Technological progress has been the key to improved living standards, but how and where do new ideas get their start? The answer might give us some insight into how we can support greater innovation. Some suggest universities have been an important source of innovative technology. A look at the people involved in the development of patented technologies can give an idea of how much innovation originates in universities.Technological innovations ; Universities and colleges

Gerald Marschke

Jinyoung Kim

English

Research Papers in Economics

How Much U.S. Technological Innovation 
Begins in Universities? 
by Jinyoung Kim and Gerald Marschke
April 15, 2007
ISSN 0428-1276
means of scientiﬁ  c communication. 
Industry personnel read scholarly 
publications written by university 
scientists, and they absorb univer-
sity research through attendance 
at academic conferences and lec-
tures. Researchers studying tech-
nology transfer believe, however, 
that much new and valuable uni-
versity-produced knowledge is not 
easily transmitted except through 
sustained, close interaction with 
university researchers. 
New knowledge initially is known 
only to its discoverer or discover-
ers. If knowledge is not incremen-
tal—that is, distant in some sense 
from pre-existing knowledge—it 
may not be easily connected to old, 
familiar science and thus difﬁ  cult 
to codify. This kind of knowledge 
is naturally excludable and tends, 
at least initially, to remain lodged 
in the human capital of the discov-
ering scientist or scientists. 
This “tacit” knowledge is passed 
to the noninitiated only when they 
have the opportunity to observe 
and query the discoverers at the 
scientiﬁ  c bench over a sustained 
period of time. Coemployment 
and collaboration may create those 
kinds of transfer opportunities. 
Thus, to tap some kinds of univer-
sity know-how, ﬁ  rms must employ 
or seek collaboration with uni-
versity researchers. We use U.S. 
patent data to study the role of 
research personnel as a pathway 
for the diffusion of ideas from uni-
versity to industry. 
 Tracking Inventors
The inventors behind the patented 
invention are listed on each patent, 
as is the ﬁ  rm, government organi-
zation, or university to which the 
patent is assigned. With our col-
league Sangjoon Lee, we matched 
inventor names on patents to con-
struct a panel data set of inventors 
that contains the patents in each 
year of the inventors’ careers. 
Federal Reserve Bank of Cleveland
In developed economies, tech-
nological progress is a key route 
to improved living standards, 
and universities are thought to be 
important sources of innovation 
in the economy. The U.S. patent 
records offer a rich set of informa-
tion with which to examine the ﬂ  ow 
of technological know-how from 
university laboratories to industry. 
Using information gleaned from 
patents, a number of interesting 
questions can be addressed: How 
signiﬁ  cant is the ﬂ  ow of techno-
logical know-how from univer-
sity to industry? Has it changed 
over time? Which industries ben-
eﬁ  t the most from university 
research? What sorts of ﬁ  rms are 
best equipped to access university 
research? 
We examine these questions using 
data from 1985 to 1997 (the last 
year for which we have reliable 
data), a period that coincides with 
an unprecedented increase in inno-
vation and patenting in the United 
States. 
 Knowledge Flow from 
University to Industry
How we seek to answer these ques-
tions depends on our belief about 
how knowledge transfer between 
the sectors takes place. Certainly 
some economically important 
science ﬂ  ows from universities 
to industry via the conventional 
Technological progress has been 
the key to improved living stan-
dards, but how and where do new 
ideas get their start? The answer 
might give us some insight into 
how we can support greater inno-
vation. Some suggest universities 
have been an important source of 
innovative technology. A look at 
the people involved in the develop-
ment of patented technologies can 
give an idea of how much innova-
tion originates in universities.  This enables us to identify for each 
inventor when and how often he or 
she is innovating for university and 
industry assignees (the legal enti-
ties to which the intellectual prop-
erty right is awarded). For each 
patent assigned to industry, one can 
tell whether its inventors had pre-
viously appeared as an inventor on 
a patent assigned to a university. 
Appearing on a patent assigned to 
a university is evidence that the 
inventor has had exposure to uni-
versity research, either directly as 
a university researcher or through 
some form of collaboration with 
university researchers. 
We also link a comprehensive data-
base on degrees awarded in North 
America and Europe to the inven-
tors to establish whether the inven-
tor has an advanced degree (doc-
torate, usually), another measure of 
exposure to university research. 
Patents list the assignees, and they 
are, in most cases, the employ-
ers of the listed inventors. For 
assignees that are publicly traded 
and in the pharmaceutical and 
semiconductor industries, two of 
the most innovative industries in 
the U.S. economy, we obtained 
data from the U.S. Securities and 
Exchange Commission. Thus for 
each of these assignee-ﬁ  rms, we 
know, for example, the ﬁ  rm’s size, 
age, expenditures on research and 
development activities, and the 
scope of its operations (its number 
of product lines). With ﬁ  rm-level 
data, one can evaluate what makes 
some ﬁ  rms more interested in 
acquiring or more able to acquire 
the know-how produced in univer-
sity laboratories. 
We ﬁ  rst consider the prevalence 
of patents granted to industry that 
list at least one inventor who had 
previously been named an inven-
tor on a recent (less than ten years 
old) university-assigned patent. 
Being named on such a patent 
typically means the inventor was 
conducting research as a univer-
sity-employed scientist in a uni-
versity laboratory, or as a collabo-
rator of such a scientist. Either 
way, the inventor with university 
research experience has had close, 
sustained contact with novel, spe-
cialized techniques and bodies of 
knowledge, much of which is dif-
ﬁ  cult to access by the ﬁ  rm. 
 Where the Collaboration 
Is Closest
Between 1985 and 1997, the per-
centage of patents that name at 
least one inventor with university 
research experience rose econo-
mywide from 0.9 to more than 
2 percent. Examination of the 
pharmaceutical and semiconduc-
tor industries reveals that results 
are not uniform across industries. 
Perhaps not surprisingly (and, 
as it turns out, by all of the mea-
sures that we examined), the phar-
maceutical and semiconductor 
industries demonstrated higher-
than-average interaction with uni-
versity research. 
Between 1989 and 1997, about 
6.6 percent of patents in the phar-
maceutical industry included at 
least one inventor with university 
patenting experience compared to 
about 1.9 percent in the semicon-
ductor industry. In both industries, 
we ﬁ  nd a substantial increase in 
the percentage of patents naming 
inventors with university patenting 
experience: from approximately 
5.5 to 6.8 percent in the pharma-
ceutical industry, and from approx-
imately 0.2 to 2.5 percent in the 
semiconductor industry.
Universities infrequently pat-
ented their inventions before the 
1980s. So while it is possible that 
ﬁ  rms were interacting with uni-
versity research in earlier years at 
the same rate as in later years, we 
do not detect it. In that case, the 
increase we observe in the use of 
inventors with university research 
experience is not a deliberate 
attempt to get at university tech-
niques and knowledge. It is more 
so a natural consequence of the 
more numerous inventors with uni-
versity patenting experience that 
occurred for reasons unrelated to 
industry’s labor demand. 
We do in fact ﬁ  nd that two-
thirds of the increase is due to the 
increased prevalence of inven-
tors with university research expe-
rience. One-third is due to an 
increase in the likelihood that a 
university-experienced inventor 
was used by industry in 1997 com-
pared to in 1985.
Perhaps a more direct measure 
of industry seeking out univer-
sity-based science is the per-
centage of industry patents that 
include at least one inventor with 
an advanced degree (master’s or 
doctorate degree in natural science 
and engineering). It is more direct 
because we know that an inventor 
with an advanced university degree 
has undergone a lengthy and 
intense period of university train-
ing. Some inventors that appear 
on university patents, on the other 
hand, may have been brought in 
on a collaborative basis and subse-
quently experienced little exposure 
to university sources of knowledge 
and techniques. 
We ﬁ  nd an increase in the percent-
age of patents granted to indus-
try that name an inventor with an 
advanced degree from 6.9 percent 
in 1985 to 14.7 percent in 1997. 
The average levels over the period 
are higher in the pharmaceutical 
and semiconductor industries than 
in the economy broadly: the aver-
age is 33 percent in the pharma-
ceutical industry and 19 percent in 
the semiconductor industry. As we 
found with the university research 
measure, the rate of increase in the 
fraction of patents naming inven-
tors with advanced degrees was 
positive in both industries, and it 
was higher in the semiconductor 
industry. Finally, we consider the percent-
age of industry patents that cite a 
recent (less than ten years old) uni-
versity patent. Patent applicants 
are legally obligated to disclose 
any knowledge they have of previ-
ous relevant inventions. The patent 
examiner then adds to the applica-
tion any relevant citations omit-
ted by the applicant. Thus, through 
the patent citations, each patent 
documents the “prior art” upon 
which the new innovation builds, 
and because we know each cited 
patent’s assignee type, we know 
whether the prior art originated in 
university laboratories. 
Like the previous measures, the 
citation measure rises over time. 
In 1985, 3.1 percent of indus-
try patents cited university pat-
ents economywide. The measure 
increases steadily until 1995, when 
it achieves a rate of 8.4 percent, 
dropping off to a little under 7 per-
cent by 1997. Qualitatively, this 
measure displays patterns that are 
similar to those of the previous 
measure. The measure’s average 
level is higher for the pharmaceuti-
cal and semiconductor industries, 
but in both industries this measure 
approximately doubles over the 
1985–95 period, though both show 
a bit of fall off through 1997. 
Given that universities patented 
their innovations at lower rates in 
earlier years, industry access was 
not as apparent. However, the like-
lihood that a university patent is 
cited by industry is not subject to 
this problem. We ﬁ  nd that the aver-
age university patent in 1995 is 
more likely to be cited in an indus-
trial patent than the average uni-
versity patent in 1985. Between 
1995 and 1997, the citation rate 
falls to very nearly the citation rate 
in 1985, however. 
 Characteristics of 
Receptive Firms
What are characteristics of ﬁ  rms 
that make them more or less 
receptive to the kind of research 
emanating from universities? In 
our ﬁ  rm-level analyses, we ﬁ  nd 
that ﬁ  rms with large research 
operations in both industries are 
more likely to access university 
research than ﬁ  rms with small 
ones, holding other measurable 
characteristics constant. 
This suggests the presence of scale 
economies that give an edge to 
large or diversiﬁ  ed ﬁ  rms in exploit-
ing university know-how. Younger 
pharmaceutical ﬁ  rms are more 
likely to utilize inventors with 
university research experience. A 
ﬁ  rm’s age does not seem to mat-
ter in the semiconductor industry. 
Empirical ﬁ  ndings in other con-
texts suggest what economists call 
complementarity between skilled 
labor and capital; that is, capital 
equipment (machinery, tools) is 
more productive in the hands of 
skilled workers, and thus capital 
equipment and skilled labor tend to 
appear together in production. We 
ﬁ  nd capital–skill complementarity 
as the use of university-research-
experienced innovators (a kind of 
skilled labor) rises with the ﬁ  rm’s 
research and development expendi-
tures per inventor. 
 How Important Are
Universities to Innovation?
The period under study witnessed 
unprecedented changes in the inno-
vation rates in the United States. 
Between 1961 and 1984, the 
annual domestic patent application 
count in the United States varied 
within a narrow range of 59,000 
and 72,000. After 1984, however, 
the annual patent application rate 
doubled, reaching 149,825 in 1999. 
The number of patents granted 
experienced a similar rise. 
Our results suggest that techno-
logical transfer from university to 
industry may have played a role 
in the innovation explosion of the 
last two decades. We ﬁ  nd econo-
mywide and in the very innovative 
pharmaceutical and semiconductor 
industries, in particular, that indus-
try’s use of inventors with past 
experience in university laboratory 
settings increased during the mid-
1980s through the 1990s. Findings 
predicated on citation-based mea-
sures of industrial access of uni-
versity research point in the same 
direction. 
A number of questions remain 
unanswered and the focus of our 
(and other researchers’) present 
and future work. Foremost among 
these is: What is the effect of hir-
ing or collaborating with univer-
sity-experienced scientists on the  
productivity and output of ﬁ  rms’ 
research and development activity? 
Patents represent more applied 
forms of research, and our patent-
based measures likely imperfectly 
capture the transfer of the more-
basic kinds of university knowl-
edge to industry. Thus another 
important part of the research 
agenda is expanding measures of 
technology transfer. Industry and 
university scientists often collabo-
rate in publishing scientiﬁ  c papers. 
Publication information is avail-
able over time and relatively easy 
to gather. Accordingly, collabo-
rations on scientiﬁ  c publications 
may serve as a useful barometer 
of technological transfer of a more 
basic kind between the academic 
and industrial sectors. Answering 
these questions will help us better 
understand the role of university 
research in U.S. economic growth.Jinyoung Kim and Gerald Marschke 
were participants at the Federal 
Reserve Bank of Cleveland’s Confer-
ence on Universities, Innovation and 
Economic Growth, held in Novem-
ber 2006. Dr. Kim is a professor at 
Korea University, and Dr. Marschke 
is an associate professor of economics 
at the University at Albany, State Uni-
versity of New York; a faculty research 
fellow at the National Bureau of Eco-
nomic Research; and a research fellow 
at the Institute for the Study of Labor.
The views expressed here are those of 
the authors and not necessarily those 
of the Federal Reserve Bank of Cleve-
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How much U.S. technological innovation begins in universities?

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How much U.S. technological innovation begins in universities?

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