Privatizing the intellectual commons: Universities and the commercialization of biotechnology Nicholas S. Argyres Senior Associate Dean-Faculty and Vernon W. & Marion K. Piper Professor of Strategy Olin Business School Julia Liebeskind, University of Southern California

The Phenomenon "Universities are uniquely qualified by tradition and by their special characteristics to carry on basic research. They are charged with the responsibility of conserving the knowledge accumulated by the past, imparting that knowledge to students, and contributing to new knowledge of all kinds“ Traditional Values & Social Contract Intellectual Commons Bayh Dole Act (1980) – Commercialization “Bayh Dole Act expanded the range of government-funded research in which universities could own patents, and encouraged universities to pursue opportunities to become more involved in the commercialization of the research conducted by their faculty through patent licensing and other means” Privatization of IP Adaptation efforts

Key Tension to be Negotiated Commitment to create and sustain an `intellectual commons' for the benefit of society at large. Adapt policies and organizational arrangements to accommodate the commercialization of university research Negotiation and Adaptation Future institutional development, in a dynamic process of co-evolution

Mechanisms: Checks and Balances Internal Governance (standardized)  Recruitment  Internal advancement  Monitoring conformity to standards through committees  Autonomy to choose research projects and collaborators without commercial considerations External Enforcement  Declining funding  Reduction in prestige  Intervention by trustees and federal agencies  Reduced ability to attract good students

Context: Biotechnology What? Genetic manipulation of living cells(applications in medicine; agriculture, energy and food processing) Why? Commercially valuable inventions through basic research

Key Drivers Pressures to contract or re-contract for property rights emerge in response to changes in the underlying values of assets over which property rights can be established.(Demsetz 1967; Libecap 1991) Key conditions:- Changes in, 1.relative prices 2.production and enforcement technology 3.preferences and other political parameters

Adaptation Efforts: Privatization of IP Formation of IP rights Ownership of privatized IP Licensing of IP Royalties and royalty distribution from IP ownership

Adaptation Efforts: Commercialization Technology transfer offices University owned ventures University based research institutes

Reactive Adaptations Formalization of strong conflict of interest rules – Outside management – Consulting

Conclusion Social-contractual commitments to “open science” diminish the scope of commercialization activities of universities Internal governance mechanisms create resistance for swift adaptation Enforcement by external stakeholders create resistance for swift adaptation Potential evolution of new organizational forms as a result of negotiation of this tension

Future Research? Empirical examination of differences in organizational forms and success with commercialization Undertake process research on how firms resolve this tension of competing institutional logics (“open science” versus “privatization”)