Synergies or trade-offs in university life sciences research.

As anticipated, both the faculty salary and LGU variables positively and significantly increase research costs, while staff wage is positive but not significant. The insignificant parameters on the undergraduate-to-faculty ratio suggest that, at an aggregate level, undergraduate teaching responsibilities do not spill over to a great degree onto research costs. Schools with medical schools did not have significantly different costs than those without, which supports the division we have imposed between the life sciences and other related parts of the university We find no significant effect of extension personnel on overall research costs, suggesting that the higher base costs at land grant universities in life sciences research come from sources other than the extension mission. The technology transfer office variables provide some surprising results, with the existence of a technology transfer office causing an increase in overall research costs. This effect is partially muted by the negative estimated parameter for those with technology transfer offices in existence before 1980, but that estimated parameter is not significant. Overall, this result is suggestive of trade-offs between increased technology transfer activities and overall research costs. (13)

While the regression coefficients provide suggestive evidence of scale and scope by output, estimates of ray economies of scale and scope derived using equations (2) and (3) provide the global measures of interest. These are estimated using the regression coefficient estimates and values of the independent variables in the formulas for ray economies of scale and scope. These are presented two ways: in table 4 using the mean of the independent variables and the regression estimates from tables 2 and 3, while table 5 presents median scope estimates for different types of universities (public/private and large/small) using the random effects parameters and independent variables for each of the universities to generate a distribution of scope and scale estimates. In table 4, the mean scale and scope estimates are tested using nonlinear Wald tests, which takes into account the variance of the estimated parameters and tests whether scale = 1 or scope = 0. Significance tests in table 4 are denoted by asterisks on the coefficients.

Table 4 shows significant estimates of increasing returns to scale, with the citation-adjusted regressions exhibiting larger scale economies. Table 5 demonstrates that these returns to scale are greatest at land grant universities, while nonland grant universities show lower-scale economies that approach constant returns to scale for the quantity regressions.

The scope estimates have more varied patterns in tables 4 and 5. The mean estimates from the quantity regressions show no significant evidence of economies of scope, while the citation adjusted models do exhibit significant economies of scope. This suggests that synergies between patents and other research outputs are most pronounced in the production of high-quality outputs. In the median estimates presented in table 5, the estimates of economies of scope are larger, especially for land grant universities, and are greatest for the small land grant universities.

Overall, the results for the median university in table 5 suggest that economies of scale and scope are the strongest for land grant institutions. Moreover, the finding in table 5 that these economies are even stronger in the citation-adjusted measures suggests that quantity and quality of articles and patents go hand in hand. The cost advantages that these increasing returns may provide the leading universities could cause divergence in productivity and overall performance even among Research I universities.

Conclusions

This work has estimated cost functions for university life science research using panel data methods in order to investigate economies of scale and scope. In contrast to much of the literature on academic patenting, the dual formulation used here allows an explicit estimate of cost complementarities and obviates the need to specify prices for research outputs. The results demonstrate the benefits of using panel data to take into account time- and university-specific effects as well as the importance of taking into account quality in measuring university outputs.

In contrast to a literature that has worried about both the declining quality of university patenting and an increased commercialization of the academic enterprise due to patenting especially in the life sciences, the results show evidence of economies of scope between patents and other missions of research universities in the life sciences. Once one adjusts for the quality of the output, our data suggest significant synergies between patents and other research outputs. This implies that rather than declining patent and article quality due to the increase in university patenting, we find evidence of lowered costs for producing high-quality outputs simultaneously.

The synergies between patents and traditional research outputs are especially evident for land grant universities. They exhibit the highest levels of economies of scale and scope, although they also have higher base costs as evident in the large and positive coefficient on the LGU dummy variable. We find that these higher base costs are not directly related to their extension mission though they may come from the expanded mandate land grant universities have to provide public goods to their states. The efficiency in the production process evident in higher-scale and scope economies for land grant universities may come from the discipline imposed by two decades of shrinking state budgets and legislative oversight, or may be due to different internal organizational structures. Whatever the cause, the strong economies of scale and scope in life science research among land grant institutions suggest that these universities have a distinct cost advantage in the production of high-quality life sciences outputs.

Our results leave some key issues on the effects of patenting on university life science research open for further research and analysis. The advent of technology transfer offices appears to increase costs in the life sciences rather than reduce them. While this effect may be due to the relative immaturity of the technology transfer process during our study period, this effect is significant and robust to alternative specifications. It suggests that there is a long learning curve to the operation of an effective technology transfer office before it generates positive synergies to a university.

In addition, the estimations show evidence of trade-offs between graduate student training and both patent and article production. The fact that this effect is stronger for patents than for articles suggests some trade-offs with respect to the long-term effects of the Bayh-Dole act, if research productivity in articles and patents comes in part at the expense of training the next generation of scientist. Future research with university level cost functions, perhaps at the level of all university outputs, might be able to shed more light on the potential trade-offs between training graduate students and other outputs.

While this work has found some synergies at the university level in the production of life science outputs at the university level, it leaves open a number of questions on how far reaching these results are. Do these synergies exist for all scientific outputs? Are they the product of aggregating to the university level or are they also present within individual labs or even faculty members? We plan to investigate these issues in future research.

Data Appendix

Academic Departments

We follow the National Science Foundation's NCES classification of disciplines for the agricultural and biological sciences. This definition includes what are generally the life science departments that do most research, but excludes clinical medical departments. The following broad department groups are included in the NSF definition of agricultural and biological sciences:

Agricultural: agricultural chemistry, agronomy, animal science, fish and wildlife, forestry, horticulture, plant sciences, aquaculture, soil sciences, landscape architecture, conservation, renewable natural resources.

Biological: anatomy, cellular, and developmental biology; biochemistry/chemistry; biostatistics and epidemiology; ecology and organismal biology; foods and nutrition; general biology/bioscience; genetics and molecular biology; microbiology and immunology; pathology; pharmacology and toxicology; physiology and biophysics; veterinary sciences.

Patents

Patent data were culled from the NBER patent database, where they were identified as having a university assignee. Patents assigned to the University of California system were associated with a campus (Berkeley, Davis, Los Angeles, etc.) by the location of their authors through searches of campus directories.