Research and development often consume considerable amounts of venture capital. However, universities do have the potential to attract the necessary capital for their educational and research activities. The coffee break may just be the right time and place where it all can start.

One way to cover all R&D expenditures is to allocate financial resources from the public budget. On the other hand, innovation created under public funding becomes public, so no private company can benefit from it in the form of income. However, financial priorities and allocation of public budgets depend on the preference of the government in power, which of course could be replaced at the next general election. Because of this, the second way of financing – from private sources – is at least as important as the previous one, creating the basis for deepening cooperation between business and the academic sphere.

In the beginning was the coffee

Mr. Rudolf Hanka from Wolfson College, Cambridge University, gave an interview for the Slovak weekly journal Trend in May 2008. He spoke about the capacity of universities to come up with ideas during a coffee break that could create opportunities for raising money towards their own research. Mr. Hanka said: “License incomes are very low, approximately 1% of all our incomes. From this money, the bigger part is paid to the inventor. The majority of private money flows to Cambridge by way of occasional funding of professorship, doctorate studies, or specific research. Possibly, however, there could be another, more innovative way, when financing a ‘new’ university building….”

What are the rewards for a private company for its financial support of a university? Mr. Hanka, continued to describe the example of the pharmaceutical giant Glaxo at the end of the 1980s. Than the University of Cambridge intended to erect a new Pharmacological Institute building. Representatives of Glaxo arrived, knocked on the door and offered a financial donation towards the new construction, in return for being allowed to set up their own business on the top floor of that very same building. Glaxo also secured the right to buy scientific ideas from the University and to have access to students and all other staff during their coffee breaks. Mr. Hanka added: “The most important factor had been the coffee break.” In England, most universities preserve the habit of a common coffee break at 10:30 a.m. and 4:00 p.m. It is a traditional time for informal dialogue and it is quite common that during these breaks many innovative ideas are born. Mr. Hanka concluded that Glaxo paid half a million pounds in exchange for the opportunity to collaborate with academic staff and students.

More coffee – more innovation?

The ability to create innovations and to explore new knowledge is the fruit of science and research. It’s a kind of venture capital, which means that there is always a risk of losing money if the research fails. On the other hand, high added value and positive financial consequences outnumber common financial losses. Companies know that. That means that cooperation between academic and business areas is the core element of being competitive. But at the same time, just businessacademic cooperation exclusively is not sufficient to create the so called “innovation potential”.

What is innovation potential?

Innovation potential is an environment that is suitable not only for finding new knowledge, but also for maximizing all financial and non-financial benefits of knowledge venture capital and its high added value by creating a competitive society. With respect to this, just having coffee and a discussion is not enough. Model No. 1 shows a simplified “R&D cycle”. One can see that in the beginning there are financial resources, followed by human resources. In the case of private funding of research, those two aspects are solely linked to cooperation between academia and business. The third item “Outcomes” represents the border, where other actors take part. From that point on, multilateral cooperation between relevant actors is the key in order to implement R&D outcomes into society and to be competitive.

Model No.1:

Creating innovation potential

Business-academic cooperation is a precondition that is followed by the assumption that various participants adhere to the strategy or a mutual plan that is focused on supporting each other and enjoying mutual benefits. This is illustrated on “Model B” which shows a schematic depiction of synergies between individual participants in creating innovation potential. Though simplified it is an appropriate model of understanding innovation potential. As the Slovak Organization for Research and Development Activities (SOVVA) claims, there are three possible situations:

• “Model A” shows non-cooperation of participants resulting in no innovation potential: ideas and discoveries do not have a chance to be implemented outside the gates of the universities; the media cannot inform audiences about up-to-date technological news; there is no technology transfer, no sharing of ideas, no control of ethical aspects of research and no control of transparency and information flow.

• “Model B” proves that if mutual and multilateral interaction exists, innovation potential starts to be created. As we can see, some kind of “partial” innovation potential exists when at least two or three actors cooperate. On the other hand, the involvement of more actors creates space for economy of scale and the effect of synergy.
• “Model C” illustrates the assumption that if the mutual multilateral cooperation deepens, innovation potential grows. It represents the ideal state of close cooperation based on openness and confidence.

Models A, B, C (in this order):

Austin proves it works

The scheme developed by SOVVA is probably the simplest model of cooperation between relevant actors. There are a number of other concepts in the world that are worth following as well. One of them is called ‘Creating the Technopolis’, which was developed by Smilor, Gibson and Kozmetsky at the University of Texas (Model 2). The “Technopolis wheel” is the model for turning a municipality into a modern technological city (Techno-polis). It was created by observing and following the transformation of Austin, the capital of Texas, at the turn of 1970s and 1980s. The main task for municipal leaders was to adapt the city itself and to answer the challenge of changing the nature of international competition. The authors of the Technopolis concept claim that the creation of public-private partnerships (PPP) is crucial. Even though the single elements of the ‘wheel’ are sometimes competitive and antagonistic, they need to find a way to cooperate. According to Smilor, Gibson and Kozmetsky, the universities, as a source of ideas and human resources, stand at the core of the general concept and have the ability to attract other subjects into cooperation. If this is reached, municipality will become competitive and is able to turn into a knowledge based subject.

Model No. 2: “Creating the Technopolis” (Technopolis Wheel)

Beyond innovation potential

Let me come back to Model No. 1, the “R&D” cycle that appears to be a closed cycle. At the beginning, in the case of private funding of science, there is a university and a company, and they try to find ways of cooperation. After this is achieved, other actors start to take part in the process and the innovation potential is created (Model B). The scientific outcomes represent not only venture capital products with high added value, but also they become inputs for the next “R&D” cycle, so the cooperation between academic and business world can further develop and deepen.

NOTICE: This article was prepared for and published in Connection Magazine (12/2008 - 01/2009) of The American Chamber of Commerce in The Slovak Republic.

Michal Hudec, EurActiv.sk (the opinions in this article represent author’s view, not EurActiv’s position)