. RESEARCH QUESTIONS  Does a direct science linkage imply more valuable patents?  Are scientific firms able to produce more valuable patents?  Empirical assessment of the contribution of science linkages -at the firm and invention- level in the quality of patents.

7 6. DATA AND METHODS (1) Data: 1186 EPO patents for 79 Flemish firms (period ) CIS-3 firm-level innovation activity ISI publication data i) the (indirect) assignee’s-scientific linkages: Dummy for firms engaged in scientific publication and number of publications and co-publications with universities and other public institutions Dummy for Collaboration with universities and federal research centers (CIS) ii) the (direct) invention-specific linkages: the scientific non-patent references cited by the patent (ISI-Web of Knowledge database). Methods:  count models on forward citation (negative binomial versus zero inflated negative binomial) and probit/Tobit models on generality and geographical impact of forward citations

8 7. DATA AND METHODS (2) Dependent Variables:  i) the number of forward citations received for each patent since the year of application (e.g. Harhorff et al, 1999; Reitzig, 2004) The number of citations a patent receives has been associated with social value (Trajtenberg, 1990); the economic value of inventions and patent opposition (Lanjouw and Schankerman, 1999; Harhoff et al, 1999). Forward citations in EPO patents and EP-PCT (equivalents)  ii) generality of forward citations Herfindahl index on forward citations across IPC classes (4 digit)  iii) geographical dispersion of forward citations Herfindahl index on forward citations across countries  iv) forward citation lag Median and shortest forward lag (number of years)

9 8. CONTROL VARIABLES  Patent Scope: no. of classes and sub classes (IPC 4 and 8 digit): Lerner, 1994; Scherer et al, 1999  Technology dependence: Citations to previous patents (technology): Harhoff et al, 2003  Time Citation lag (backward patent citations):  Inventors’ past patenting (prolific inventors): Latham and Le Bas (2003); Gambardella et al (2005)  Number of inventors: Mariani (2003)  Technology Classes (5 classes, Fraunhofer classification)  Firm size (employees): Veugelers and Cassiman (2005)

10 9. FIRM AND PATENT LEVEL SCIENCE LINKAGES

SCIENCE LINKAGES AND PATENT QUALITY

12 11.Science linkages in the forward citation model

Firm and Patent level –science linkages- interactions

The scope of forward citation

FINDINGS  Evidence of a firm specific effect on patent value: Firms with scientific publications generate high value patents Conditional on receiving a citation, being a firm engaged in science increases the expected count of forward citation by 30%; and the expected rate of forward citation by a factor of 1.3.  Patents without scientific NPR are more frequently cited than comparable patents of firms without these science linkages: 30.2% (increase by a factor of 1.2).  Patents from scientific firms are more quickly cited; and more likely to be cited by a foreign country.  Industry – Science Link?

IMPROVEMENT AND FURTHER RESEARCH Inventors’ scientific linkage (publication or past affiliation) Endogeneity issues: e.g. to instrument scientific linkages (invention and firm level: past scientific activity; industry science reliance; age of the firms; e.g. technology exhaustion; within firms’ patenting; technology). Incidence of science on entry into new technology fields (Shane, 2001; Zucker et al, 2005). Identification of star scientists (identifying inventors’ characteristics) and boundary spanners scientists (high performance in science and patenting).