Public Universities and Regional Growth: Insights from the University of California

Stanford University Press

Stanford, California

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Library of Congress Cataloging-in-Publication Data

Public universities and regional growth: insights from the University of California / edited by Martin Kenney and David C. Mowery.

     pages cm — (Innovation and technology in the world economy)

Includes bibliographical references and index.

ISBN 978-0-8047-9067-3 (cloth : alk. paper) — ISBN 978-0-8047-9135-9 (pbk. : alk. paper)

1. University of California (System)   2. Public universities and colleges—Economic aspect—California.   3. Academic-industrial collaboration—California.   4. Research—Economic aspects—California.   5. Economic development—California.   I. Kenney, Martin, editor of compilation.   II. Mowery, David C., editor of compilation.   III. Series: Innovation and technology in the world economy.

LD729.8.P83 2014

378.794—dc23

2013051008

ISBN 978-0-8047-9142-7 (electronic)

Typeset by Thompson Type in 10/13 Galliard

Public Universities and Regional Growth

INSIGHTS FROM THE UNIVERSITY OF CALIFORNIA

Edited by Martin Kenney and David C. Mowery

STANFORD BUSINESS BOOKS

An Imprint of Stanford University Press

Stanford, California

INNOVATION AND TECHNOLOGY IN THE WORLD ECONOMY

MARTIN KENNEY, Editor University of California, Davis and Berkeley Roundtable on the International Economy

Other titles in the series:

MARY LINDENSTEIN WALSHOK AND ABRAHAM J. SHRAGGE

Invention and Reinvention: The Evolution of San Diego’s Innovation Economy

JOHN ZYSMAN AND MARK HUBERTY, EDS.

Can Green Sustain Growth?

From the Religion to the Reality of Sustainable Prosperity

ISRAEL DRORI, SHMUEL ELLIS, AND ZUR SHAPIRA

The Evolution of a New Industry: A Genealogical Approach

JEFFREY L. FUNK

Technology Change and the Rise of New Industries

KAYE HUSBANDS FEALING, JULIA I. LANE, JOHN H. MARBURGER III, AND STEPHANIE S. SHIPP, EDS.

The Science of Science Policy: A Handbook

JERALD HAGE

Restoring the Innovative Edge:

Driving the Evolution of Science and Technology

SALLY H. CLARKE, NAOMI R. LAMOREAUX, AND STEVEN W. USSELMAN, EDS.

The Challenge of Remaining Innovative:

Insights from Twentieth-Century American Business

JOHN ZYSMAN AND ABRAHAM NEWMAN, EDS.

How Revolutionary was the Revolution?

National Responses and Global Technology in the Digital Era

MARTIN FRANSMAN, ED.

Global Broadband Battles:

Why the U.S. and Europe Lag Behind While Asia Leads

DAVID C. MOWERY, RICHARD P. NELSON, BHAVEN N. SAMPAT, AND ARVIDS A. SIEDONIS

Ivory Tower and Industrial Innovation:

University-Industry Technology Transfer Before and After the Bayh-Doyle Act in the United States

MARTIN KENNEY AND RICHARD FLORIDA, EDS.

Locating Global Advantage: Industry Dynamics in the International Economy

GARY FIELDS

Territories of Profit:

Communications, Capitalist Development, and the Innovative Enterprises of G. F. Swift and Dell Computer

URS VON BURG

The Triumph of Ethernet:

Technological Communities and the Battle for the LAN Standard

Contents

List of Illustrations

Acknowledgments

Contributor Biographies

1. Introduction

MARTIN KENNEY AND DAVID C. MOWERY

2. Semiconductor Innovation and Entrepreneurship at Three University of California Campuses

CHRISTOPHE LÉCUYER

3. The University of California and the Evolution of the Biotechnology Industry in San Diego and the San Francisco Bay Area

STEVEN CASPER

4. Electrical Engineering and Computer Science at UC Berkeley and in the Silicon Valley: Modes of Regional Engagement

MARTIN KENNEY, DAVID C. MOWERY, AND DONALD PATTON

5. Serendipity and Symbiosis: UCSD and the Local Wireless Industry

MARY WALSHOK AND JOEL WEST

6. University in a Garage: Instrumentation and Innovation in and around UC Santa Barbara

CYRUS C. M. MODY

7. We Are Both Hosts: Napa Valley, UC Davis, and the Search for Quality

JAMES LAPSLEY AND DANIEL SUMNER

References

Index

List of Illustrations

Tables

Table 1.1. U.S. Patent Office Utility Patent Grants by Reported Residence of Primary Inventor: Selected States and Nations, Various Years

Table 3.1. Publication Activity of Prominent San Francisco Biotechnology Firms, 1976–1994

Table 3.2. Publication Activity of First-Generation San Diego Biotech Firms with Links to Hybritech

Table 3.3. Publication Activity of Prominent San Diego Biotechs outside Hybritech Network, 1984–1995

Table 3.4. Top Ten San Francisco Companies by Frequency of Academic Publications and Collaborations with Local Universities, 1980–2005

Table 3.5. Top Ten San Diego Companies by Frequency of Academic Publications and Collaborations with Local Universities

Table 3.6. University Patents, San Francisco and San Diego, 1980–2005

Table 4.1. Summary of Characteristics of Major EE&CS Projects

Table 5.1. Early UCSD Leaders

Table 5.2. San Diego Telecommunications Companies Founded by UCSD Alumni, 1985–2001

Table 5.3 UCSD Extension Certificate Programs Serving the Local Telecommunications Industry

Table 5.4. Telecommunications-Related Extension Enrollment by Year

Table 7.1. The Paris Tasting

Figures

Figure 3.1. Aggregate Publications by San Francisco and San Diego Biotechnology Companies, 1976–2005

Figure 4.1. Selected Bay Area Relational Database/CRM Software Firms, Founders, and Spin-Offs

Figure 4.2. UC Berkeley Professors and Their Relationships to the EDA Industry

Figure 4.3. Electronics Research Laboratory, UC Berkeley, Expenditures by Source ($1,000), 1980–1997

Figure 5.1. Graduate Degrees in Wireless-Related Engineering Fields, 1991–2011

Figure 6.1. Number of UCSB Physics Graduate and Undergraduate Students, 1955–1986

Figure 6.2. An Advertisement from Digital Instruments’ We Have Science Covered Campaign

Figure 7.1. Napa Share of California State Total as a Percentage

Figure 7.2. Thousands of Gallons of Dessert and Table Wine Sold in the United States in Various Years

Figure 7.3. Napa Cabernet Acres and Price

Figure 7.4. Value of Napa Grapes and Grape Value as a Percentage of Total Napa Agricultural Value

Map

Map 5.1. Information and Communication Technologies (ICT) Jobs in San Diego County

Acknowledgments

The editors gratefully acknowledge a grant from the University of California Office of the President for two authors’ meetings and staff support. The Institute for Business Innovation at the Haas School of Business, UC Berkeley, provided invaluable support for the meetings. UC Davis staff helped in innumerable ways. First and foremost, the editors gratefully acknowledge the enthusiasm, encouragement, advice, and invaluable assistance of Mary Walshok in conceiving and assisting the project at every step of the way. We thank Christophe Lécuyer for his encouragement and assistance in the gestation stage of this project. Robert Cook-Deegan and John Walsh provided many helpful suggestions for strengthening the book. Martin Kenney thanks Ralph Hexter and the University of California, Davis, Provost’s Forum for the Public University and the Social Good. The Forum supported Alycia Thompson, who provided superb editorial and other staff assistance that greatly simplified the burdens of coordinating meetings and producing the book. We thank Margo Beth Fleming for her sage advice and encouragement. The usual disclaimers apply, and the editors and authors are solely responsible for all of the statements and conclusions drawn in the book.

Contributor Biographies

Steven Casper is the Henry E. Riggs Professor of Management at the Keck Graduate Institute of Applied Life Sciences in Claremont, California. His research focuses on comparative studies of the development of new technology industries, with a special interest in processes by which biomedical science has been commercialized across the United States and Europe. He has published a book on the development of science-based industry in Europe (Creating Silicon Valley in Europe: Public Policy Towards New Technology Industries, Oxford University Press, 2007). Dr. Casper was previously a faculty member at the University of Cambridge, UK, where he was a University Lecturer in Innovation and Entrepreneurship at the Judge Institute of Management Studies. He was previously employed as a Senior Research Fellow at the Social Science Center, Berlin. He received a PhD in government from Cornell University. In 2009, Casper was awarded a Fulbright Research Scholarship to Canada.

Martin Kenney is a Professor at the University of California, Davis, and a Senior Project Director at the Berkeley Roundtable on the International Economy. He has published five books and over 120 scholarly articles on venture capital, university-industry technology transfer, new industry formation, and technology-enabled globalization. His two recent edited books Understanding Silicon Valley and Locating Global Advantage were published by Stanford University Press, where he is the editor of a book series in innovation and globalization. He has been a visiting scholar at the Economic Research Institute of Finland, Copenhagen Business School; Judge School of Management, University of Cambridge; Institute of Innovation Studies, Hitotsubashi University; Kobe University; and Tokyo University. In 2009 he was a visiting scholar at the Stanford University Asia Pacific Research Center and in 2011 at the Economic Institute of Finnish Economy. He has consulted for or lectured at various private sector organizations, including Association of Computing Machinery, Cisco, Dell India, Intel, and GHX, and public sector organizations such as Inter-american Development Bank, National Academy of Engineering, National Academy of Science, the National Research Council, OECD, the President’s Council on Science and Technology, World Bank, and the World Economic Forum. He is the West Coast editor for Research Policy.

James Lapsley is a Continuing Educator Emeritus UCD Extension, where he directed the Department of Agricultural and Natural Sciences from 1978 to 2009. After retirement he assumed a 30 percent position as an Adjunct Associate Professor UC Davis, Department of Viticulture and Enology, and as researcher in the Agricultural Issues Center. He is the author of Bottled Poetry (UC Press, 1996), a study of the emergence of the Napa Valley and a market for higher-quality wine in the United States. He coedited Successful Wine Marketing, which was awarded the OIV Grand Prize in 2001 for the Best Book on Wine Economics. Lapsley was President and Winemaker for Orleans Hill Winery from 1980 to 2002, a winery that specialized in wine produced from organically grown grapes. In 2003, Lapsley was a Fulbright Scholar in Uruguay, where he collaborated with faculty in the Schools of Chemistry and Agronomy to create a degree program in enology. He received his PhD in history from UC Davis in 1994 and has written numerous papers on California wine history.

Christophe Lécuyer is a Professor of the History of Science and Technology at the Université Pierre et Marie Curie and a Senior Research Fellow at the Charles Babbage Institute at the University of Minnesota. He is known for his research on the history of Silicon Valley and the history of high technologies. Among his publications are Making Silicon Valley: Innovation and the Growth of High Tech, 1930–1970 (MIT Press, 2005) and Makers of the Microchip: A Documentary History of Fairchild Semiconductor (MIT Press, 2010, in collaboration with David C. Brock). Christophe Lécuyer has taught at MIT, Stanford University, and the University of Virginia and held a managerial position at the University of California Office of the President. He was a Senior Fellow at the Collegium de Lyon and the Institute for Advanced Study at Central European University and a Visiting Professor at Telecom Ecole de Management and the Ecole des Hautes Etudes en Sciences Sociales. He is a graduate of the École Normale Supérieure (Ulm) and received his PhD from Stanford.

Cyrus C. M. Mody is an Assistant Professor of the History of Science, Technology, and Engineering in the Modern Era (c. 1600 to the present) at Rice University. His own research focuses on the physical and engineering sciences in the very modern era (c. 1970 to the present), with particular emphasis on the creation of new communities and institutions of science in the late Cold War and the post-Cold War periods. His book, Instrumental Community: Probe Microscopy and the Path to Nanotechnology (MIT 2011) explores the coevolution of an experimental technology (the scanning tunneling microscope and atomic force microscope and their variants) and the community of researchers who built, bought, used, sold, theorized, or borrowed these instruments. Currently, he is working on a history of the communities and institutions of nanotechnology, in collaboration with colleagues at the Center for Nanotechnology in Society at the University of California, Santa Barbara, and the Chemical Heritage Foundation in Philadelphia.

David C. Mowery is the William A. & Betty H. Hasler Professor of New Enterprise Development at the Walter A. Haas School of Business, University of California, Berkeley. He earned a BA, an MA, and a PhD in economics, each from Stanford University. He began his teaching career as an Assistant Professor in the Social and Decision Sciences Department, Carnegie-Mellon University in 1982, being promoted to Associate Professor prior to moving to UC Berkeley in 1988. He has also served as Assistant to the Counselor, Office of the U.S. Trade Representative and a Fellow at the Council on Foreign Relations.

Mowery has also been an expert witness at congressional hearings on science and technology policy issues; a member of National Research Council panels, including Competitive Status of the U.S. Civil Aviation Industry, Causes and Consequences of the Internationalization of U.S. Manufacturing, Federal Role in Civilian Technology Development, U.S. Strategies for the Children’s Vaccine Initiative, and Applications of Biotechnology to Contraceptive Research and Development; a member of the Committee on Science, Engineering, and Public Policy, American Association for the Advancement of Science, 1997–2003; a member of the Presidential Commissions on Offsets in International Trade, 2000–2001; a coeditor of special issues of the journals Industrial and Corporate Change and Management Science; and an advisor to the Organization for Economic Cooperation and Development, as well as various federal agencies and industrial firms.

Mowery’s research interests include the impact of technological change on economic growth and employment, the management of technological change, and international trade policy and U.S. technology policy, especially high-technology joint ventures.

Donald Patton is a Research Associate with the Department of Human and Community Development at the University of California, Davis. He received his doctorate in economics from the University of California, Davis, in 1993.

His current research interests involve clusters, entrepreneurship, and economic development. Other research interests revolve around university intellectual property rights and policies affecting the transfer of university technology. In addition, he has been involved in constructing a database of all initial public offerings in the United States from 1988 to the present. Support for this effort has been provided by the National Science Foundation, the Small Business Administration, and the Kauffman Foundation.

Daniel Sumner is the Frank H. Buck Jr. Professor in the Department of Agricultural and Resource Economics at the University of California, Davis, and the Director of the University of California Agricultural Issues Center. He participates in research and teaching and directs an outreach program related to public issues related to agriculture.

He has published broadly in academic journals, books, and industry outlets. His research and writing have received numerous awards for research quality, quality of communication, and contribution to policy. He has served as Chair of the International Agricultural Trade Research Consortium, a consultant for farm organization, government agencies, and firms and is a frequent speaker at national and international conferences and symposia. In 1998, he was named a Fellow of the American Agricultural Economics Association for his career achievement.

From 1978 to 1992 Sumner was a Professor in the Division of Economics and Business at North Carolina State University. He spent much of the period after 1986 on leave for government service in Washington, D.C., where he served on the President’s Council of Economic Advisers before moving to the USDA. Immediately prior to moving to California in January 1993, Sumner was the Assistant Secretary for Economics at the U.S. Department of Agriculture, where he contributed to policy formulation and analysis on the whole range of topics facing agriculture and rural America—from food and farm programs to trade, resources, and rural development. In his role as supervisor of the USDA’s economics and statistics agencies, Sumner was also responsible for data collection, outlook, and economic research.

Sumner received a bachelor’s degree in agricultural management from California Polytechnic State University in San Luis Obispo in 1971, a master’s degree from Michigan State in 1973, and a PhD in economics from the University of Chicago in 1978.

Mary Walshok is the Associate Vice Chancellor for Public Programs, Dean of University Extension, and Professor of Sociology at the University of California, San Diego. She oversees a $37 million university division that educates 56,000 enrollees annually and reaches 22 million households through UCSD-TV and UCTV, as well as millions more through the web. A thought leader on aligning workforce development with regional economic growth and innovation, she is the author of Blue Collar Women, Knowledge without Boundaries, Closing America’s Job Gap, and Invention and Reinvention: The Evolution of San Diego’s Entrepreneurial Economy (2014, Stanford University Press). As an industrial sociologist, she has been researching various American regions for the U.S. Department of Labor, NSF, and Lilly Foundation. One of her current research projects is an NSF-funded study of the role of boundary-spanning organizations in shaping the social and cultural dynamics of the highly innovative regions. Walshok is also active on numerous community and national boards and is a cofounder of CONNECT, one of the most admired innovation cluster development organizations in the world.

Joel West is Professor of Innovation & Entrepreneurship at the Keck Graduate Institute of Applied Life Sciences. He is an internationally known researcher on innovation management, Dr. West has been invited to speak at industry and academic events on five continents. He is particularly known for his work on open innovation, as coeditor of Open Innovation: Researching a New Paradigm (Oxford, 2006) and cofounder (with Henry Chesbrough) of the Open Innovation Community. His other research areas include renewable energy, entrepreneurship, intellectual property, open-source software, international business, and strategies for IT vendor firms. Before joining KGI in 2011, he spent nine years as an Associate Professor and then Professor at San José State University in its College of Business and Lucas Graduate School of Business. He has also taught at UC Irvine, Pepperdine, and Temple University Japan. He has a PhD in Management from the University of California, Irvine, and an SB in Interdisciplinary Sciences (Meteorology) from the Massachusetts Institute of Technology. Prior to becoming an academic, he had an extensive career as an engineer, manager, and entrepreneur in the software industry.

CHAPTER ONE

Introduction

MARTIN KENNEY AND DAVID C. MOWERY

The twenty-first century is the century of knowledge-based economic growth. Recognizing this reality, national and regional governments in the industrial and industrializing economies have introduced policies and strengthened institutions to support innovation. One institution that has received significant attention in the course of these efforts is the research university. There are a number of reasons for the recent policy focus on research universities. Considerable evidence (Narin et al., 1997; Hicks et al., 2001) suggests that the dependence of technological innovation on advances in science and engineering research has increased in recent decades, a considerable change from the trial-and-error character of innovation in the late nineteenth and early twentieth centuries. Universities also play a unique role in both research and training, and their ability to expose graduates to the frontiers of scientific research provides a powerful mechanism for the transfer of knowledge and technology.

One of the most important recent U.S. initiatives in this area is the Bayh-Dole Act of 1980, which sought to promote the patenting and licensing by U.S. universities and federal laboratories of research advances based on federally funded research, based on the belief (which in turn had limited empirical support—see Eisenberg, 1996) that such policies would accelerate the commercialization of innovations based on publicly funded research (Berman, 2012). The post-1980 period has witnessed considerable growth in patenting by U.S. universities, and many of these patents have been licensed to private firms. Although it is far from clear that the Bayh-Dole Act in fact caused this growth in patenting and licensing, the Act is widely viewed as a success and has influenced the policies of other Organisation for Economic Co-Operation and Development (OECD) and industrializing-economy governments seeking to encourage university–industry technology transfer (Mowery, 2009; Mowery et al., 2004). In addition, since 1980 state governments and universities in the United States have launched a dizzying array of initiatives for the support of new-firm formation and technology commercialization based on university research.

The intensive focus of many of these policies (including the Bayh-Dole Act) on patenting and licensing of university research advances overlooks the interactive nature of university–industry research relationships, which embody considerable feedback and iteration, rather than operating as a unidirectional flow of fundamental knowledge into industry application (Colyvas et al., 2002). In addition, these patent-focused reforms downplay the existence of multiple channels of interaction and knowledge flow between academia and industry. Our chapters indicate that a great deal of economically valuable technology transfer takes place outside the administrative channels created by most U.S. universities for technology licensing. Indeed, a number of important cases in this book highlight the movement of technology, people, resources, and knowledge from industry to university. The chapters demonstrate the importance of bidirectional and informal human and information flows, few if any of which are dependent on technology transfer offices. Technology licensing is only one of a multitude of channels through which technology and knowledge flow into and out of the university.

In spite of the endorsement by policy makers and university administrators throughout the United States of the value of closer university–industry relationships, as well as the appearance of a large scholarly literature on this topic in the past two decades, we still know surprising little about the dynamics of these relationships, the effects of university research on regional economic development and the reverse, and the most appropriate approaches for assessing the benefits and costs of these relationships. The emphasis in recent U.S. policy on patent-based channels of interaction and knowledge transfer is reflected in the similarly patent-centric focus of much of the academic literature on university–industry research interactions, despite considerable evidence that patents and patent licensing play a modest role in many university–industry relationships.

The importance for industrial innovation of different channels of communication linking intrafirm R&D (research and development) to R&D in government or university laboratories was studied in a survey of R&D managers conducted by Cohen and colleagues (2002). They found that pharmaceutical executives assign greater importance to patents and license agreements involving universities and public laboratories than do other executives; even respondents from pharmaceuticals rated research publications and conferences as a more important source of information. In most other industries, patents and licenses of inventions from university or public laboratories were reported to be of little importance compared with publications, conferences, informal interaction with university researchers, and consulting (Agarwal and Henderson, 2002; Nelson 2012).

Another important feature of the relationship between academic and industrial researchers is its interactive character. Industrial research may in fact lead and influence the agenda of academic research in some fields, as was the case in the early stages of research on light-emitting diodes and semiconductors.¹ According to Lécuyer (2005a), Provost Frederick Terman of Stanford University encouraged William Shockley to locate his new firm near the university in 1955 to expose Stanford engineering faculty to new research in solid-state physics and electronics, and a future dean of Stanford’s Engineering School served an apprenticeship of sorts at Shockley Semiconductor.² The movement of researchers between industry and academia facilitates this interactive relationship (for example, the move by Dr. Shuji Nakamura, a pioneering research in gallium-arsenide LEDs [light-emitting diodes], from Nichia Chemicals in Japan to the University of California, Santa Barbara, in 2000; see Chapter 7 in Mowery et al., 2004, for further discussion). Because many empirical studies of university–industry research linkages rely on cross-sectional analyses of patenting and licensing data, the evolution of industry- and campus- specific linkages over time often is overlooked, and these linkages inaccurately are characterized as unidirectional, with inventions and knowledge flowing exclusively from academia to industry, in another manifestation of the simplistic linear model of innovation.

This volume examines the evolution of university–industry relationships in research and innovation at six campuses of the University of California system, ranging from viticulture to computer science. This collection of studies enriches our understanding of the dynamics of university–industry relationships and regional economic development in several ways. First, the approach adopted in each of the chapters relies on historical analysis of the evolution of academic and industrial research, innovation, and regional development in a number of different specific fields of research. This approach enables a richer characterization of the interactive relationship between industrial and academic research and innovation than appears in many empirical analyses that focus mainly on patenting, article citations, and licensing. Second, our coverage of research fields is broader than recent historical studies, many of which have concentrated primarily on biotechnology or the life sciences generally. Although these fields have been and remain extremely important to the development of university–industry relationships in the United States during the past three decades, the unusual characteristics of research, innovation, and technology transfer in biomedical research and innovation means that the findings of these previous studies may not apply to other areas of academic research and university–industry relationships.

Our focus on a leading U.S. public research university, the University of California, also contrasts with that of previous historical studies of leading private U.S. universities such as the Massachusetts Institute of Technology (MIT) or Stanford. Inasmuch as public research universities in the United States in 2009 performed nearly 69 percent of all academic research and approximately 60 percent of federally funded R&D and accounted for 34 percent of bachelor’s and more than 50 percent of doctoral degrees awarded in 2009 (National Science Board, 2012),³ we believe that it is essential to examine their role in the evolving landscape of university–industry relationships.

It is also important to recognize some caveats associated with this volume’s case studies. We cannot portray these cases as representative of the totality of university–industry research relationships in U.S. public universities or in the University of California (UC). Nor are the cases covered in this volume representative of the full diversity of regional economic impacts of research at leading public universities such as the UC and its various campuses. In addition, the historical approach adopted in these cases tends to highlight successes in research and innovation, rather than presenting a balanced account of successes and failures. Here, too, we cannot claim that our sample is in some sense representative. Moreover, the selection of case studies was influenced by author availability, meaning that equally interesting and important cases at other campuses were not chosen. Finally, as we note in the following pages, the University of California is an unusual institution, distinguished by its large size; by its network of campuses that are funded, managed, and evaluated as coequal research universities; and by the remarkable economic vitality of many regions of the enormous statewide economy. The chapters in this volume therefore are intended to present a rich portrait of the contrasting technological and economic dynamics of evolving university–industry relationships across a diverse set of research fields, regions, and university campuses, without making claims that the studies necessarily generalize to other regions or universities. We hope that these studies will stimulate similar research on other universities and research fields.

CALIFORNIA AND THE UNIVERSITY OF CALIFORNIA SYSTEM

California was admitted to the Union in 1849, and its economic growth through the remainder of the nineteenth century and much of the twentieth century was based on minerals extraction and agriculture. By 2012, it was the most populous state in the United States, and its economy (gross state product) ranks the state as one of the ten largest economies in the world. More significantly for this book, today the state has become a globally recognized center of innovation. One imperfect measure of the state’s innovative performance is patenting. California’s share of all U.S. utility