Does one size fit all? The multiple organizational forms leading to successful academic entrepreneurship.

This paper offers an integrative theory, through the use of transaction cost theory principles, that attempts to match the attributes of university-held innovations with the specific organizational form that best supports the identified attributes in innovation commercialization efforts. Two commonly utilized organizational forms are considered: the spin-off and the technology license agreement. Additionally, innovation transfer is conceptualized as a transaction and each of the organizational forms is considered an alternate governance mechanism for the management of the commercialization transaction. It is further conceptualized that by minimizing transaction costs, through the proper selection of the organizational form, universities may increase the odds of successful revenue generation from their entrepreneurial efforts. The overall goal of the paper is to enhance our understanding of proper organizational form-innovation attribute alignment as a key driver of innovation commercialization success, so that universities and their industry partners can increase their effectiveness in commercialization activities.

Introduction

Universities in many regions around the world are being pushed to find alternative sources of funding to finance daily operations and research activities. One of the more promising sources for alternative funding is the commercialization of the university's research discoveries. As such, the role of the university is undergoing a transformation as their missions are being extended to incorporate a greater commercial orientation. The dual role of the modern academic mission now requires universities to not only serve society by educating students, but also to foster research that can be developed into commercially viable products and technologies (Kirby, 2005). Not surprisingly, the entrepreneurial movement within universities has been met with both enthusiasm and resentment as the scholarly community struggles with the ethical implications of such activities (Mowery, Nelson, Sampat, & Ziedonis, 1998). Despite philosophical objections, the entrepreneurial focus on innovation commercialization within research universities is an ongoing and growing reality as universities in the United States, Europe, Australia, and other developed nations face competitive funding pressures (Cano, 2007). This trend is highlighted by a recent report in The Chronicle of Higher Education, which informs that at least two dozen universities each earned more than $10 million in fiscal year 2005 from licensing their rights to innovations developed through university research (Blumenstyk, 2007).

It would seem that the potential financial and economic benefits of university commercialization activities would be quite enticing to university and public policy administrators; however, university produced research is not currently flowing as quickly as it could to entrepreneurs and innovative companies who are eager to exploit new innovations. In fact, only a handful of universities consistently produce a steady stream of commercially viable innovations, and fewer still have a successful track record of working well with the business community in commercialization efforts (Schramm, 2006). Entrepreneurship researchers have recognized this trend, and as a result, have explored several issues related to the most commonly used commercialization avenues: the university spin-off and the technology license agreement (e.g., Agrawal, 2006; Shane & Stuart, 2002). A spin-off firm is an entirely new venture created solely for the purpose of commercializing the university's innovation, while a technology license agreement is a contract that gives outside entities the right to commercialize the university's innovation (Etzkowitz, 2000). In this paper, the term innovation is used to refer to any invention, new technology, idea, product, or process that has been discovered through university research that has the potential to be put to commercial use.

The widespread use of spin-off's and technology license agreements in university innovation commercialization activities has resulted in two separate, but highly related, streams of academic entrepreneurship literature, one focusing only on the technology license form and the other dealing only with the spin-off form (e.g., Agrawal, 2006; DiGregorio & Shane, 2003; Shane & Stuart, 2002; Thursby & Thursby, 2004). The outcome of these two distinct literature streams has been an increased understanding of the idiosyncratic issues associated with each form. However, the major disadvantage of this approach is that many universities utilize, or have the potential to utilize, both organizational forms in commercialization activities. Despite this limitation, a unified model that considers the differential effects of proper organizational form selection on the odds of commercialization success has not yet been introduced (Carlsson & Fridh, 2002). Hence, the purpose of this paper is to provide an integrative theory that identifies transaction costs as a major factor in the identification of the conditions under which one organizational form may be preferred over another for the commercialization of university-held innovations.

The theoretical model developed in this paper is based on an alignment principle that draws heavily on Williamson's (1981) Transaction Cost Theory (TCT) concept of asset specificity and opportunism, as well as on the work of Zander and Kogut (1995) who identify the attributes of innovation knowledge as codifiability, teachability, complexity, and system dependence. The Zander and Kogut innovation knowledge taxonomy provides a basis for the differentiation of innovations, while TCT allows the consideration of the costs associated with variations in the levels of asset specificity and the threat of opportunism that are a function of the attributes of the innovation. Thus, it is conceptualized that the knowledge associated with an innovation can be categorized according to its attributes and that these attributes directly impact transaction cost in commercialization activities. In this way, the magnitude of transaction costs becomes a key driver in the university's selection of the appropriate organizational form for innovation commercialization. The theory also recognizes the idea that the proper selection of the organizational form leads to a reduction in transaction costs, and in so doing, increases the odds of commercialization success, which is defined as the generation of revenue for the focal university.

In addition to an integrative contribution, this perspective is also needed because it directly addresses another important deficiency within the literature. In a recent review of the academic entrepreneurship literature, O'Shea, Allen, O'Gorman, and Roche (2004, p. 22) note that, "many of the studies conducted to-date are based on theories that are actually atheoretical in nature, that is the research suggests relationships in the form of a model without providing a consistent explanation to account for those relationships. As a consequence, there is a need for more studies to systematically explain, from an organizational perspective, why some universities may be more successful than others." In keeping with this theme, the theory developed in this paper is based on the systematic logic of transaction cost theory. In this way, the paper represents a novel application of a well-developed organizational theory to explain relationships unique to the academic entrepreneurship context. The outcome of this application is not only the advancement of academic entrepreneurship theory, but also salient recommendations for the increased effectiveness of the practice of academic entrepreneurship. The paper is designed to generate insights, based on a normative model, for university technology transfer units, industry partners, commercialization-minded faculty members, and administrators. Such insights could be of value to these individuals, allowing them to evaluate the attributes of the innovation and associated transaction costs as an indicator of the organizational form that will best support the transfer of the innovation under development. Finally, it should be noted that in the process of developing the theory, a salient group of drivers that play an important role in the commercialization of university-held innovations are identified, as well as a set of potential organizational forms for commercialization. However, I do not pretend to have isolated all the variables or organizational forms that may impact university commercialization efforts.

Organizational Forms and Innovation Commercialization

In a broad sense, the term organizational form refers to the characteristics of an organization, or a set of organizing activities, that define it as a distinct entity and also identifies it as a member of a group of similar organizations (Romanelli, 1991). As such, this paper considers two distinct organizational forms for the commercialization of university-held innovations: the technology license agreement and the creation of a new spin-off firm. While there are many organizational forms that could potentially be utilized for the commercialization of university-held innovations, this paper considers only these two forms. The rationale behind the selection of these two forms is that these forms are widely accepted and utilized in global commercialization activities, which increases the generalizability and practical applicability of the developed theory (DiGregorio & Shane, 2003; Etzkowitz, 2000; Feldman, Feller, & Bercovitz, 2002; O'Shea et al., 2004; Thursby & Thursby, 2004). Although beyond the scope of this paper, an exploration of the potential applicability of additional organizational forms to the context of academic entrepreneurship is certainly a worthy theoretical endeavor. As such, the integrative model developed in this paper provides a foundation for the future exploration of the suitability of additional organizational forms in commercialization activities.

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