Break the gap between basic research and commercialization

The Industry-University Cooperative Research Center (I/UCRC) was initiated by the National Science Foundation (NSF). It is a government-funded and industry-based cooperative scientific research and innovation alliance based on universities. NSF aims to promote the development of industry-university-research cooperation and enhance the industrial competitiveness of the United States through investment.

I/UCRC was founded in the 1970s and was originally part of the laboratory research and development innovation project initiated by NSF. I/ UCRC continues to this day and has become the largest industry-university-research cooperative research project in the United States. In 2018, there were 68 I/UCRC centers receiving funding, involving 182 universities and 1162 member companies, with 810 researchers and 1787 students participating, with an average of 17 member companies participating in each center. I/UCRC’s total research and development funds reached 79.8 million US dollars, and the amount of NSF investment accounted for no more than a quarter.

How does NSF use such a small investment to leverage a large amount of external capital investment to attract companies to participate in the construction of the I/UCRC center and become its members? The author believes that the secret lies in the good business model designed by NSF for the I/UCRC center. This article will introduce its business model from the development stage, operation method and specific transaction structure of the I/UCRC model.

Accompanying growth: cultivate self-reliance
According to the degree of participation of NSF in the I/UCRC model, its development can be divided into three stages: incubation, development, and maturity.

In the incubation stage, after NSF publishes the new I/UCRC project plan, university professors submit proposals to NSF to apply to join the original center, become a site within the center, or create a new center. The content of the proposal mainly includes the possible promotion of the project to the development of the industry, the potential research key areas, and the contribution to the surrounding areas, with emphasis on the development prospects of the project rather than the commercialization potential.

After receiving the proposal, the NSF project department will build a review team consisting of scientists, engineers, professors, project officials, etc., using peer evaluation to evaluate the development prospects of the proposal, its relationship with the industry, and marketing strategies. The qualified projects will be recommended by the project manager to the Appropriation and Agreement Department to determine the funding details such as the amount of funding for the project (Figure 1).

After the initial approval of the project, a new center will not be established directly, but a 12-month planning funding period will be required. During the planning grant period, professors need to further improve and supplement the proposals submitted at the time of application, future staffing, industry participation plans, financial budgets, and development models after NSF funding. At this stage, NSF will give advice to professors and universities on commercialization in order to better improve the proposal. At the same time, NSF will also provide certain funds for the proposal to help the project complete the preliminary publicity and promote the research to obtain preliminary results.

When a new I/UCRC center completes its incubation period, forms a long-term development plan and establishes a certain industry relationship, the center enters the NSF long-term funding development stage (Figure 2). NSF’s funding is divided into phase I and phase II, both for a period of five years. Among them, the first phase will fund 250,000 U.S. dollars each year, and the second phase of the projects that the Center will participate in will fund 100,000 to 150,000 U.S. dollars each year. The center must meet the requirements set by the NSF in order to continue to receive funding. For example, the center needs to have sustainable development capabilities. On average, each site needs to receive an annual membership fee of $200,000, and at least 4 full-qualified members.

Figure 1 Business model of I/UCRC during pregnancy

The NSF’s supervision and evaluation of the center is mainly carried out through the annual report meeting of the center to the NSF through the evaluators stationed in the center and the center. Among them, the assessor supervises the research direction of the center, reviews the research and development of the center, and establishes a collaborative mechanism to collect basic data and information of the center across the country. When the two funding periods ended, NSF withdrew from the normalized funding of the center, and the center’s development entered the next stage, the mature period (Figure 3).

Figure 2 Business model of I/UCRC development period

During the mature period, most of the funds to maintain the center’s operations come from member companies, and a small part comes from the supporting funds of universities and NSF based on project research. Take the Non-woven Fabric Research Center as an example. More than 98% of its operating funds come from private companies, achieving self-financing. I/UCRC has established a good relationship with enterprises through the funding of the first two stages of NSF, and obtained commercialization results and experience, and realized a business model of deep integration of industry, university and research through continuous cooperation with enterprises.

Professional operation: to make up for the business shortcomings of basic innovation
In the process of the I/UCRC center from generating proposals to establishing a mature experimental center that can be self-financing with industry membership fees, NSF acts as a regulator and model designer throughout the process to ensure the center’s research quality and fund utilization efficiency (see Table 1 ).

In the project approval stage, because the proposals put forward by university professors are still lacking at the commercial level, NSF’s review mainly lies in the academic prospects of the project itself, and the possible commercial development potential, and the specific commercial promotion is placed in the subsequent proposals. Perfection period.

Figure 3 I/UCRC mature stage business model diagram

During the 12-month proposal improvement period, NSF provided a small amount of funds to promote project output results, and used its business experience and operation center experience to help professors present their development potential from a corporate perspective. Therefore, the commercial elements of the proposal at this stage, the specific relationships with enterprises and other stakeholders, and the specific operation procedures of the center will be more complete under the guidance of NSF.

After the center is established, NSF needs to supervise whether the center is implemented in accordance with the previously designed proposal, whether it is operated in accordance with the transaction structure with stakeholders in the I/UCRC model design, and whether the funds are compliant and used for research and development use. Therefore, NSF dispatched assessors to the center and passed the center’s annual report to ensure that the center’s development path is correct. Through multi-stage and different forms of supervision of the center, the I/UCRC model can be operated in different ways in different projects.

It is not only NSF who participates in the operation of the center. As stakeholders who provide important resources and capabilities, universities and member companies also have different management capabilities for I/UCRC. After paying membership fees and becoming members, member companies can participate in the Industrial Advisory Board (IAB) in the form of industrial representatives, and influence the development of the center through voting rights. The responsibility of the Industrial Advisory Committee is to evaluate and approve the research fields of the center, and to supervise the use of funds.

As providers of human resources and intellectual resources, colleges and universities mainly manage the center through resident chief researchers. The resident principal researcher is generally a professor, who is responsible for reporting to the university where the research site is located and following the instructions of the center director and the industrial advisory committee.

Table 1 NSF’s supervision of I/UCRC at various stages

The supervision and evaluation of the center by the IAB, the resident principal researcher, and the evaluator are finally summarized to the director of the center, which has an impact on the operation of the center. The director of the center is the leader of the I/UCRC, responsible for the overall work and overall planning of the center. The director of the center is the chief researcher of the site, and his appointment needs to be reviewed by the NSF.

Innovative transaction structure: balance resource input and output allocation
The I/UCRC center model includes three stakeholders of universities, NSF, and enterprises. The interests of the three parties are different, and the core resource capabilities involved in the transaction are different. The following is a more detailed analysis of the transaction structure in the I/UCRC model from two aspects of resource capacity input and output allocation.

In the I/UCRC model, the core resource capabilities invested by universities are intellectual resources such as professors and students, as well as resources such as research equipment and research projects; what enterprises invest in is capital and business experience; while NSF invests in model design, and the early stage Capital investment, regulatory resources, and relationship resources with enterprises and universities.

The human resource input of universities is the key to maintaining the continuous operation of the center, producing results, and attracting enterprises. The NSF requirement for each site is that there must be a professor or tenured professor as the lead researcher. The main form of corporate investment and business experience is to purchase membership and join the Industrial Advisory Committee to exercise voting rights.

NSF’s investment in the center can be divided into two aspects: personnel and funds. In terms of funding, NSF will provide approximately US$10,000 in funding for the proposal during the incubation period, and will provide two phases of funding after the center is established. By providing initial capital investment, NSF assumed the risk that the project could not be commercialized or could not produce results, and helped colleges and universities to make proposals through the valley of development. In terms of personnel, during the proposal approval and project incubation stage, NSF has established a professional evaluation team to provide universities with commercialized knowledge and a network of relationships with enterprises. After the establishment of the center, NSF designed the framework of the center; dispatched assessors to report on the status of the center; and collected requests from enterprises and universities to maintain the stability of transactions.

Output distribution The output distribution of the I/UCRC model adheres to the principle that R&D units obtain intellectual property rights, and member units can use it for free and have priority purchase. In the I/UCRC model, the intellectual property rights produced by the center are owned by the participating universities. By paying membership fees, member companies can use the intellectual property produced by the research without royalties. If a company wants to obtain a unique patent use right, it can purchase the copyright from the intellectual property owner—a university. Only when all member companies give up the ownership of intellectual property rights, universities can transfer copyright to non-member companies. Through the design of profit distribution, for smaller companies, even if they cannot purchase intellectual property rights through copyright competition, they can also obtain royalty-free use rights through I/UCRC. The copyright priority is given to members to purchase this design, which also guarantees the value of membership. In addition, the data and non-patent results obtained in the research will be equally disclosed to all IAB members through the half-year meeting.

NSF has also designed a corresponding model for patent transfer, in order to obtain more expenses through patent transfer to support the continuous operation of the center. The charter of the center stipulates that, in addition to the fees incurred, royalties and fees collected for patents produced in the center will be allocated according to the university’s royalties allocation policy, but at least 33% of the share should be included in the center operation Account to ensure the continuous operation of the center. If the center cannot continue to operate, the remaining funds in the center’s operating account will be transferred to the university related to the center to support university research and development. According to the Bayh-Dole Act, any patents and papers produced by the center must fulfill the obligation to declare NSF funding and give priority to the development of American industries.

Multi-stakeholder participation: diversify early risks
The initial screening of NSF has increased the success rate of research and development. In the I/UCRC model, during the proposal submission stage, NSF’s preliminary selection eliminated most projects with low commercial potential or difficult output results, ensuring the quality of the established center and reducing the risk of project failure. The subsequent planning funding period can also help colleges and universities in the initial research and development of the project, and adjust the direction according to the company’s possible demands. If the project fails to achieve the expected development, it will not be able to submit a proposal that meets the NSF requirements after the incubation period, which also achieves the purpose of screening high-quality projects.

In the traditional model, the subject matter of the transaction required by the enterprise is a relatively low-risk and relatively mature technology. However, it is difficult to make accurate judgments on the commercialization prospects of the projects provided by universities because of the enterprises that are the providers of funds. Even after the preliminary screening by the universities, the commercialization process of the projects has a greater risk. The NSF stakeholder is introduced in the I/UCRC model to take the role of early risk, use the experience and ability of screening projects that the company does not have to screen, and provide a small amount of funding for universities to obtain the development direction of the project. The overall control ability. In the early stage, NSF undertook to reconstruct the traditional production-university-research model, to undertake the division of project screening and initial cultivation, and to use its own anti-risk ability and project identification ability to increase the success rate of research and development.

Compared with the traditional industry-university-research cooperation model, the I/UCRC model has added NSF as a stakeholder. One of NSF’s roles is to act as an intermediary between universities and enterprises, matching the interests of the two, and improving the effectiveness of research and development. .
The membership system introduces more stakeholders, lowers the threshold for research and development, and reduces the investment scale of a single entity. In the I/UCRC model, companies participate in the research and development of the center through the membership system, allowing multiple member companies to jointly provide research funding for the center, which reduces the threshold for a single company to participate in research and development activities while ensuring project research and development funding, thereby attracting more interests The relevant party enters the I/UCRC mode to realize the forward cycle.

At the beginning of the establishment of I/UCRC, NSF hoped that it would become a booster for the development of regional enterprises, benefiting various entities including non-profit organizations, start-ups, and mature enterprises. Therefore, I/UCRC has set up a membership model for enterprises to participate, and large and medium-sized enterprises with sufficient funds can purchase full membership to gain greater influence. Companies that are unwilling to invest too much money and are on the sidelines of the development of the center can buy half membership, which is lower than full membership but can also enter the industrial advisory committee and participate in the center’s decision-making. For start-ups and non-profit organizations, observer memberships can be set up, with low membership fees, access to the center’s research data results, and opportunities to meet with university professors. Through the membership system, the center has acquired a considerable number of member companies, which not only greatly enriches the R&D fund pool, but also enhances its influence in the industry.

While the membership model lowers the threshold for research and development, it also brings transaction risks such as how to efficiently make decisions among members and how the results are distributed among members. If there is no proper model design for this issue, additional communication costs will be incurred.

NSF avoids the above potential risks by clearly dividing the exercise of member powers and the distribution of intellectual property rights in the membership agreement. In terms of management, official member companies become members of the Industrial Advisory Committee by paying membership fees, and make joint decisions through voting. At the same time, the upper limit of the number of votes is set to avoid the center being controlled by a larger company. In terms of the distribution of results, only regular members can have the right to use license-free fees, while informal members can only get the results of the paper type; if a member company needs to obtain a unique right to use the results, the member company needs to negotiate with the school to buy And notify other members of the IAB. The setting of transaction details between members enables the membership system to become an important model for the center to introduce more partners and help start-ups develop and expand the center’s business perspective.

Multi-party joint management: improve input and output efficiency
In the management mechanism of the I/UCRC, universities, members, and NSF have established institutions to participate in management, each of which uses its own resources and capabilities, reduces model transaction costs, and improves input and output efficiency. As project proponents, universities with R&D capabilities mainly manage long-term site planning and corporate attraction programs through the resident principal researcher (PI). For central policy issues, university presidents and deans can also participate in decision-making through academic advisory committees. As the main investor, the enterprise has a clear demand for the use of funds. It mainly obtains research results through IAB, and selects suitable development projects with commercial prospects from the projects proposed by universities. As the organizer of the I/UCRC center, NSF has been in the embryonic stage of the project through the evaluation of the permanent center and supervised the development of the center in accordance with the proposals approved by the NSF.

Such a management system utilizes the core resource capabilities of the three parties to participate in the transaction structure, and reduces the transaction costs of one party managing or setting up a special management agency. The management model of I/UCRC clarifies the part of the three parties responsible for management: as a government agency, NSF has strong organizational capabilities and a mature central framework, so it provides model assistance for the rapid development of the project when the project has not yet taken shape.

When the center is officially established and member companies join, the permanent assessors and annual meetings will supervise to ensure that the general direction is correct, and the freedom of development is given to the center and the company. As a provider of funds, enterprises focus on whether the funds can be used effectively and produce appropriate results, but they lack long-term investment in human resources for central supervision. Therefore, through the half-year meeting, the IAB voted to determine the use of funds and the choice of research and development areas.

Universities hope to realize the integration of production, education and research through the center, and promote the development of research and development capabilities, while the design of the resident chief researcher makes the details of research and development fully managed by the university.

The ingenious design of the management mechanism enables the three parties to meet their own needs, and also avoids the cost of communication caused by one party. NSF stipulates that more than 90% of the center’s operating funds must be invested in research and development, which also confirms the improvement of input and output efficiency by its management model.

Unified goal: improve the effectiveness of research and development
Compared with the traditional industry-university-research cooperation model, the I/UCRC model has added NSF as a stakeholder. One of NSF’s roles is to act as an intermediary between universities and enterprises, matching the interests of the two, and improving the effectiveness of research and development. .

During the gestation period of the proposal, the personnel with commercial experience in NSF will help the professor to explain his project from the perspective of commercialization, and assume the role of negotiation between the enterprise and the university. After the establishment of the center, NSF required that the annual plan provided by the center should explain the highlights and specific ways to attract companies. The specific agenda of the half-year meeting was designed to ensure that companies can understand the progress of the project through the meeting and enhance the direction of research and development through the selection of the project. The results produced can effectively help the enterprise.

In the traditional model, the transaction cost of enterprises wanting to obtain a high degree of control over the research content is relatively high. Because the internal operation and evaluation mechanisms of universities are different from those of enterprises, it is often difficult for enterprises to go deep into the university system to supervise the completion of projects, nor can they confirm whether the invested resources have been fully applied to the research related to the project.

In the I/UCRC model, due to the existence of the stakeholder role function of NSF, the research and development of universities is more purposeful and provides more practical help for enterprises. A survey in 2018 shows that 81.23% of member companies believe that I/UCRC is helpful to their R&D, and the proportion of contract renewals is around 90%. Most of the projects researched by the center meet the needs of member companies. According to the statistics of member companies, only 28.25% of the research projects are not related to member companies, while 26.94% of the projects may be related to the company in the future, 27.26% of the project companies may study in the next few years, and 14.19% of the project companies are in need but Because the risk is too high, the research and development of the center is very important to the development of the enterprise. ※※※※※

The I/UCRC model is a typical model of the combination of industry, university and research in the United States. By introducing the design of the stakeholder participation model of NSF, a sound management, operation, and transaction model has been established, thus solving the problem of enterprises taking high risks in the traditional industry, university and research model , Cooperating with universities to manage the problems of high cost, low efficiency, and low model stability. Universities have also established good connections with enterprises through the I/UCRC model, and obtained opportunities for R&D funds and project commercialization.

As a model designer, NSF has established a new model of supporting industry-university-research cooperation: screening projects during the gestation period, initially identifying projects with development potential, assisting early-stage development through small funds, and establishing contacts with enterprises. During the development period, we supervise the operation of the center and allocate funds in stages to ensure the quality of the project and control the development direction of the center. Through the design of the industrial advisory committee, the requirements of the enterprise and the research direction are matched. In the mature stage, it maintains the connection with the center through a single project or R&D award, and continues to support industry-university-research cooperation through projects.

Through the I/UCRC model, under the funding and promotion of NSF, universities and enterprises have realized in-depth and sustainable cooperation in industry, university and research, providing a model of business model worth learning for industry, university and research cooperation and collaboration.