Economic Success of Employment and Revenue Generated from

Research Commercialization Activities

Samuel Amponsah Odei

University of Pardubice, Faculty of Economics and Administration, Studentska 95, Pardubice, Czech Republic

Keywords: Spin Offs, Entrepreneurial Universities, Commercialization, Patents, Innovation.

Abstract: The concept of entrepreneurial universities has gained more attention from policy makers and academics due

to its perceived prospect of contributing to innovation and economic growth. Spin offs companies helps

universities to commercialize their knowledge and technological developments. The commercialization of

academic research results through academic spin-offs is becoming an important and increasingly reliable

source of revenue for universities. Universities also contribute to employment creation when they establish

new spin off firms or help to revamp existing ones. Universities and industries usually cooperate and

engagement themselves through joint research projects and this helps universities to commercialize and

exploit research results by way of patents licensing and spin-offs. The main focus of this paper is to establish

the relationship that exits between the economic successes of spin offs in terms of employment and revenue

generation and their spillover effects of contributing to regional growth and development. Using the linear

regression method, this paper has demonstrated that, spin offs firms contribute better to employment creation

than revenue generation. Spin offs that are partially owned by higher educational institutions and those termed

social enterprises contribute better to employment creation than those without the full control of university’s

management. Spin offs do contribute insignificantly to revenue generation.

1 INTRODUCTION

The idea of academic entrepreneurship has gained

increased scholarly attention in recent years.

Academic entrepreneurship basically involves

universities taken measures to promote research

commercialization and contributing to the

development of their neighboring regions (Siegel and

Wright, 2015). The

creation of firms from

universities and other research organizations

constitutes an excellent way of commercializing

public research results, as well as allowing

universities to contribute to socioeconomic and

regional development (Bellini et al., 2000).

University spin-offs are deliberately established to

commercialize new technologies that usually

emanates from academic research (Zahra,Van de

Velde and Larraneta, 2007). The firms that are

established and affiliation to universities are referred

to as academic spin-off firms. Spin off companies

transfer technology from their attached universities to

themselves, and also from themselves (spin offs)

companies to customers. Spin-off firms born from

university researchers initiatives are the dominant

mode of commercialization of university research

(Landry, Amara and Rherrad, 2006). The creation of

spin-off companies is considered as the basis for the

commercialization of university research and also a

noticeable way of fulfilling the entrepreneurial dream

of universities (Clarysse and Moray, 2004).

University innovations policies encourage their

contribution to the development of local economies

by establishing new industries, promoting product

development and directly contributing to

employment and wealth generation (O’Shea, Chugh

and Allen, 2008).

The choice of universities to venture into research

commercialization represents a shift from the

traditional mission of universities that have longed

remained teaching and research. The commercialize-

tion of academic research results or the fulfillment of

third mission (entrepreneurial duties) has positioned

universities in different role in society (Rasmussen,

Moen, and Gulbrandsen, 2006). Universities have in

recent times become key players in the economy

because of their direct role in establishing innovative

spin-off companies and cooperating with existing

firms to create new products. The collaboration

between universities and industry is of significant

importance in the stimulation of technological

Odei S.

Economic Success of Employment and Revenue Generated from Research Commercialization Activities.

DOI: 10.5220/0006499201510157

In Proceedings of the 9th International Joint Conference on Knowledge Discovery, Knowledge Engineering and Knowledge Management (KMIS 2017), pages 151-157

ISBN: 978-989-758-273-8

change, economic development and competitiveness

in industries (Mansfield and Lee, 1996; Stejskal and

Hajek, 2016). The combination of the traditional as

well as this new mission has resulted in the

emergence of what has become the ‘entrepreneurial

university’ which is now multi tasked universities

combining research, teaching, as well as direct

contributing to the local economy (Clark, 1998).

Spin offs firms emanating from “academic

entrepreneurship,” are established to exploit the

results of academic research or intellectual property

created at the university (Shane, 2004; Klofsten and

Jones-Evans, 2000). A spin off is “a company that is

founded (1) by a faculty member, staff member, or

student who left the university to start a company or

who started the company while still affiliated with the

university; and/or (2) around a technology or

technology-based idea developed within the

university” (Smilor, Gibson and Dietrich, 1990, p.

63). These spin off firms are important and beneficial

to the national and local economies due to the fact that

they provide jobs and other economic opportunities.

Besides their economic contribution, these firms tend

to have a high turnover in terms of profits and offering

high-wages to their employees. Spin offs helps

university teachers to diversify their sources of

income because these spin offs mostly rely on the

expertise of academic inventors who are highly

qualified staff with long experience from their

research, this helps to reduce the likely of lecturers

quitting the teaching job (Toole et al, 2015).

Universities the world over are deeply engaging

in commercialization activities as a way of

contributing to economic development of their

regions and this is also necessitated by the fact that

there is growing decline in public investment for

funding traditional teaching and research of

universities, so universities have to look elsewhere

for reliable funding alternatives and spin offs seems

to be the solution (Chiesa and Piccaluga, 2000).

The main objective of this paper therefore is to

establish the relationship that exits between the

economic successes of spin offs in terms of

employment and revenue which have the spillover

effects of contributing to regional growth and

development. It will also identify which spin off type

contributes better in terms of employment and

revenue generation. With the above mentioned

objective, I therefore want to assess whether spin offs

are successful in generating employment or turnover.

The following research question will accordingly be

answered by this paper. Do spin off firms contribute

better to job creation or revenue generation?

The paper is organized in the following order:

section 2 constitutes the theoretical background

providing reviews of literature, section 3 is devoted to

the data and methodological aspect and section 4

presents the empirical analysis and its findings.

Section 5 concludes the paper and draw attention to

some policy implications.

2 THEORETICAL

BACKGROUND

Research commercialization is the process whereby

academic findings and inventions are transformed

into profit-making products and services for social

benefits. The commercialization of research plays an

important role in economic growth, job creation and

society’s structural change. Spin-off companies are

important means of commercializing technology and

academic research (Roberts and Malone, 1996). Spin

offs are new firms established by an academic to

transform newly generated knowledge from

universities and other public research organizations

into market products that can generate revenue and

offer employment opportunities. These spin-off firms

transform scientific knowledge into commercial use

to benefit individuals and other economic agents. The

accumulation of knowledge has become a vital factor

of production that increasingly contributes to firm’s

productivity and growth (Prokop, 2015). Spin-off

establishment is an essential component in the

knowledge transfer process, and this positions

university better to solving economic and societal

problems (Prokop and Stejskal, 2015). Establishing

new spin off firms is increasingly seen by universities

as evidence of their entrepreneurial quality and

training.

One of the possible ways through which spin offs

can contribute to the economic development of their

respective regions and national economies is through

job creation (Shane, 2004). Spin-offs serve as the

means to transfer technology from research

organizations and can contribute significantly to jobs

and wealth creation (Steffensen, Rogers and

Speakman, 2000). Spin offs entrepreneurship is

arguably one of the best ways to create employment

in recent times (Buenstorf, 2009). As evidenced by

(Niosi, 2006) spin off companies are capable of

generating employment and raising revenues.

According to a research by Smith and Ho (2006), spin

offs established by the Oxford university created and

employed about 9000 people constituting

approximately 3.5% of total local employment in the

Oxford region of the United Kingdom. In addition to

the above mentioned, the Catholic University of

Leuven in Belgium has been very successful in

establishing about 61 spin-off companies and these

companies combined employed over 2000 people

annually (Macho‐Stadler et al., 2008). In a similar

dimension, the Chalmers University of Technology

located in the Swedish city of Gothenburg has also

been successful in establishing spin offs that

contributes to the economic development of the city.

Spin off firms from Chalmers University of

Technology successfully offered about 2800 people

employment in the year 1993 alone (Dahlstrand,

1997), they also directly contributed to creating about

10% of employment or created 70 new jobs annually

(Wallmark, 1997). The Massachusetts Institute of

Technology (MIT) is among the leading

entrepreneurial universities in the world. A study

conducted by the Bank Boston acknowledged that

about 4,000 spin-offs companies associated to the

MIT employed 1.1 million people (Boston, 1997).

These employments and revenues can contribute

directly to individuals and national economic

development. Academics and their student can

diversify their incomes sources when they directly

engage in spin off creation. Some students may stand

the chance to benefit from temporal employment

offered by spin offs due to the fact that most spin offs

are in close proximity to the parent institution (Egeln,

Gottschalk and Rammer, 2004). Spin-offs firms are

capable of generating almost 40% of local jobs as

compared to non-spin off firms, this makes spin off

firms a significant contributor of jobs (Wallin and

Dahlstrand, 2006; Perez and Sánchez, 2003).

Spin offs created by universities and their

academic staff can be a reliable way to raise

additional revenues to supplement the dwindling

university sources of income (Van Geenhuizen and

Soetanto, 2009). Universities can raise additional

revenue by renting out their laboratories for

experiments and also allow their staff to engage with

industries and get some revenue. The

commercialization of academic research outcomes by

spin-offs in the form of license fees constitutes an

essential source of income for universities.

Academic patent is also an alternative means of

revenue for universities and academics (Etzkowitz et

al, 1998). The products and services of spin offs can

be sold to raise money for the company, staff and the

parent university.

Academic capitalism (Slaughter and Leslie, 2001)

has become core component of universities policies,

they permit their academic staff to engage in market-

like or profit oriented behaviours. Academics stand

the chance to benefit from market behaviours through

patenting activities, royalties, licensing agreements

among others. A study by Smith and Ho (2006) has

shown that spin off firms are greater revenue

generators. Their study found out that the spin-offs

companies established by Stanford University in the

USA were able to generate about 42% or about US$

106.3 billion of all revenue that accrued to 150 firms

in The Silicon Valley in 2001. The MIT spin offs

were also able to generate $232 billion from its annual

sales (Steffensen, Rogers and Speakman, 2000).

It is not surprising that one of the criteria used to

measure the success of spin off firms is their revenue

generation ability. Spin offs firms are very fruitful at

generating revenue, they accounted for about 99.4%

of overall revenues generated by startups (Franco and

Filson, 2006). In some instances, spin offs can

generate a turnover of about 350 million Euros in a

year (Macho‐Stadler et al., 2008). In the United

States, the Colombia University made a turnover of

about $143 million through licensing income and this

accounted for roughly 15% of all U.S. university

income earned from patents (AUTM, 2001).

3 METHODOLOGY AND

SOURCES OF DATA

Data for this paper was collected from the Higher

Education Statistics Agency (HESA) 2014/2015-

2015/2016 survey. HESA provides consistent

information on higher education by conducting data

collection and analysis on UK higher education.

HESA conducts an annual Higher Education -

Business and Community Interaction (HE-BCI)

survey on all knowledge transfer activities of all

higher education providers (Jörg et al, 2014). HE-BCI

record is collected annually from all UK publicly

funded higher education institutions (HEIs) and a

number of alternative providers (APs), collectively

referred to as higher education providers (HEPs) by

HESA. This paper used the HESA-HEBCI data to

analyze the economic success of UK universities

commercialization activities in relation to their

contribution to economic development by way of

employment and income generation. This paper

focused on the employment and revenue generation

potential of these entrepreneurial universities. The

data consist of about 161 higher education providers

engaging with industries in various ways.

To measure the relationship between the

economic success of employment and revenue

generation from universities commercialization

activities, this paper used the linear regression

analysis. The linear regression model helps to

describe the relationships that exist between the

dependent variables and the independent variables in

a simplified and straightforward mathematical form

(Schneider, Hommel and Blettner, 2010). The Linear

regression analysis is the most commonly used

statistical technique for measuring relationship that

exists between two or more variables (Matthews et al,

1990). Additionally, the linear regression was used to

ascertain the prospect of how universities through

their spin offs contributes to job creation and revenue

generation. First of all, the paper compared the

employment and revenue turnover that spin offs

created. These two variables we compared to each

other to find out which spin offs were good at

generating or creating.

The general formula for the linear regression

equation is usually in the form

Y = a + bX (1)

Where

X is the explanatory variable

Y is the dependent variable

b slope of the line

a is the intercept

4 RESULTS

The main aim of this paper is to measure the

relationship that exist between spin offs (universities

commercialize-tion activities), job creation and

revenue turnover that these spin off firms generate by

way of their contribution to economic development

(fulfilling their third mission of contributing to

society).

The results of the linear regression analysis are

shown in the table below.

Table 1: Variables Entered/Removed

Model Variables Entered

Variables

Removed Method

1 Rev_SE,

Emp_GSU,

Rev_SNHEPO,

Rev_SHEPO,

Emp_SE,

Emp_SSU,

Rev_GSU,

Emp_SNHEPO,

Emp_SHEPO,

Rev_SSU

Enter

a. All requested variables entered.

b. Dependent Variable: HESO

Legend: HESO- Higher Education Spin Offs,

Emp_SHEPO- employment from spin-offs partially

owned by HEP, Emp_SNHEPO- employment from spin-

offs not HEP owned, Emp_SSU- employment from Staff

start-ups, Emp_GSU-employment from graduate start-

ups, Emp_SE-employment from Social enterprises,

Rev_SHEPO-revenue from HEP owned spin-offs,

Rev_SNHEPO-revenue from spin-offs not HEP owned,

Rev_SSU-revenue from staff start-ups, Rev_GSU-

revenue from graduate start-ups, Rev_SE-revenue from

social enterprises.

Table 2: Model Summary.

Model R

Square

Adjusted R

Square

Std. Error of

the Estimate

1 .745

.554 .525 1.5978

a. Predictors: (Constant), Rev_SE, Emp_GSU,

Rev_SNHEPO, Rev_SHEPO, Emp_SE, Emp_SSU,

Rev_GSU, Emp_SNHEPO, Emp_SHEPO, Rev_SS

Table 2 above elaborates on the summary of the

model used for this analysis. The results in Table 2

have shown that the R= 0.745, R

=0.554, Adjusted

= 0.525 (rounded to 3 decimal places), which can

be interpreted that the independent variables are 53%

of the variability of the dependent variable i.e. Higher

Education Spin offs. The Adjusted R

is also an

estimation of the effect size, which at 0.525 (53%) is

indicative of a medium effect size, according to

Cohen's (1988) classification. Accordingly this model

has demonstrated that it is statistically significant at F

= 18.75, significance level = .000. This indicates that

in the nutshell, the model applied is statistically

significant and it can predict the dependent variable,

HE spin offs.

Table 3 below presents the results of the empirical

analysis of the variables used in this model, it can be

Table 3: Coefficients

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) .336 .147 2.277 .024

Emp_SHEPO .007 .001 .684 6.322 .000

Emp_SNHEPO .000 .002 -.017 -.207 .836

Emp_SSU .019 .010 .657 1.868 .064

Emp_GSU .001 .001 .084 1.127 .262

Emp_SE .017 .005 .265 3.477 .001

Rev_SHEPO -1.684E-5 .000 -.170 -1.814 .072

Rev_SNHEPO -6.372E-6 .000 -.034 -.378 .706

Rev_SSU .000 .000 -.648 -1.824 .070

Rev_GSU -1.413E-5 .000 -.055 -.736 .463

Rev_SE .000 .000 -.093 -1.513 .132

a. Dependent Variable: HESO

Source: Authors own

seen that when it comes to employment and

turnover from spin offs and their spillover effects on

economic development, spin offs contribute

significantly to employment creation than revenue

generation. The results show that universities

commercialization activities contribute more to

employment significantly. In all spin offs that are

partially owned by higher educational providers

contributed to employment generation with

statistical significance of (.000). Again spin offs that

constitute social enterprises generate employment;

they are statistically significant at (.001). The

employment generated by graduate startups, staff

startups and spin offs with no HE ownership did not

contribute significantly to employment creation.

On the hand when we compare the revenue

generation prospect of HE spin offs, we can see that,

the contribution of spin offs to revenue generation

was very insignificant. The significance level of

revenue generation by spin offs is showed no

significance. The results of this analysis supports

the claim that spin offs are good at contributing to

employment than revenue. The results also show

that when it comes to measuring the success of spin

offs, it can be seen that spin offs perform better in

employment than revenue. The reason why they

perform better in employment generation than

revenue generation can be attribute to their small

and not competitive nature. Spin offs face stiffer

competition from well established firms that are

financially well positioned in the market. This can

explain why spin offs are better or successful at

generating employment than revenue.

5 CONCLUSION

This paper sought to measure the relationship

between economic successes of spin off firm’s

contribution to fulfilling their third mission of

contribution to economic growth. The main aim of

this paper was to assess spin off firms and their

contribution to job creation and revenue generation

as a means through which they fulfill their third

mission. The measure of success used in this paper

was limited to the job creation and the prospect of

profitability of spin offs.

As seen above, the empirical results from the

analysis have demonstrated that, spin off firms are

very successful in contributing to socioeconomic

development of their regions. They do this

successfully by offering employment opportunities.

Empirically, university spin offs are very successful

with their contribution in the form of employment

creation than generating revenue for staffs, students

and others. The employment contribution of spin

offs was significant for spin offs that have a HE

ownership and those characterized as social

enterprises. Conversely, when it comes to the

prospect of revenue generation, the results proved

that, spin offs did not generate more revenue as

expected. Through employment, spin offs help to

reduce the high rates of unemployment and also

they can be a way for individuals to earn some

income. Since spin off companies partially owned

by HEP and those termed social enterprises

contribute significantly to job creation, it therefore

calls for policy measures to support universities in

their entrepreneurial quest because the

commercialization and commodification of

academic research can generate employment. This

policy dimensions can be tailored in the directions

of sustainable funding for universities to carry out

more research that will be beneficial to industries

and society as a whole. Again industries can also

provide some financial support to universities to

carry out business research. These financial

schemes can strengthen university industry

collaboration.

The results of this paper therefore call for further

research on the other possible dimensions

universities can help contribute to the economic

development of their respective regions. Additional

research is also needed to ascertain why the

remaining types of spin off do not contribute

significantly to employment.

ACKNOWLEDGMENTS

This work was supported by a grant provided by

the scientific research project of the Czech Sciences

Foundation Grant No: 17-11795S and Student

Grant Competition of University of Pardubice in

year 2017.

REFERENCE

Association of University Technology Managers FY

(2001). The AUTM Licensing Surveys; University

Start-up Data. AUTM Inc., Norwalk, Connecticut

Bellini, E., Capalldo, G., Edström, A., Kaulio, M., Raffa,

M., Ricciardi, M. and Zollo, G., 1999. Strategic paths

of academic spin-offs: A comparative analysis of

Italian and Swedish cases. In 44th ICSB Conference,

Naples.

Boston, B., 1997. MIT: The impact of innovation. A

BankBoston economics department special report.

Boston.

Buenstorf, G., 2009. Opportunity spin-offs and necessity

spin-offs. International Journal of Entrepreneurial

Venturing, 1(1), pp.22-40.

Chiesa, V. and Piccaluga, A., 2000. Exploitation and

diffusion of public research: the case of academic

spinoff companies in Italy. R&D

Management, 30(4), pp.329-340.

Clark, B. R., 1998. The entrepreneurial university:

Demand and response 1. Tertiary Education &

Management, 4(1), pp.5-16.

Dahlstrand, Å. L., 1997. Entrepreneurial spinoff

enterprises in Göteborg, Sweden. European Planning

Studies, 5(5), pp.659-673.

Egeln, J., Gottschalk, S. and Rammer, C., 2004. Location

decisions of spin-offs from public research

institutions. Industry and innovation, 11(3), pp.207-

223.

Etzkowitz, H., Webster, A. and Healey, P., 1998.

Capitalizing knowledge: New intersections of

industry and academia. Suny Press.

Franco, A. M. and Filson, D., 2006. Spin-outs: knowledge

diffusion through employee mobility. The RAND

Journal of Economics, 37(4), pp.841-860.

Jörg, B., Waddington, S., Jones, R. and Trowell, S., 2014.

Harmonising research reporting in the UK–

experiences and outputs from UKRISS. Procedia

Computer Science, 33, pp.207-214.

Klofsten, M. and Jones-Evans, D., 2000. Comparing

academic entrepreneurship in Europe–the case of

Sweden and Ireland. Small Business Economics,

14(4), pp.299-309.

Landry, R., Amara, N. and Rherrad, I., 2006. Why are

some university researchers more likely to create

spin-offs than others? Evidence from Canadian

universities. Research Policy, 35(10), pp.1599-1615.

MachoStadler, I., PérezCastrillo, D. and Veugelers,

R., 2008. Designing Contracts for University Spin

offs. Journal of Economics & Management Strategy,

17(1), pp.185-218.

Mansfield, E. and Lee, J. Y., 1996. The modern

university: contributor to industrial innovation and

recipient of industrial R&D support. Research policy,

25(7), pp.1047-1058.

Matthews, J. N., Altman, D. G., Campbell, M. J. and

Royston, P., 1990. Analysis of serial measurements in

medical research. Bmj, 300(6719), pp.230-235.

Niosi, J., 2006. Success factors in Canadian academic

spin-offs. The Journal of Technology Transfer, 31(4),

pp.451-457.

O’Shea, R. P., Chugh, H. and Allen, T. J., 2008.

Determinants and consequences of university spinoff

activity: a conceptual framework. The Journal of

Technology Transfer, 33(6), pp.653-666.

Perez, M. P. and Sánchez, A. M., 2003. The development

of university spin-offs: early dynamics of technology

transfer and networking. Technovation, 23(10),

pp.823-831.

Prokop, V. and Stejskal, J 2015. Consequences of

Enterprises´ Cooperation within the Innovation

Process-Case Study of the Czech Machinery Industry.

DANUBE: Law and Economics Review, volume v

tisku, issue: v tisku.

Prokop, V., 2015. The Impact of Public Knowledge

Investments on Enterprises’ Competitiveness–

Electronics Industry Case. In Proccedings of the 16th

European Conference on Knowledge Management

2015. Academic Conferences and Publishing

International Limited Reading.

Rasmussen, E., Moen, Ø. and Gulbrandsen, M., 2006.

Initiatives to promote commercialization of

university knowledge. Technovation, 26(4), pp.518-

533.

Roberts, E. B. and Malonet, D. E., 1996. Policies and

structures for spinning off new companies from

research and development organizations. R&D

Management, 26(1), pp.17-48.

Schneider, A., Hommel, G. and Blettner, M., 2010. Linear

Regression Analysis. Dtsch Ä Rztebl Int, 107(44),

pp.776-82.

Shane, S. A., 2004. Academic entrepreneurship:

University spinoffs and wealth creation. Edward

Elgar Publishing.

Siegel, D.S. and Wright, M., 2015. Academic

entrepreneurship: time for a rethink?. British Journal

of Management, 26(4), pp.582-595.

Slaughter, S. and Leslie, L. L., 2001. Expanding and

elaborating the concept of academic capitalism.

organization, 8(2), pp.154-161.

Smilor, R. W., Gibson, D. V. and Dietrich, G. B., 1990.

University spin-out companies: technology start-ups

from UT-Austin. Journal of business venturing, 5(1),

pp.63-76.

Smith, H. L. and Ho, K., 2006. Measuring the

performance of Oxford University, Oxford Brookes

University and the government laboratories’ spin-off

companies. Research Policy, 35(10), pp.1554-1568.

Steffensen, M., Rogers, E.M. and Speakman, K., 2000.

Spin-offs from research centers at a research

university. Journal of business venturing, 15(1),

pp.93-111.

Steffensen, M., Rogers, E.M. and Speakman, K., 2000.

Spin-offs from research centers at a research

university. Journal of business venturing, 15(1),

pp.93-111.

Stejskal, J., & Hajek, P. (2016). Measuring the

Effectiveness of Cooperative Ties in Knowledge

Networks. In European Conference on Knowledge

Management (p. 831). Academic Conferences

International Limited.

Toole, A. A., Czarnitzki, D. and Rammer, C., 2015.

University research alliances, absorptive capacity,

and the contribution of startups to employment

growth. Economics of Innovation and New

Technology, 24(5), pp.532-549.

Van Geenhuizen, M. and Soetanto, D.P., 2009. Academic

spin-offs at different ages: A case study in search of

key obstacles to growth. Technovation, 29(10),

pp.671-681.

Wallin, M. W. and Dahlstrand, Å.L., 2006. Sponsored

spin-offs, industrial growth and change.

Technovation, 26(5), pp.611-620.

Wallmark, J. T., 1997. Inventions and patents at

universities: the case of Chalmers University of

Technology. Technovation, 17(3), pp.127-139.

Wright, M., Clarysse, B., Lockett, A. and Knockaert, M.,

2008. Mid-range universities’ linkages with industry:

Knowledge types and the role of intermediaries.

Research policy, 37(8), pp.1205-1223.

Zahra, S. A., Van de Velde, E. and Larraneta, B., 2007.

Knowledge conversion capability and the

performance of corporate and university spin-offs.

Industrial and Corporate Change, 16(4), pp.569-608.