The commercialization of national laboratory technology through the formation of ‘spin-off’ firms: evidence from Lawrence Livermore National Laboratory

International Journal of Manufacturing Technology and Management

Volumn 3, Issue 1-2, 2001, Pages 106-119

  Mowery, David C ^a   Ziedonis, Arvids A ^b  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

national laboratories; spin off firms; Technology transfer

Indexed keywords

EID: 84896214197     PISSN: 13682148     EISSN: None     Source Type: Journal    
DOI: 10.1504/ijmtm.2001.001398     Document Type: Article

References (26)

1. Mowery, D. C. and Rosenberg, N. (1992) ‘The US national innovation system’ in R.R. Nelson, (Ed.) National Innovation Systems: An International Comparison New York: Oxford University Press.
2. Roberts, E. (1991) Entrepreneurs in high technology: Lessons from MIT and Beyond (New York: Oxford University Press).
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4. Segal Quince and Wicksteed, Inc., (1985) The Cambridge phenomenon: The growth of high technology industry in a university town London: Brand Brothers.
5. Olofsson, C. and Wahlbin, C. (1984) ‘Technology-based ventures from technical universities: A Swedish case’, Proceedings of the 1989 Frontiers of Entrepreneurship Research Conference, Babson College.
6. Sayer, A. and Morgan, K. (1986) ‘The Electronics Industry and Regional Development in Britain’ in A. Amin and J. Goddard, (Eds.) Technological Change, Industrial Restructuring and Regional Development, London: Allen and Unwin.
7. Markusen, A. and Oden, M. (1996) ‘National Laboratories as Business Incubators and Region Builders’, The Journal of Technology Transfer, Vol. 21, Nos. 1-2, pp.93–108.
8. We are indebted to researchers and managers from Lawrence Livermore National Laboratory (LLNL) and the survey respondents and interviewees for their time and assistance in conducting this study. We are especially indebted to Dr. Rokaya Al-Ayat of LLNL for making this study possible, to Brian Silverman, Hank Chesbrough, Rose Marie Ham, and Annett Inacker for assistance in the research on which this paper is based, and to Rose Marie Ham and Ann Markusen for comments on previous drafts of this paper. The research for this paper was supported by Lawrence Livermore National Laboratory, the US Air Force Office of Scientific Research, the Alfred P. Sloan Foundation, and the Canadian Institute for Advanced Research. The conclusions and opinions expressed in this paper are those of the authors, and do not represent the view of Lawrence Livermore National Laboratory, the University of California, or other sponsors of this research.
9. Stankiewicz, R. (1994) ‘Spin-off companies from universities’. Science and Public Policy, Vol. 21, pp.99–107.
10. Doutriaux, J. (1987) ‘Growth pattern of academic entrepreneurial firms’, Journal of Business Venturing, Vo.l. 2, pp.285–297.
11. 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 Vol. 5, pp.63–76.
12. Roberts, E. (1991) ‘The technological base of the new enterprise’, Research Policy Vol. 20, pp.283–295.
13. Cooper, A. (1971) ‘The founding of technologically based firms’, Centre for Technology Management, Milwaukee, WI.
14. Henderson, R., Jaffe A. and Trajtenberg, M. (1992) ‘Geographic localization of knowledge spillovers as evidenced by patent citations’, National Bureau of Economic Research Working Paper No. 3933, Cambridge, MA.
15. Our definition of spin-offs is limited to new technology-based firms founded by current or former full-time employees of LLNL a definition that differs slightly from that employed by Markusen and Oden [7]. Our definition includes consulting firms founded by current or former full-time employees; Markusen and Oden [7] excluded single-employee consulting firms and firms operated by current employees of the laboratories from their study. In another respect, however, the definition employed by Markusen and Oden [7] is somewhat less restrictive than ours or that of Roberts [2,12], in that it includes enterprises founded by laboratory consultants or non-employees that seek to commercialize innovations drawing on laboratory technologies.
16. Laboratory policy requires that all LLNL employees disclose all relationships with outside firms. The resulting internal compilation formed the basis for our initial list of potential spin-off firms, which we expanded through a ‘snowball’ technique of data collection, in which founders of firms or LLNL employees were asked about the identities of additional spin-off firms.
17. The power of patents to protect intellectual property varies among technologies, and not all innovations are patentable. Nonetheless, patents are widely accepted as an important ‘intermediate product’ in the innovative process-most patented inventions require substantial investment and modification for commercialization. Patent data are widely used by economists and others as an indicator of innovative activity, because they cover a much broader arrange of firms than R&D investment data, they measure an intermediate output of the innovation process, and they can be linked with other patents in ways that can illuminate linkages among firms’ innovative activities.
18. In fact, this statistic understates the concentration of patenting activity within this population. 26 of these 37 patents resulted from the inventive activities of a single individual who had founded several firms.
19. Ham, R. M. and Mowery, D. C. (1995) ‘ Improving cooperation between national laboratories and industry’, Issues in Science and Technology.
20. The response rate to our survey is broadly similar to those of previous surveys of spin-off firms and technology-intensive organizations. Markusen and Oden [7] conducted interviews with 33 of the 60 spin-off firms identified by their study, yielding a 55% sample. Although their study achieved a higher response rate, the 42% response rate (196 of our 462 identified firms) obtained in the Roberts study of MIT spin-offs [2] is more typical. A study of industry collaboration with university research centres by Cohen, Florida, and Goe [21] obtained a response rate of 48% (511 of 1056 centres surveyed).
21. Cohen, W. Florida, R. and Goe, W. R. (1994) ‘University – industry research centres in the United States’, Carnegie Mellon University, Pittsburgh, PA.
22. Founding capital for these eight spin-offs came from a variety of sources. Two firms were initially capitalized by the founder at under $10,000, and one was financed by the founder and his relatives at $50,000. In another small firm (capitalization less than $10,000), most of the equity financing came from another company. The larger firms obtained financing from other sources in addition to the founder; more than $100,000 of capital for one firm was provided by the founder and other partners. Another firm (capitalized at between $500,000 and $1,000,000) obtained 75% of its seed funds through a private stock offering. The firm with the largest capitalization (over $5,000,000) received 20% of its initial funds from another firm’s equity investment, and the remaining 80% from venture capital. For those firms reporting sales figures for their first five full years of existence (five firms), median revenues amounted to almost $4.6 million (1994 dollars), and for the six firms reporting 1995 employment, the median figure was four employees.
23. Total revenues in the first five years for products based on technologies licensed from Lawrence Livermore were almost $5 million. One firm, licensing LLNL technology for a product expected to be introduced in 1996, projected revenues in the first five years of product life to exceed $30 million. LLNL technologies that were not licensed but were described by managers as ‘criticial’ contributed to products accounting for $2 million in revenues for these eight firms.
24. The founder of one chemicals firm in this category noted that ‘The availability of technical library and publications as well as technical contacts and the ability to exercise these factors within the guidelines of Lawrence Livermore policies was important in the early phases of company development’.
25. Universities have also faced controversies over the commercial exploitation by researchers of technologies that draw on federally funded R&D performed in their university laboratories (See [26]), but these have not resulted in restrictions of comparable severity to those in force at Lawrence Livermore.
26. Blumenstyk, Goldie, (1995) ‘Turning off spin-offs’, The Chronicle of Higher Education, July 21, 1995.