Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 1-19)




  1. Good afternoon, Professor. Our names are in front of us and you may not know but your name is in front of us too. First, a warm welcome to you. We are delighted that you have taken time out to come today. I know that your time is scarce. May I also welcome your wife, who, I gather, is sitting at the rear of the Committee room? We have around 35 minutes and a range of questions and it would be enormously helpful if you could bear that in mind in your responses. If there is anything at the end of it we still need to cover—unfinished business—perhaps you and I could correspond to tidy up any loose ends. Before we start, if there is anything you would like to say to us by way of introduction, please do. Then we shall go straight into some questions.

  (Professor Roos) It is a pleasure to be here. I should tell you a little about my background at MIT. I spent most of my career involved in working on the university/industry interface. In addition to my academic pursuits, I have run a centre for transportation studies and I ran the centre for technology policy and industrial development in which we did a number of industry studies, one in particular on the automobile industry where we had a great deal of participation, not only from automobile companies around the world but also from the DTI and European Commission. We published the book, The machine which changed the world, which wound up having a fairly profound, I think, effect on the auto industry. We had the book translated into 13 languages, it sold 600,000 copies and went a long way towards cementing the relationship between university and industry. I am currently Associate Dean of Engineering Systems; I run an interdepartmental faculty in which we have engineers, managers, social scientists and I am currently on sabbatical leave at Cambridge University.

  2. Hence we have the pleasure of you before us today. What role has state or federal government policy played generally in developing MIT's activities in this area of entrepreneurship or has this been really quite independent of federal or state government support?

  A. Let me answer that in two ways. First, directly with respect to what the role of government has been, because a very, very dramatic change occurred in the early 1980s. Up until the beginning of the 1980s, if the federal government sponsored research at a university or at small business the patents, the licences, stayed with the federal government. The federal government would then grant essential non-exclusive licences to industry. Not surprisingly, maybe about five per cent of the patents ever got picked up, for two reasons: first of all, people were not interested in non-exclusives, they wanted exclusives if they were going to be doing new innovative product development; secondly, the government was really not well suited as an organisation to promote entrepreneurship. So in the early 1980s there was a landmark piece of legislation called the Bye-Dole, because it was Bob Dole and Bert Bye who passed this legislation and, by the way, it still exists today. It has survived for all these many years. What it said was that universities and small businesses can elect to have ownership of inventions, but the rights stay with the university. The faculty has to sign an agreement to assign the inventions to the university, but in return it then gets some revenue. That has had an absolutely dramatic impact. It has transformed the universities. It has created a new set of organisations, for example, there is an organisation of technology transfer office in the universities which has gone up by 400 per cent between 1980 and 1990 and another 400 per cent between 1990 and 2000. In my paper I give you some statistics with respect to MIT: 4,000 companies, 1.1 million new jobs, $200 billion of sales. That is all the result really of Bye-Dole and that has been the case at other universities. Let me answer that a second way. If you were to ask me what is really most important, where you have the university, industry and government, most important would be the university itself. MIT has developed an entrepreneurial culture where, throughout the entire organisation, starting with undergraduates right through faculty, there is very much a focus, not only on doing basic research, but then exploiting that research, getting the research out. It has been responsible for a major impact with respect to entrepreneurship in terms of the alumni, in terms of the faculty and the companies it spawned. To me that is the primary reason why MIT has been successful. The second reason is the willingness of industry to work in a partnership mode with the institution. Obviously, if industry were not willing to be involved, then this was not going to work at all. Then of course government, but I would have to put government almost as third in terms of the importance. Clearly government has been important. Eighty per cent of our basic research funding comes from government and without that one would not have the breakthroughs of new science and technology. From an entrepreneurship point of view, all three are important, but the industry and the university are really the most important and have made it successful.

  Chairman: That is extremely helpful.

Lord Fearn

  3. Are you aware of any evaluations of federal or government support schemes for new businesses which have been particularly helpful or unhelpful in the MIT context of supporting entrepreneurship?

  A. Let me go back just for a moment. What I should also have said was that the state government has had almost no impact at all. It has all been at federal level. That is probably not the case if one looks at Stanford, where California has been more aggressive than the State of Massachusetts, but certainly in the MIT case, no impact.

Lord Howie of Troon

  4. Is that because California is bigger than Massachusetts?

  A. No, I think it is not only because it is bigger, but—

  5. It has more money.

  A. It has more money. To be perfectly honest—I hate to say this—it has a much better informed legislature than Massachusetts. Massachusetts tends to be very politicised and does not have the educational heritage. If one looks at California, they have a university system and they really have invested in training and education which is very, very important. It is a combination of factors. To answer the original question, I am not aware of any evaluations. It is not to say they have not been done, but I am not aware of them.

Lord Fearn

  6. You mentioned one million jobs.

  A. Yes.

  7. How are they spread?

  A. Not surprisingly the majority of the jobs have tended to be in Massachusetts. If one looks at major areas of significant entrepreneurial activity in the United States, it is not surprising they tend to what is referred to as the Route 128 sector, which is around MIT, Silicon Valley, which is around Stanford, a sector around University of Texas and then one around North Carolina University. Major impact is there, however. The Bank of Boston did a study in the 1970s and they found there were five states other than Massachusetts who had 20,000 or more MIT jobs in that state in terms of new entrepreneurial business; most with the state, but certainly it was broad based as well.

  8. You said 80 per cent were supported by government.

  A. MIT does sponsored research and 80 per cent of the money for the research comes from the federal government. That research is often the basis of the entrepreneurial activity where either students, alumni or faculties will go out and then form new companies, but that is not directly the result of the 80 per cent government funding; that is really an indirect benefit which is coming from it.

Lord Cavendish of Furness

  9. How well has the MIT culture taken root at Cambridge?

  A. Do you mean the Cambridge phenomenon or Cambridge University?

  10. Cambridge University.

  A. The Cambridge-MIT Institute was started about three years ago and the rationale behind it was to take the successful examples of MIT and transfer them to Cambridge University, primarily in four areas. First: undergraduate education. What has happened there is really quite interesting. Already we are finding students who are coming back and asking questions of Cambridge University: why are we not doing this, which is occurring at MIT? I might also mention the MIT students who come back to MIT asking similar questions. This is cultural exchange. I think the experiment is going extraordinarily well in terms of the start-up mode, in particular three areas: the undergraduate exchange; a second area is a series of what we call professional practice programmes. There are programmes which focus not on educating people to go out and do research, which is the traditional role of graduate education, but to go out and be entrepreneurs, to go out and work in industry. These are programmes which bring together management and technology, so they are joint programmes. At Cambridge they are between geology and engineering; one of the programmes, for example, is bioscience enterprise. We have another, chemical engineering practice, where students go out into industry as part of their education. The first year they have been run has been enormously successful; far more applications than we ever expected. We had over 90 students in programmes. We are very, very pleased with those and they are going to be expanded. On the third area my colleague, Alan Hughes, is in a better position to answer. One of the ideas was that whatever was successfully done between MIT and Cambridge should be transferred throughout the entire UK. So we have set up something called the national competitiveness network, which brings together all the science enterprise centres, which DTI has funded initially, plus other universities. You can ask Alan for more detail, but those have been enormously successful in terms of knowledge generation, information exchange, bringing these universities together and some of the programmes we have done have been to train technology transfer officers in all the various universities. The fourth area is research and so far we have funded a number of broad area programmes and now we are entering the phase where we are going to focus on five or six areas. Five or six areas are primed to generate lots of entrepreneurial activity, lots of knowledge exchange, bringing together not only MIT and Cambridge, but universities in the competitiveness network to regions and the national government. We received 157 proposals about a week ago and we are in the process now of trying to select out of those 157 about six major areas to focus on.

  11. Which of MIT's activities have contributed most to maintaining innovative and entrepreneurial capacity in large companies? Are any or all of those activities exportable to Europe? Can government do anything to promote that?

  A. It is somewhat difficult to select a particular activity. As I think about the relationship we have with large companies, the relationships tend to be very broad based and purposely so; they are reinforcing. I shall take an example. Ford Motor Company. We have an industrial partnership with Ford, one of eight, in which they spend of the order of $4 million a year, it is broad based, it is long term and it is strategic. As a matter of fact it started when Lord Trotman was CEO of Ford and he sat down with the President of MIT and said "Let's see what these two institutions can do". In addition to that, Ford sends students to MIT every year in three or four major educational programmes. They are involved in a number of seminars, they are sponsoring summer internships bringing students out there. A whole set of activities. What we found over time was that the university and industry were working closer and closer. The one thing I should like to stress is that it is a partnership. We have Ford people at MIT; we have MIT people at Ford. There is a real interchange back and forth. We have MIT professors consulting for Ford so when the research looks really promising and Ford wants to get an exclusive on it, they will hire the faculty member as a consultant. All of that could be transferred to Europe and to the UK, but what it requires is the university to be able to have the right sort of entrepreneurial culture to be able to accept that and to exploit it.

Lord Shutt of Greetland

  12. It is a very similar question, but it is about the smaller and new start-up companies. Which of the activities of MIT have contributed most to maintaining innovative and entrepreneurial capacity with those?

  A. Let me point out here a government programme which has worked rather well. There is a programme called the small business innovation research programme in which every government agency has to certify a certain percentage of their research funding that is going to go to small or start-up organisations. But there is a requirement that those organisations have to partner with the university. I think that has been really quite effective. We have many examples of that at MIT where we tended to work with small organisations. The other thing which has tended to work well, is that we do a lot of work on a consortia basis which allows the small firm to get involved, so that we might have a programme which has 100 or 200 different organisations involved, many of whom were small start-up organisations who could never afford to have an individual contract with MIT. We think it is really important to have them involved and they benefit in two ways. They benefit with the interaction of MIT, but the second benefit is that they can start strategising about supply chains and they can see various other organisations sitting around the table and saying to themselves "As we grow, who are the organisations we want to do joint ventures with, strategic alliances with" and so it has lots of real benefit. Thirdly, we put on a very extensive series of technology update seminars many of which are geared specifically towards small and medium organisations.

  13. The final point you make in your paper is "The UK needs a research university system that respects entrepreneurial activities". You are saying that a university based on entrepreneurship is very important indeed. Are you able to tell in the United States the people who have become very successful entrepreneurs who have not touched the university system? I am trying to find out what you are adding to this. Are there people who get away with it successfully without getting near you?

  A. Yes. That is quite true but there are certain areas where one really needs significant scientific or technological knowledge. If one looks at biotechnology for example, I think if you look at just about all the successful start-ups in biotech, they came out of universities. It is not quite the same as Steve Jobs going in his garage and building a little computer or doing some software. That is something which clearly can be done by a broad-based community. If one starts to look at some of the emerging technologies like nanotechnology or biotechnology, absolutely the university: it is not important, it is critical, absolutely critical in terms of the entrepreneurship and the generation of those companies. You can just look at the record and get the data.

Baroness Cohen of Pimlico

  14. May I pick away at this? I worked in my youth for just such a Route 128 company which you described; in fact it was a political company. We designed war games for your Defense Department and the place was full of mathematicians except for me who was a scenario writer. In America the natural reaction seemed to be that if you had a government contract you set up a business to do it, it did not go to the university department. If a university department got a government contract, it set up a business to do it so everybody could make some money and get on. It seems to me that you have told us something critical about assignation of rights, which I remember being a great issue back in 1966. Could you tell us again what the Dole legislation actually did? This seems to me to be a policy we might get our eye on.

  A. What it did was to say "We, the government, are not the best organisation to get inventions and technology out into the marketplace, that is better done by the universities or by small businesses. So if we give a government contract, we will grant the university or small business the right to all inventions to come out of that research".

  15. That is huge.

  A. But the university has to share with the researcher who is responsible for it and that researcher must sign an agreement that the IP rights are not his, they are the university's. So the university now is in a position where it can do the deployment of the technology.

  16. Is it the same with a small business? If a university got a contract and subbed to a small business, the small business would have to sign away the IP rights.

  A. Yes.

  17. So there is the university sitting with a lot of IP rights with which it does what? Just finances the university, or . . .? How does that aid setting up a business?

  A. It does three things. First of all, we believe at MIT and I think most universities would believe the same thing, that we have a responsibility to disseminate the results of our research in as broad-based a fashion as possible, totally independent of the profit-making motive, to get the technology out. In the past, that was simply writing a scholarly paper and industry would pick it up, but it has become much more complex, so we have several offices at MIT; we have a technology licensing office, which is specifically geared towards taking these inventions and working out agreements with industry in terms of who is going to have rights and how the royalties are going to be split. In some cases MIT will take an equity share. I think, however, it is a misnomer to believe that universities are going to get very, very rich doing this. The profit-making aspect of it is quite secondary.

  18. No, I was really wondering how they generated industries with it.

  A. Yes, but I am saying that some people have the mistaken notion that some university is going to make a lot of money and that is not really the case. The universities also benefit because typically in their work with these start-ups a lot of the experience has come back to the university. I know a number of MIT professors who have said that they learn more from industry than they give to industry. It comes back into the classroom, it comes back into research, so it has been an enormously beneficial set of relationships.

  19. And the university has the IP rights, so industry has to come to it.

  A. Yes. As I say in the memorandum, I would estimate 150 new firms a year coming out.

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