Examination of Witness (Questions 1-19)|
TUESDAY 6 MAY 2003
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 coverunfinished businessperhaps
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
(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
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.
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
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
A. No, I think it is not only because it is
5. It has more money.
A. It has more money. To be perfectly honestI
hate to say thisit 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.
6. You mentioned one million jobs.
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
A. Do you mean the Cambridge phenomenon or Cambridge
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.
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.