From Researcher to Entrepreneur

Max Planck study shows that 1 out of 4 scientists who patent their results also establish their own business.

May 08, 2006

Successful scientists are also active entrepreneurs. Germany's recent Nobel Prize winner, Theodor Hänsch, is a good example: the physicist co-founded MenloSystems, which has taken his "frequency comb" and used it to make products for the market. In fact, every fourth researcher that registers a patent also founds a company. That is the result of a study at the Max Planck Institute for Economics in Jena. It looked at cancer researchers in the United States; the study's authors say what's true for those medical scientists is also true for scientists of every stripe - in Germany as well as the U.S.A. (Study commissioned by the Ewing Marion Kauffman Foundation, March 29, 2006)

Public officials have said repeatedly that investing in research helps the economy - that "knowledge is the natural resource of the 21st century". What has not been so clear, however, is whether scientific progress actually yields economic growth. Some politicians complain that science stays among scientists - that they are only interested in publishing their work in high-profile journals or winning the Nobel Prize. This argument suggests that the "knowledge factories", set at the heart of the university and independent research institutes, are producers of much waste. The general public cannot understand their projects, which are available only to the minds of the initiated. But this scenario is not reality, according to David Audretsch and his colleagues at the Max Planck Institute for Economics. At least among scientists who register patents, one quarter of them start their own company and turn their invention into a business idea.

Audretsch and his co-workers analysed data from the National Cancer Institute in the U.S.A. The organisation uses most of its $4.8 billion budget to support cancer research. Audretsch's team looked at the 20% highest funded projects at the institute in the years 1998-2002, projects which involved some 1,700 scientists. Almost 400 of them registered patents. Audretsch admits "we are aware that our sample could influence the study's results." In other words, the scientists which receive the most money may have the best results - and the best chance to turn them into economic gain. "I personally believe that scientific excellence is a requirement for economic success, and mediocre scientists also found fewer businesses," says Audretsch. "But some experts say that top scientists have little time to exploit their results for businesses purposes."

The Max Planck researchers investigated the usual process behind scientists finding a way to apply their research to the economy. In the U.S.A., it means working with offices responsible for transferring technology from laboratory to market. Companies apply for licenses to profit from their inventions. "These offices have varying levels of success," Audretsch says. The one at Stanford University, at least, is very active and makes sure that companies attempt to bring to market projects from all different kinds of scientific research - as Theodor Hänsch remembers from his time at the university. Many companies are born out of the university; this is not a surprise to David Audretsch, who says "for scientists from a renowned university, it's much easier to get venture capital."

Besides venture capital, researchers also need social capital, if they want to become entrepreneurs. Audretsch and his colleagues understand social capital to mean how well a scientist communicates and co-operates. "He is able to profit from the experiences of others and borrow knowledge from them that he doesn't have," Audretsch says. "But unfortunately, we have very limited data about this." Audretsch's team evaluated how many patents the entrepreneurs registered with colleagues and how often they published scientific results with other authors - compared to scientists that did not enter the market. Indeed, entrepreneurs registered more patents, and had more frequent co-operative publications.

Audretsch guesses that these results basically reflect German academic culture, as well as American. "Probably, conditions are better in the U.S.A. for entrepreneurs to found companies," he says. "But conditions can change in Germany." Physicist Theodor Hänsch believes, however, that the spirit of entrepreneurship is not as strong in Germany as in the United States.

"This has to change," says Peter Gruss, President of the Max Planck Society. "It's not enough to have ideas - they have to be brought to reality. The current study by our scientists shows the conditions under which basic scientific knowledge can be applied and given economic expression." David Audretsch's major topic of inquiry is how knowledge moves from laboratory to marketplace. And he already has a formula: "We need better knowledge filters." These are criteria to figure out whether ideas have economic use. Such criteria would be of great use to the German Research Innovation Endowment Fund, the concept of which was developed at Garching Innovation. The Max Planck subsidiary company is paving the way for technologies from institutes and research organisations to be used economically. The institutes, however, often do not develop the ideas in a way that they are market-ready. That is the purpose of the new endowment fund: it gives financial support from the public coffers to scientists from universities and research institutions. Of course, not every idea will be funded, because not every idea can make money. "But researchers shouldn't have to go through what SAP's founders went through," Audretsch says, referring to scientists who took their software idea to IBM and were rebuffed - and then went on to found their own company.

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