Incentives or Resources? Commercialization of University Research by Startups vs Established Firms

Abstract

The commercialization of scientific research performed at U.S. universities since the Bayh- Dole Act of 1980 has increasingly been governed by licensing contracts between universities and private firms (Mowery, Sampat, and Ziedonis 2004). A number of scholars have examined factors that influence whether an established firm or start-up venture would be best positioned to develop and introduce a university invention to the market (Shane 2001, 2002; Lowe and Ziedonis 2006). Less attention has been paid to how technology licenses between the univer- sity and these two types of firms are structured to facilitate commercialization, however. We argue that start-ups and established firms have different inherent organizational risks; com- paratively, start-ups bear a greater risk of firm failure, while commercialization incentives in established firms may be weaker. Using data from over one thousand technology licenses at a leading university licensor, Stanford University, we examine how these organizational risks, along with other relevant technology characteristics, affect the structure of licensing contracts in start-ups and established firms. For start-up firms, we also examine the implications for li- cense structure of the involvement of (a) a venture capitalist and (b) a university founder. Our results shed light on how organizational structure, via licensing terms, can be used to control for technology and organizational risks, bearing implications for the role of organization in commercialization success.