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Share University Resources With Local Businesses

These days, policymakers are looking for anything they can do to boost economic growth and job creation. In the realm of education, the search for economic steroids has led many governors and state legislatures to push universities to do more to encourage entrepreneurial activity. For instance, in North Carolina, three state universities—North Carolina Central University, North Carolina State University, and the University of North Carolina at Chapel Hill—have joined with Duke University on a program to create more university spinoffs, using $3.6 million in funding from the Blackstone Charitable Foundation. In August, Mary Sue Coleman, University of Michigan president and co-chair of President Barack Obama’s National Advisory Council on Innovation & Entrepreneurship, wrote a column arguing that Michigan’s own approach can serve as a model for how state universities might encourage their students’ "crazy ideas."

Perhaps because university spinoffs such as Google (GOOG), Cirrus Logic (CRUS), and Genentech Roche (ROG:VX) have become hugely successful companies, the academic focus seems to be primarily about generating further potentially high-growth companies to exploit inventions made by faculty, staff, and students. But limiting the push to spinoffs will cause universities to miss out on more effective ways to enhance entrepreneurial activity immediately, such as allowing small businesses to use university resources—their equipment, facilities, and faculty expertise—at marginal cost.

Why can’t universities support both local companies and spinoff generation? To some extent, some may be able to. But time and money are limited. There simply aren’t enough resources for universities to teach students, conduct research, encourage spinoffs, and help local businesses to expand. It’s true that academic research shows that university spinoffs perform better than your average startup on virtually any metric you can think of—job creation, revenue growth, odds of survival, and profits generated. The catch: Spinoffs are too infrequent to serve effectively as the sole mechanism by which universities drive entrepreneurial activity. The Association of University Technology Managers reports that in 2009 only 596 new businesses were founded to exploit university inventions.

Moreover, creating successful spinoffs is hard to engineer. Only a small fraction of inventions made by faculty, staff, and students—about 10 percent, university officials responsible for licensing such innovations to the private sector tell me—are the kinds of technologies around which companies can be created. Most university inventions require further involvement by their creators to commercialize them. Unfortunately, relatively few faculty members want to take time away from research and teaching to develop new businesses.

Equipment, Brainpower, Networking

A more effective way for universities to encourage entrepreneurial activity would be to make resources available to local small businesses. Here are three examples of how they can achieve this:

Many new and small businesses cannot afford to buy all the equipment they need to design new products, conduct research, or test products. By allowing local entrepreneurs access to research infrastructure, universities can help new and small local businesses make use of equipment at marginal cost. Georgia Tech’s Enterprise Innovation Institute, for example, helps Georgia companies use the university’s resources to make manufacturing operations leaner, conduct research and product development, and improve operations.

Universities employ a lot of specialists—also known as professors—who can help small business owners with infrequently occurring, yet important, business challenges such as complying with regulation, restructuring, and designing products. Large corporations can afford to keep specialists on staff; most small companies cannot. Setting up such programs as the Center for the Support of Economic Development (CSED) at the University of New Mexico, which facilitates access to student support under the direction of faculty, would provide affordable access to knowledge. The New Mexico CSED program, for example, helps local companies forecast technology development, create product descriptions, and evaluate investment opportunities.

Universities can also take advantage of their role in the community to facilitate networking among small business owners; research shows that this enhances business performance. Because universities are generally open institutions with facilities that are available inexpensively in down hours, it’s easy for them to facilitate interactions among entrepreneurs, financiers, customers, and suppliers. For example, the University of Akron Research Foundation funds Arch Angels, a network that allows tech entrepreneurs in northeast Ohio to gain access to, and funding from, local angel investors.

In short, universities simply can’t create enough spinoffs for this mechanism to serve as the only way universities encourage entrepreneurship. Allowing small business owners to take advantage of the equipment, facilities, and expertise that universities develop as part of their educational mission is another way for academic institutions to encourage economic growth and job creation.

Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.

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