University Times

It’s no secret that Pitt and Carnegie Mellon University are important contributors to the Pittsburgh area’s economy. Employment at the two universities (including UPMC) combined is roughly the same size as southwestern Pennsylvania’s high-tech employment sector, at about 60,000.

Both are among the top schools responsible for creating venture capital spinoff companies, and Pitt last year tied with Duke University for sixth nationwide with 10 startups born of University-developed technology.

Pitt/UPMC and CMU combined brought in more than $900 million in sponsored research and development dollars in the past year, which, by estimates from the Association of American Universities, supports the equivalent of nearly 28,000 jobs.

Along with those statistics, Donald F. Smith Jr., vice president for economic development at Pitt and CMU, noted that of about 70 Pitt-related technical startup firms in the region, at least 14 are faculty-founded, eight are licensees of University intellectual property and the remainder are founded by alumni.

“I think University inventors are key players in today’s economy. That’s true everywhere but it’s especially true in Pittsburgh,” said Smith in a March 29 keynote address at the University Senate’s spring plenary session.

“As Pittsburgh tries to make the leap from an industrial city to a technology and entrepreneurial knowledge-based economy, faculty inventors are key players. They’re producing the raw materials in terms of the talent that comes,” Smith told the audience at the session whose theme was the commercialization of academic innovation.

University impact is more concentrated in the Pittsburgh area than in other regions, he said.

“In Pittsburgh, we’ve been playing a much bigger role, for many reasons, some of which are just changes in the economy,” Smith said. “The knowledge economy puts a premium on talent and technology. Universities, research universities, are great places for producing the best talent in the world and for producing technologies that make the commercial products.

“But there’s also somewhat of a sense here in Pittsburgh that the universities have taken one step forward and the business community has taken one step backward” as the metals industries withered and the profile of local universities rose, Smith said. The impact of the steel industry’s decline still reverberates today, he noted: People who left the region in the 1980s aren’t here now to start or invest in companies and create the economic development activity that successful regions need.

“We recognize we have great interdependence with the region. We can’t be a great research university if Pittsburgh is failing as a place and a region. Our ability to attract the best students and the best faculty is fundamentally tied to the region’s economy.”

Not only do the universities contribute in terms of their size in generating employment, their research facilities help import intellectual talent and, in turn, business.

“In the new economy, this is where the action is,” Smith said, noting that half the student body at the two schools is local, and more than half stay in the region after graduation. “Fortunately for us, education has always been the No. 1 goal, and the good news for us is, if you’re focused on commercialization and economic development, it’s still our No. 1 goal. We have to teach and educate great students if we’re going to be successful,” he said.

“How many faculty, researchers and doctors do we attract to this region who are supplying the brain power behind service delivery, behind medical delivery and behind company formation?” he said. “We really are talent aggregators as well as talent developers.”

In turn, the presence of such talent draws technical companies, he said, naming a number of companies — Rand, Real Solutions, Intel, Seagate and Google among them — that have a presence in the region based in part on proximity to the local brain power.

“Star faculty are a draw,” Smith said. “[Companies are] coming here to have access to the great folks we have doing research and teaching.”

Local companies in turn sponsor research and provide employment for graduates, thus improving the economy, he said.

Smith, hired in 2002 to coordinate joint economic development initiatives for Pitt and CMU, announced the launch of the University Partnership (www.universitypartnership.com) aimed at growing the local technical sector economy by raising awareness and serving as a resource for researchers and entrepreneurs.

“I encourage you to embrace your role as a key mover in the technology economy in our region,” Smith told the assembled faculty and administrators. “Thank you for what you do. It helps us have a base we can build on to do things to grow this region’s economy, to turn it into not the top of the second tier of the tech regions, but a top-tier tech region in the U.S. I think we can get there and I think the things we’re talking about today are essential in helping us to do that.”

Admitting that the University is a relative newcomer to the commercialization of academic innovations, Smith said help is in place, and growing, to assist faculty members in technology transfer.

“Entrepreneurs don’t invent something and ‘poof,’ have a company; they have to swim across the Darwinian sea to make it to the other side. Here at the University we’re actually trying to create lifeboats and water wings and other kinds of flotation devices to help faculty navigate that Darwinian sea,” he said.

In his introductory remarks, Chancellor Mark A. Nordenberg reinforced the University’s support for technology transfer as part of its mission.

“This… is a cause in which we believe. It’s reflected in the many things we’ve done over the course of the last decade: The creation and expansion of the Office of Technology Management (OTM) and the support of efforts like the Institute for Entrepreneurial Excellence (IEE) and the Office of Enterprise Development (OED) within the Health Sciences.

“Here at Pitt we do view companies spawned and license agreements executed and patents issued and inventions disclosed as measures of progress….And our progress on each of these fronts has been substantial,” Nordenberg said.

“We can never lose sight of two things. First the single greatest good we can do for this community is to make the University of Pittsburgh the best university that it can be, which means in turn that our technology transfer initiatives have got to be aligned with our academic mission. The second is that though we may be doing comparatively better than others in our region, our own resource base is under stress with public support at all levels declining and with students shouldering tuition loads that are a source of real strain, which also means that our technology transfer initiatives have got to be calibrated to institutional economic realities and needs.”

Provost and Senior Vice Chancellor James V. Maher credited the 1980 Bayh-Dole Act with contributing to the growth of the nation’s small-business sector and radically changing the mission of its universities.

“Bayh-Dole is basically telling us if you want to do research on the federal dollar, you have a societal requirement to try to commercialize the intellectual property developed in your research labs,” he said.

That edict has created “a real, serious cultural tension” in universities as higher education moves from dual missions of teaching and research, to a three-part mission that includes commercializing intellectual property.

“We’re getting better and better at it,” he said. “As we get better… the whole community around us will prosper enormously.”

Among the plenary speakers were representatives of the on-campus organizations that assist in bringing academic research to the market.

Alexander P. Ducruet, an OTM technology licensing manager, said his group provides patent and licensing information to faculty, offering strategic planning for technology transfer. OTM also negotiates contracts with commercial interests, collects the revenues and handles government reporting requirements for those deals. Last year, about 60 new license agreements for University technology were negotiated, with about 35 new companies spun off over the past five years, he said.

Ann M. Dugan, assistant dean and executive director of IEE within the Katz Graduate School of Business, described the institute’s work. “Our confluence really starts where innovation and invention hit entrepreneurship,” she said. IEE comes in when entrepreneurs have been through OTM and are seeking to move their technology into the commercial sector.

A big part is connecting entrepreneurs with resources, she said, noting that IEE helped clients get $26.6 million in loans last year, counseled 750 internal and external clients and helped in the launch of 63 new businesses.

IEE helps faculty determine whether there’s a market for an idea and, if so, to develop a business plan. “Without really understanding the potential market need, it could just be a good idea or good research that doesn’t really have an application into the commercial sector,” she said.

OED director Carolyn E. Green reiterated what many throughout the session noted: Partnerships with business are crucial in order to bring ideas to market.

“We want our work in the Health Sciences to impact human health. We want the drug that we’re thinking about to cure someone’s cancer; we want that heart pump that we’ve been working on to save someone’s life. So, that focus and that desire to get there is mutually shared between us and that industry partner.

“But, we have to work with them because the University can’t go into manufacturing and sales and be in business. If we want our product to reach the patient the only way we can do that is with an industry partner,” she said.

Michael J. Madison, Pitt associate dean for research and associate professor of law, has not participated firsthand in commercialization, but the former Silicon Valley intellectual property attorney has created a blog to discuss what it will take to make such efforts viable in Pittsburgh.

“I have a message that I hammer on in that blog, (http://pittsblog.blogspot.com) … that commercialization of technology is not just about you and your invention. For the University, for the business community, for the researcher, the innovator, successful commercialization depends on the existence of an environment that supports and nurtures commercialization,” he said.

“What characterizes a productive environment in the business community is really different from what characterizes a productive environment in the university,” he said.

“Academics as a whole are not well equipped for the dynamism and pace of the business and private sector,” he said.

“If the University is going to take commercialization seriously … it needs to recognize that distinction in terms of entrepreneurial innovation cultures and… needs to capitalize on it,” he said.

Moreover, a transformation of the local culture into one that embraces entrepreneurship is necessary.

The hub-and-spoke style coordination of resources that served the region well in its heavy industry days is no longer as effective as a network approach that is friendlier toward high-tech development, Madison said.

“A new technical economy grows from the bottom rather than from the top,” he said. “How we think about this culture of entrepreneurship, this culture of innovation, how we conceive of the roles of innovation and individuals and institutions, about finance and investing, about the role of the University and the role of University faculty, needs to focus less on central planning and more on how to develop that environment at the bottom that supports emergent economic growth.”

Areas such as the Silicon Valley or Seattle, which have strong high-tech sectors, have links and pathways among the various players, rather than centralization.

“What their success has in common is the lack of a hierarchy that’s associated with how commercialization proceeds. It’s not top down, it is bottom up,” he said.

Madison said he’s trying to promote a dialogue on the key elements of an entrepreneurial economy: research and development, business planning, financial and human capital and deal flow.

“You can’t necessarily predict where the next big thing will come from,” he said. “You can’t necessarily predict what the next big thing is going be. It’s important to spread the money around and to seed lots of different ideas and lots of different prospects because in the end you don’t know what is going to be successful and what is not.”

In spreading that money around, investors must accept risk as an inherent part of the process. In Pittsburgh, investors are particularly uncomfortable with the concept that failure can be good in that it yields experience, he said. “Commercialization means embracing the logic of risk rather than trying to shield yourself from it,” Madison said.

Finding experienced managers for startups and raising the volume of transactions also are needed in order to jumpstart an entrepreneurial economy here.

“All of these pieces need attention simultaneously” in both material and cultural terms, Madison said. “The University and faculty need to recognize that there’s a different world out there it can embrace and make a part of what it’s doing.”

—Kimberly K. Barlow