A look at university-managed funds

Technology transfer policies are always at the centre of policy debate. As suggested by the European Commission (2007), technology transfer schemes are reputed to be ‘the processes for capturing, collecting and sharing explicit and tacit knowledge, including skills and competence’ and so constitute a fundamental engine for enhancing economic and social welfare.

In the last decades, universities have significantly increased their interaction with entrepreneurs and corporations. Through the pursuit of the so-called “third mission”, university-industry collaborations have activated a process of technology and knowledge transfer (Florida and Cohen 1999; Etzkowitz et al. 2000) that engendered social and economic benefits for the society as a whole (Lee 1996, 2000). This collaborative process has taken several institutional forms, ranging from patent licensing to academic spin-outs passing through academic incubator facilities. In this respect, one (often neglected) array in the quiver of an academic institution is represented by the setting-up and management of venture capital and private equity funds (university-managed funds, UFs thereafter).

Despite the fact that the first ever modern private venture capital (VC) firm was founded by academics from the Massachusetts Institute of Technology (MIT) and the Harvard Business School (Lerner 2005),1 UFs are still a limited (and consequently under-researched) phenomenon. Since 1973, only 26 UFs were active in Europe (15) and in the United States (11) (source: Thomson One database). However, UFs are definitely worth of being analyzed. In fact, important academic institutions have set-up such funds, and it is not unlikely that many other universities will do the same in the next future. The question is: ‘why did they do it?’. The starting point is that VC is increasingly viewed has a sine qua non condition to spur innovation (Kortum and Lerner 2000), entrepreneurship (Da Rin et al. 2006; see Knockaert et al. 2010 for specific reference to academic spin-outs) and economic growth (Samila and Sorenson 2011). Even though universities have played in the past and still continue to play today a marginal role both in mature VC markets (e.g. the US) and in thin ones (e.g. the fragmented European market), the increasing emphasis of policymakers on the need to sustain the development of VC, especially during the current economic and financial crisis (European Commission 2010, p. 20; Bertoni and Croce 2011), makes potentially envisage a growing relevance of the academic actor in the next future.

But what do we know about the existing experience of UFs? Very little. In the extant literature, the very few scientific works on the topic are of argumentative nature (e.g. Atkinson 1994; Lerner 2005). Until now, there has been no attempt at the empirical level to describe the phenomenon.

Our work lies on an under-researched area at the crossroads of entrepreneurial finance and technology transfer and provides relevant implications for academics, practitioners and policymakers. The picture we offer on the specific role played by UFs in different geographical contexts and how university initiatives interact with more traditional types of VC investors represents an update of the multi-faceted landscape of technology transfer mechanisms. This effort enlarges the information set of policymakers at national and supranational levels so to enable them to improve technology transfer mechanisms, taking into account the peculiarities of the local institutional context in which policies are applied.

* Copy available at

http://ssrn.com/abstract=2197377

Email: samuele.murtinu@polimi.it. Ph.: +39 02 23992807.

1  As explained by Lerner (2005): ‘The first modern venture capital firm, American Research and Development (ARD), was designed to focus on technology-based spinouts from the Massachusetts Institute of Technology. As envisioned by its founders, who included MIT President Karl Compton, Harvard Business School Professor Georges F. Doriot, and Boston-area business leaders, this novel structure would be best suited to commercialize the wealth of military technologies developed during World War II’.

Limited bibliography:

Atkinson, S.H., (1994). University-affiliated Venture Capital Funds. Health Affairs 13, 159–175.

Bertoni, F., Croce, A., (2011). Policy reforms for venture capital in Europe. In Colombo, M.G., Grilli, L., Piscitello, L. and Rossi, C. (Ed.), Science and Innovation Policy for the New Knowledge Economy (pp. 196-229). Elgar, Cheltenham Glos (UK).

Da Rin, M., Nicodano, G., Sembenelli, A., (2006). Public policy and the creation of active venture capital markets. Journal of Public Economics 90, 1699-1723.

Etzkowitz, H., Webster, A., Gebhardt, C., Terra, B. R. C., (2000). The future of the university and the university of the future: evolution of ivory tower to entrepreneurial paradigm. Research Policy 29, 313-330.

Florida, R., Cohen, W. M., (1999). Engine or infrastructure? The university role in economic development. In L. M. Branscomb, F. Kodama and R. Florida (Ed.) Industrializing knowledge: University-industry linkages in Japan and the United States (pp. 589-610). MIT Press, Cambridge.

Kortum, S., Lerner, J., (2000). Assessing the contribution of venture capital to innovation. Rand Journal of Economics 31, 674-692.

Knockaert, M., Wright, M., Clarysse, B., Lockett, A., (2010). Agency and similarity effects and the VC’s attitude towards academic spin-out investing. Journal of Technology Transfer 35, 567-584.

Lee, Y. S., (1996). ‘Technology transfer’ and the research university: A search for the boundaries of university-industry collaboration. Research Policy 25, 843-863.

Lee, Y.S., (2000). The sustainability of university-industry research collaboration: An empirical assessment. Journal of Technology Transfer 25, 111-133.

Lerner, J., (2005). The university and the start-Up: Lessons from the past two decades. Journal of Technology Transfer 30, 49-56.

Samila, S., Sorenson, O., (2011). Venture capital, entrepreneurship, and economic growth. Review of Economics and Statistics 93, 338-349.