Challenges and Opportunities for Innovation in the Public Works ...

The typical approach for the capture of the value added by a discovery has been
to license its commercial exploitation for a fee representing a percentage of the ultimate
commercial value. Over an extended period of time, this time-honored approach can
indeed generate substantial revenues as a discovery moves into the market place.
However, that value is ordinarily spread out of a period of years, so that the immediate
financial value of the discovery is relatively small. (While the alternative of selling the
discovery for a fixed price has the advantage of an early burst of resources, unless the
discovery is of known and immediate value, the total value realized tends to be materially
less, since the buyer is taking all the risk of commercialization.)
The revenue stream that is created by commercialization typically lacks the
reliability that is necessary to use it as a base for amortizing capital debt. Yet it is a
resource that, under the right circumstances, can be used to support infrastructure
development. The key is to create ongoing financial linkages that transcend single
projects and discoveries. The research and development partnership and its progeny
provide vehicles for just such a capital financing mechanism.
In recent years, an increasing number of colleges and universities and other
government-sponsored research entities have become directly involved in "technology
transfer." That term encompasses a broad range of activities intended to lead to the
commercialization of discoveries arising out of the work of members of the academic
community. Indeed, although the term itself is of recent vintage, "technology transfer" has
been a fact of life in higher education virtually from the inception of the first universities,
as discoveries have made their way into the stream of commerce. The difference, and
the focus of this analysis, is the transformation of the role of the institution from that of a
passive vehicle into an active participant in the process of technology transfer, through
that process creating a mechanism for infrastructure improvement.
There are several restraining forces on the utilization of newly-created knowledge
as a significant financial instrument. One, quite obviously, is uncertainty over the value
of the discovery. However, another less obvious factor is uncertainty respecting the
nature and magnitude of the risks faced by institutions that become directly involved in
the commercialization of research. The advantages of a revenue stream can readily be
outweighed by liabilities that quickly sap those same resources -- and then go on to
invade the general resources of the entity.
It should be clear at the outset that there is no such thing as a "risk free"
involvement in technology transfer, any more than it is possible to design a perfectly safe
chemistry laboratory. But just as it is eminently feasible to design, construct and operate
a reasonably safe laboratory, so it is possible to develop a technology transfer program
that reasonably protects the interests of the institution (and its personnel).
There are several generic models of technology transfer that seek to capture the
value-added of discoveries in an economically efficient manner consistent with protecting
the integrity of the institution. Of course, the general proposition is that the more riskadverse
the structure, the less the financial gain, and visa-versa. While this, like most
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