On University - Industry Interaction


Dr. M Bhasi
School of Management Studies
Cochin University of Science and Technology
Kochi-682 022

1. Introduction

Governments, have worried about the effectiveness of university-industry links, at least since the 1950s, but this concern has now become almost worldwide, as the long forecast transformation of the industrial scene from labour-intensive manufacture to knowledge-based industry has taken place. There is now a considerable literature about university-industry relations in the new configuration. The literature refers regularly to the "triple helix" of university-industry-government relations and to "mode 2" interdisciplinary research or to concepts of "entrepreneurial science". There is a growing interest in universities' regional impact, universities' role in wealth creation and in the "capitalization of science", and in the effects of globalization and localization. At the same time universities, facing severe reductions in their unit of resource of state funding are becoming much lesser and they are forced to generate non-state resources. Some are also thinking of becoming much more global in their ambitions both in teaching and research.

These changes in the context of university-industry links are having and will have significant impacts on the organizational forms through which they are managed. But to understand these new structures, it is more useful to consider the kind of traditional structures of management, which, at least, in India have been used to maintain links between universities and industry. Under this model universities were funded for teaching and research by the state and looked to industry either because they needed more funding or because industry offered interesting research problems that individual academicians were keen to tackle. Another reason for university interest was that industry often had experimental facilities, equipment or testing facilities not available in university laboratories. Industry, on the other hand, conducted much of its own R&D but recognized the value of out-sourcing a good deal of its more basic research to university laboratories and valued the opportunity of bringing complex problems to universities where leading academics might be found to solve them. The characteristic arrangements were for research contracts to be signed between individual companies and universities to carry out a particular research task or for individual academics to be offered consultancies with companies either for particular projects or to act as a general referral point for problems. Universities appointed industrial liaison officers (ILOs), usually with some industrial backgrounds, to maintain links with industry, facilitate links between academics and companies. R&D was seen as a linear process in which basic research led through applied research into development. Universities did the basic and some of the applied research, and companies did the rest. Relations were essentially one to one, a single company research director with an individual academician. The key was how the former knew of the congruence of academic interest with an industrial problem or how the latter assessed potential industrial interest in the direction of his or her research. In this kind of environment the industrial liaison office was often situated on the periphery of the university campus and provided information brochures, advising individual academics and companies, and visiting companies to enable interaction.

Of course it was not always as simple and tidy as this, and through the 1980s, under the pressure of scarcity of funds, the ILOs became more proactive, more interested in a professional technology transfer role, more concerned with identifying intellectual property, patenting it and licensing it. As Government began to see evidence of industrial collaboration as a performance indicator the role of the ILO was energized and given more central focus. As the scale of industrially-related research grew, the question of the level of overhead charges, or indirect costs, that needed to be levied became more important, especially as state-funding levels declined.

2. The growth of Mode 2 research

The linear model of the staging of pure into applied research and then into development has become outdated, in part because of the pressure of competition which compresses the time available for the commercialization of research ideas and in part because commercialization or the development of real products demands an interdisciplinary approach. Mode 2 research is defined as "where discovery and application are more closely integrated" . Commercialization, he suggests, "is organized less around the translation of discoveries into new products than in searching for design configurations with the potential for development." Increasingly it is not a problem of generating new discoveries but of making use of the knowledge base that is already available; so the new approaches depend less on basic science and more on the application of knowledge for wealth creation.

3. The changing industrial context

Single company to university laboratory relationships are being overtaken by pre-competitive consortia or clubs of companies, and sometimes governments, who commit resources and manpower to work with one or more universities on closely targeted R&D, pooling equipment and research expertise. This can involve industrial and university teams working together in the same laboratory or unit with much greater urgency and 'near market' sense of mission than in the past. Under such arrangements "knowledge production is characterized by a closer interaction between scientific, technological and industrial modes of knowledge production, by the weakening of disciplinary and institutional boundaries, by the emergence of more or less cluster of experts, often grouped around large projects of various kinds, and by this sort of world, networking is of critical importance; the days of the single expert or the single point of contact within a university are gone.

4. The changing role of governments

The recognition of the critical role of the knowledge-based industries for national economies has led to much greater priority being given by governments to what is described as the triple helix of government-industry-and the universities. "Fundamental changes occurring at organizational and institutional levels within and between university, industry and government, constitute a new environment of innovation replacing the linear model. Bilateral government-industry and university - industry ties have expanded into trilateral relationships at the regional, national and multinational levels. Encouraged by government, universities have become a key element in innovation policies throughout the world..." The key collaborations are based on partnerships rather than contractor-research relationships.

5. The development of regional roles

Universities are key agents within regional economies, linking with local and regional government and with industry. The growth of science parks, local industrial parks, membership of regional development agencies all bear testimony to the extent to which universities are playing an increasingly significant role in attracting knowledge-based companies to the area or spinning out new companies from amongst their own researchers.

In this context, learning economy, emphasizing the "importance of interactive learning as the basis for innovation and change in modern developed economies" and the concept of "the learning region" are pertinent.

6. The rise of the research centre in universities

These external demands have had an increasing impact on university-academic organization. Where once the academic department reigned supreme, based on a single discipline and, at least in developing countries, teaching a single degree discipline, academics are increasingly grouping themselves in cross-departmental research units or centers in order to tap into the new research markets. They cite intensified competition in fast moving fields and "the realization that a practical or theoretical problem can best be attacked by a group of investigators drawn from several disciplines". However, centres are created by "leaders", academic entrepreneurs, and depend a great deal on their success in generating external funds and industrial contracts. Indeed they often simulate some aspects of industrial research laboratories buying in on a short term basis skills not possessed in the centre, sharing valuable equipment and providing "neutral ground" in which company collaborators can work with university staff. Such centers often offer immediate research access to companies via company subscriptions, industrial clubs and regular seminars for external members.

These external and internal changes are revolutionizing the organizational structures that universities formerly had in place to interface with industry. Inevitably they demand a new range of skills: the ability to build networks, a capacity for brokerage, a wider vision about the university and the economy, strategic skills in identifying and marrying market niches and gaps and university research strengths, legal and intellectual property skills, skills in company formation and a broad appreciation of industrial training requirements. Where you have powerful research centres relating to industrial problems it is likely that the specialist expertise in the research centre far outweighs in effectiveness any liaison skills that can be provided centrally by the university industrial office. Thus, as industrially funded or Mode 2 research expands in universities, research centres take over many of the functions that were previously located in the industrial office in the centre of the university. Inevitably, therefore, the situation becomes much less tidy; more tension can be generated between university central authorities and academic entrepreneurs in academic departments and research centres, and questions of co-ordination, adherence to university regulations, and recognition of success in terms of the allocation of institutional resources or of a financial return to the institution become issues of great sensitivity.

It is not possible to provide easily applicable solutions to these difficulties, especially when university circumstances, funding arrangements and commitment to a particular range of disciplines are so various.

7. Organizational issues

It is clear from the above description that the monolithic set of structures that universities previously employed to relate to industry are now no longer relevant and increasingly successful universities are adopting a range of organizational instruments to relate to the industrial world.

7.1 Science parks or incubator facilities

The recognition that regional economies need stimulation from knowledge-based companies and that academic entrepreneurs, if they are to be loosely retained  within a university structure, need independent space and facilities to develop company formations have led to many universities establishing science parks or company incubator units on or adjoining their campuses. A few universities have now established incubator facilities which provide space and support in terms of some common services in order to assist researchers to establish viable businesses based on their research findings. Some universities have, in partnership with external financial bodies, set up venture capital agencies, which will invest in such ventures. One of the advantages of this particular arrangement is that the fund will invest in research, which shows promise of producing a commercial outcome, rather than, as would be the case with a normal private sector venture capital company, only when the research is ready for exploitation.

The importance of a Science Park may be much less as a vehicle for launching university-based companies than in attracting knowledge-based companies to locate on a site adjoining a university and becoming partners with departments, centers or individual researchers in research and development.

7.2 The Research Office

The traditional university research office deals primarily with research grants and contracts, coming from national research bodies, research councils and foundations. Apart from being passive, research has become more competitive, in positioning an institution and, in a country like the where the Research Assessment Exercise has an important impact on recurrent grants and  'institutions' position, research offices have become more proactive in the new world of university-industry-government, partnerships have begun to play a key role, helping to formulate bids, negotiating with research councils and government and ensuring the contracts are carefully drawn up. However, these offices now tend to sit rather uncomfortably organizationally, when new specialist offices and agencies are springing up.

7.3 The problem of co-ordination

What has happened is that the university-industrial interface has moved from being one of n university activities, to becoming a central concern. The 'Triple helix' and the "new product of knowledge" have transformed the management of research in universities and have crossed traditional organizational and financial boundaries. Because it has become central to universities success, and because so many schemes demand a significant university investment, the various specialist offices have needed both co-ordination and leadership at something like Pro-\ Chancellor, Vice- Rector or vice-presidential levels. However, since the key players are academics   and  researchers   in   departments   and  centres,   this   role is much   less  real presentational, diplomatic or motivation. In other words, whatever the policy the university have towards region, industry or research in general, the implementation of that policy, when it comes to the details, lies within the individual academic staff. Many of the academicians will hold permanent appointments and without their support, such policies can simply remain 'stuck' at level of aspiration. Pro-Vice-chancellors may encourage and motivate, 'putting-up a public face" but they cannot deliver the product. Co-ordination in this area remains a matter of debate, and even, occasionally, one of controversy. At the bureaucratic level, the various offices and activities develop missions of their own, and overlaps in functions can all too easily occur. At the academic level, however, large research centres or departments and highly successful individuals tend to be successful because they follow strategies that rely on their own strengths and interests.

7.4 Short course units

R&D findings are increasingly conveyed to industrial, as well as to other clients, through short courses, or through modular masters programmes, designed to be taken in employment. Business schools and technologically based academic departments are the most active in this area, and networks created often result in company clubs and consortia to commission research. The provision of such programmes represents a key element in the diffusion of 'the new production of  knowledge', and a very important linkage between universities and industry. These programs will be mostly departmentally based, but universities have also created central short course units to assist departments, either in their penetration on the field, or in the management programmes for groups of departments or centers, which co-operatively can offer specialist programmes, sometimes these units are located in Departments of Continuing Education/Lifelong Learning; sometimes they are linked to one of the offices described above. In such circumstances, short course programmes represent powerful tools for bringing universities and industry together.

8. Financial issues

It needs to be remembered that one of the stimuli for universities to expand their role in these new markets, is the pressure that is placed on them by the increasing reduction in the resource for university teaching. However, the more universities follow this route, as a way of generating new income, the more at risk they place themselves, as they move away from the comfort of being funded by the state and against student interests. Large research portfolios are not necessarily financially beneficial, and can often be a considerable drain on a university's resources, unless overheads or indirect costs are claimed at an appropriate level. The more a university enters the large research leagues, the firmer its financial control must be, and the more closely its research office must ensure that the terms of the research contracts are being fulfilled. Failure to do so can lead to significant losses of income.

8.1 Overheads/indirect costs

The question of the level of overheads, or to use the preferred phrase, "indirect costs", that should be charged in respect of externally financed research, is often controversial. Nothing, however, cans be as controversial as to the manner in which, once obtained, they should be divided between the centre of the university, in respect to central costs, and the department or research centre. There are however some principles which should be observed:

(a)  A university should not subsidize private industry, by undertaking contract research and failing to charge an appropriately calculated indirect cost rate. Industry will often argue that they pay their taxes and should therefore not be expected to pay a university's running costs twice. However, as we all know, they are not paying twice, because a university is not funded for the additional running costs, which taking on contract research imposes. Also, the market demands that costs be covered. 

(b) The charge should be transparent; i.e., its make up should be described in sufficient detail so as the company may understand what it is paying for. For example, seek a 50% overhead, on research in science and technology, and 25% in the social sciences. These charges are based on a formula that covers the number of staff involved, the space occupied and the overall demands placed on the university by the contract.

(c) The final authority for the acceptance of the contract and the overheads involved is vested the Finance Officer, or in some other senior officer, who is able to refuse to sign if the figure is not reached. A university should feel able 'to walk away' from a research contract, that does not match up to covering its costs. The individual academic is, only too often, more interested in the contract, for the research involved (or occasionally the individual consultancy that goes with it), than on the level of overhead charged by the institution. Reconciliation, between the respective interests of the researcher and the university, has to take place.

(d) An element of the indirect costs must be incurred at departmental or research centre level and the sub-division of the lump sum needs to be regulated and transparent. What happens to the departmental share, is a matter the department must deal with, but there are often internal disincentives, where the department takes the entire departmental share and do' not disburse an element to the individual academic's own laboratory or office. Some universities, operate a sliding scale as an incentive to secure the full indirect cost, so that if a contract brings in the full 50%, the department receives a high proportion of the overhead than if it only brings in 40%.

(e) There is no substitute for transparency at all levels, but experience suggests that while this may make the resolution of difficulty easier, nothing will eliminate the possibility of dispute.

8.2 Incentives and motivation

While academic life and research, in particular, depend a great deal on personal motivation, the is no doubt that, in the real world, rewards are important. The most effective rewards are not necessarily financial; public recognition of achievement, granted by the university authorities, well as by one's peers is sufficient. Nevertheless, well managed staff promotion procedures that reward success in research are important stimuli to good and sustained performance, just poorly managed or arbitrary procedures or procedures that seem to prefer age and seniority, talent and success, are important de-motivators.

Resource allocation, whether at the level of university to department/research centre department/research centre, to the individual, provides a crucial reward system. In a department that outperforms the rest in research, but receives the same formulaic allocation of resource based only on the number of students, teachers will rightly feel that their institution is expending its efforts in the wrong way. An individual academic, who is winning large contracts, but who given a norm-based space allocation, or a norm-based allocation of secretarial, or both departmental support, will feel similarly 'de-motivated'.

A university culture that consistently rewards success is difficult to build up and to sustain, b once achieved, it provides the leverage, which encourages individuals, departments and other institution as a whole, to over perform, in comparison with other universities.

8.3 Investment

Research is expensive in time, equipment and salaries. In the present highly competitive university world, universities need to build up reserves that can be invested into research areas that match the new research economy. This implies the need to develop a strategic view of research and not simply a reliance on the research interests of individual academics. It is for this, among many reasons, that universities have tended to designate a Pro-Vice-chancellor to take the lead, both in overseeing research offices and other organizational units, and in trying to develop a coherent institutional research strategy. Within the fast moving competitive research market, and in the world of research partnerships and alliances, an essential feature of the 'new production of knowledge', it is essential that a university, at very short notice, is able to make quick decisions and have available funds for effective investment, or for the mobilization of research teams, or facilities. Universities need to be more business-like, if they are going to play their full part in the knowledge based economy.

9. Conclusion

What the foregoing suggests, is that the traditional organization of universities round disciplines, and the traditional university financial structures, need significant adaptation in order to fit in the new environment. Some universities favour significant financial or managerial devolution, to departments/research centres, but this can strip the institution of its overall strategic role. On the other hand, managing a university like a command economy will certainly stifle the entrepreneurial spirit, at the level of the academic unit. Plethora of single function offices can breed bureaucracy, but bundling all these functions into one Research Office can reduce focus on individual lines of activity. Individual universities have to find their own solutions to these problems, depending on their size, disciplinary base and the economy of their region. However, what has become clear is that either the implications of the new industrial environment must become a central element in a university's business, or it will pass it by. If universities allow themselves to be by-passed they will seem increasingly irrelevant to society, and will lose their best staff, either to competitor universities, or to non-university based research and training consortia. The development of knowledge-based industries, and the economy as a whole, would also undoubtedly suffer.

Dr. M Bhasi
School of Management Studies
Cochin University of Science and Technology
Kochi-682 022

Source: E-mail July 13, 2007


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