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

general propositions, has some exceptions, it is inescapable that in a venture that involves
the commercial sector the transference of risk carries with it a considerable economic
cost.
The principal active models of technology transfer are as follows:
1. The creation of commercialization entities that bring discoveries into the
stream of commerce. The entity may be an operating division of a
government agency or institution, or it may be a wholly-owned subsidiary.
2. The creation of start-up companies to develop discoveries, with the agency
or institution providing some or all of the initial capital, holding all or a
substantial portion of the equity and providing management and administrative
services. The difference between the commercialization entity and the
start-up company is that the former is intended to be an ongoing activity,
while the latter is designed to be spun out, optimally through an acquisition
by a commercial buyer.
3. The creation of ioint ventures with commercial entities to provide for the
commercialization of discoveries.
Each of these mechanisms can create revenue patterns that in turn may be used
for infrastructure improvements. The first two options enable an agency or institution to
go into the capital marketplace to finance the facilities needed to develop the discovery,
and incidentally support the ongoing research and other activities of the organization. In
the first option, investment in the commercialization entity, either in the form of debt or
equity, provides the needed capital. In the latter case, the initial investment is compounded
by the buy-out value, which can provide the agency or institution with a
significant intermediate-term infusion of capital (assuming, of course, that the discovery
is developed as commercially valuable).
The third option, the joint venture, affords the agency or institution an entirely
different array of capital improvement options. In addition to the infusion of funds arising
out of the commercial exploitation of the discovery, the joint venture can provide a direct
vehicle for the development of facilities outside of the ordinary financing framework. Most
common is the situation where the joint venture is capitalized to construct facilities, which
are then leased to the agency or institution for the purpose of conducting further research,
the agency or institution utilizing the value of the discovery as all or a significant portion
of its lease cost. Thus, the agency or institution can obtain a facility that is outside
financed, without incurring the attendant debt.
There are, however, fundamental differences between government research and
commercial activity. There is a philosophic difference: commercial ventures are
organized to deal with the financial risks of commercialization, through limiting the liability
of investors, loss shifting through insurance or indemnification and, perhaps most
important, by a general understanding among the participants in the venture that the risk
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