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(1) Among the key changes were the Bayh-Dole Act of 1980, several court cases (Diamond v. Chakrabartty 1980; Ex parte, Allen 1984; and Ex-parte Hibberd 1987), the gene gun, revolutionary advances in computational capabilities, and micro-array technology.

(2) These are authors' calculations from U.S. Patent Office (2002) data available in Hall, Jaffe, and Trajtenberg (2003). For the purposes of this research, "life sciences" are defined as biological and agricultural sciences including biotechnology but excluding nonbiotech pharmaceuticals, and medical technologies (see data description and appendix for details).

(3) For other research on the external effects of university patenting, see Foltz, Kim, and Barham (20l)3), Link. Scott, and Siegel (2003), and Thursby and Thursby (2002).

(4) Arora (1995) identifies two methods for identifying complementarities in the error structure of a primal equation. The first requires that there be only two outputs, while the second requires that one have data on all variables directly affecting the decision variables.

(5) The different common functional forms can be seen in this formulation as follows: if Y = ln(y) and w = ln(w) then one gets the translog, while if Y = [square root of] y and w = [square root of] w then one gets the generalized leontief functional form.

(6) The translog functional form produces estimates of economies of scale and scope that have the same patterns as those presented here. The estimates of scale and scope are, however, larger in magnitude than the estimates from the generalized quadratic. Copies of these results can be obtained from the authors upon request.

(7) The appendix provides a complete list of the included universities, "Research I" universities is a category that was identified as a campus that in 1994 had at least $40 million in federal R&D funding, while granting at least fifty doctorates per year. In 1994, there were eighty-nine Research I universities in the United States, all but three of which are included in these data.

(8) The NSF in its surveys asks universities for its expenditures on research and development, which does not directly include teaching costs. Thus, in order to match what is measured in our dependent variable--research costs--we do not include undergraduates as a university output.

(9) Note that an argument can be made for an opposite effect if some extension monies are used for research purposes, or if the extension system by providing real world feedback lowers the cost to researchers of identifying high impact research issues.

(10) For doctorates, we were unable to locate reliable data, such as the subsequent employment of graduates, that could be used to adjust quality.

(11) Since the results presented below are primarily driven by cross-sectional variations, this level of technological change is unlikely to have much affect on the key measures of economies of scale and scope. Although, as pointed out by a referee, it is possible that technological change in the period covered by our data has changed the potential for economies of scope.

(12) See Hardle (1990) for a description of the Lowess technique. Surfaces for articles and doctorates as well as patents and doctorates had fairly uniform slopes, showing neither economies of scale or scope.

(13) Since we did not include technology transfer costs as a research cost, this variable represents the effect of the technology transfer office on the costs of research independent of what it costs to run an office.

Jeremy D. Foltz and Bradford L. Barham are, respectively, associate professor and professor at Department of Agricultural & Applied Economics, University of Wisconsin Madison and Kwansoo Kim is associate professor, Department of Agricultural Economics & Rural Development, Seoul National University. Table 1. The Growth of University Life Science R&D: University Totals Year R&D

Expenditures

($1,000,000) Patents 1981 2,398 45 1982 2,404 57 1983 2,483 53 1984 2,599 54 1985 2,780 58 1986 2,946 74 1987 3,104 91 1988 3,284 93 1989 3,447 135 1990 3,586 129 1991 3,695 139 1992 3,757 186 1993 3,882 198 1994 3,999 246 1995 4,097 265 1996 4,131 398 1997 4,298 597 1998 4,510 757 Sample average yearly total 3,411 199 Avg. annual growth rate (%)

1981-1998 3.8 19.4

1981-1990 4.4 13.6

1991-1998 2.9 25.9 Year Articles Doctorates 1981 32,273 3,615 1982 33,498 3,638 1983 33,258 3,689 1984 34,201 3,842 1985 35,879 3,736 1986 36,402 3,701 1987 36,456 3,653 1988 38,067 3,870 1989 39,985 3,971 1990 41,291 4,101 1991 43,565 4,328 1992 45,624 4,439 1993 45,208 4,585 1994 46,482 4,677 1995 47,208 4,904 1996 47,269 5,120 1997 47,232 5,124 1998 48,342 5,143 Sample average yearly total 40,680 4,230 Avg. annual growth rate (%)

1981-1998 2.4 2.1

1981-1990 2.8 1.5

1991-1998 2.0 2.9 Note: Numbers are yearly totals for the 96 universities in the sample. Patents are counted by the year they were granted. Table 2. Life Science Cost Function: Quantity

Fixed Effect Random Effect Patents 248.173 213.507

(107.566) ** (105.268) ** Articles 47.469 50.887

(4.500) *** (4.026) *** PhDs -22.078 -15.842

(28.795) (26.777) Patens (2) -9.985 -9.302

(2.726) *** (3.416) *** Articles (2) -0.0197 -0.0207