Just Thinking

ASU, UA Could Do More to Spur Innovation Economy

by Richard Gilman

The state has a conundrum. It can’t get straight whether its universities are financial assets or liabilities.

A liability, as we all know, takes money out of our pocket – with no regard to whether we can afford the payments.  Conversely an asset brings money in, even if we did nothing more to earn it than make a wise investment decision.

The Legislature, or at least its Republican majority, puts the state’s universities in the liability category.  The universities, no different than the state’s prisons, are just another bill to be paid. Our leaders in Phoenix managed to reduce the payment plan, then reduced it again, and even so they still write out the check reluctantly.

Thinking Arizona graphic by Tony Bustos

No surprise, those on campus think exactly the opposite.  They regard themselves as assets, representing one of the very most important investments the state could make.  Their students go on to contribute to society in many walks of life.  In addition, the universities support a variety of community needs, create an intellectual environment, and provide many forms of enjoyment for all comers.

The value of many of these outcomes is difficult to quantify.  They are of the soft, fuzzy, intangible, feel-good variety.

Looking for a Financial Return

It’s much harder to pinpoint the type of financial return that assets, in classic terms, are supposed to provide.  Yes, the universities employ large staffs, pay wages, purchase supplies and services, and the ripple effects of those expenditures are considerable.  Beyond that, however, the perception is that the universities aren’t putting money in more pockets around the state.  Or if they are, they’re doing a lousy job of showing off their contribution.

It doesn’t have to be this way.

The universities could be engines for the broader economy.  The health of a state’s economy is, in part, a function of how much innovation it produces.  The universities could and should be vital contributors of that innovation.

Let’s call the inventive output of a state its Innovation Quotient – or IQ.  This measure might be used to gauge inventions, as evidenced by the number of disclosures and patents, as well as what comes of those of inventions, as represented by new technology that is either channeled to existing companies or is used to start up new ones.

Thinking Arizona graphic by Tony Bustos

We can hypothesize that states with high IQ’s will end up with jobs higher on the food chain.  These employees work in a company’s home offices, in research and development, perhaps in manufacturing, as well as at the high-paying support activities that cluster nearby.

By the same logic, states with low IQ’s are forced to rely more on scraps thrown out by companies headquartered somewhere else.  This is lower-skilled work – for example, customer service operations – that these firms farm out to locales based on workforce availability and low wages.  The result may be good, steady employment; the jobs just don’t pay too well.

IQ Is Intuitive But Hard to Prove

The IQ proposition makes sense intuitively, although it is hard to prove.  State economies are gargantuan Gordian knots.  Cause and effect are difficult to unravel, and even sizeable additions get obscured by all the ups and downs, and twists and turns.

Massachusetts is one state that demonstrates the correlation one might expect.  It has a high IQ, thanks in part to the Massachusetts Institute of Technology and Harvard, and the high wages per capita to go with it.  By contrast, many other states do not neatly follow suit.

Some states have low IQ’s, and yet still manage high wages per capita.  The why’s vary.  Alaska, Wyoming and North Dakota, for instance, are so awash in natural resources that they don’t much need to care about IQ.  Connecticut and New Jersey, as two other examples, feast off of neighboring New York City.

Conversely, a few states have high IQ’s but low wages per capita.  Utah is one notable case.  It boasts considerable innovation on a per capita basis.  Nonetheless, wages there remain low.

California is a ‘tweener. The state’s technological prowess is widely recognized, thanks largely to the high profile of Silicon Valley. But it ranks only 12th nationally in income per capita, thereby demonstrating how even a high IQ can be dissipated by the size and diversity of a state’s economy.

As far as Arizona is concerned, there’s not much to crow about on either side of the equation. The state is middle of the pack on IQ, while ranking in the bottom 20 percent on income per capita.

The difficulty in finding a pattern in all of the above may be due to the scale and/or the complexity of the Gordian knot.  But the inconclusive results suggest that very few states, other than for instance Massachusetts, are doing innovation well enough to move the numbers to any noticeable degree.

What does this have to do with the universities?  They are, or at least ought to be, the state’s foremost innovation factories.

But if they are to fulfill this potential, if they want to be regarded by hard-headed, cold-hearted bean-counters as assets rather than liabilities, they need to address – to put it in the vernacular – both the sizzle and the steak.

The sizzle starts with making the case, and that means re-framing the argument.

Thinking Arizona graphic by Tony Bustos

All costs are not created equal.  Taking out the trash and tending the grounds are necessary services, but they represent expenses that will not be repaid.  By comparison, a portfolio of research could be treated as an investment that will pay itself back and provide a handsome return, not only in societal enhancement – but in real economic terms.

This suggestion is far from original.

A former president of the University of Arizona, John P. Schaefer, used a similar notion way back in the 1970s to justify a wholesale expansion of research laboratories on campus.  The same basic logic underlies Arizona State University’s current efforts, which co-mingle “research, economic development, innovation and entrepreneurship” within the research infrastructure that ASU has re-christened “knowledge enterprise development.”

Flying In the Face of Tradition

The ASU initiative, masterminded by President Michael Crow and a cadre of lieutenants, takes leadership and creativity.   However, the new speak doesn’t mean that everyone has automatically enlisted.  Therein lays the challenge.  Administrators can promulgate whatever they please, but ultimately the fancy concepts have to be backed up by what happens inside the black box of the laboratory.

Campus cultures are thick as molasses.  Most faculties fervently believe in the freedom of academic inquiry.  They resist anything that smacks of being directed or measured.  Of course they wouldn’t want that.  Who would?  Their argument is that progress can’t be demanded or forced, which may be true.  It’s also only human that they wouldn’t want anyone looking over their shoulder.

But while laboratory breakthroughs may depend first and foremost on the brilliance of the research, system-wide progress also will require system-wide change.  That would seem to necessitate:

— Developing clarity of mission, and ultimately unity of purpose. 

University communities are deeply conflicted in any number of ways.

They argue over whether they should emphasize what’s good for them versus what’s good for the community at large, whether discoveries should be patented or published openly, what faculty members should be incented to do, and how much academic purity is lost when commercialism enters the picture.

Universities vary in what they value, depending on the influences that dominate each campus.  Pure scientists, who hold sway at the UA, are primarily interested in adding to our knowledge of how the world works.  Many take pride that they are not sullied by commercialization.  Engineers, who have a bigger presence at ASU, are more intrigued by solving problems.  The solutions don’t do much good unless they are put into general application, and that usually means commercializing them.

The preceding statements may be generalizations, but the divisions are real.  They have to be reconciled if a true unified effort is to occur.

– Emphasizing one’s competitive advantages.

Everyone in research knows the big bucks – 60 percent of all research dollars – are in the life sciences.  The trouble with that is everyone knows it.

The UA benefits to the tune of $272 million, more than it gets in any other field of research, but the field is crowded – very crowded.  While the UA ranks 26th in all research expenditures, it falls to 38th in life sciences.  In this competitive environment, one needs to programmatically seek out whatever sets it apart from everyone else.

The UA, for instance, has not just country- but world-class strength in an entirely separate field – optical sciences.  That’s a significant niche onto itself.  In addition, it’s a springboard for interdisciplinary opportunities.  As one good example, the optical science folks have hooked up with the medical school to give the UA what should be a big advantage in medical imaging.

– Setting expectations, and answering to them.

ASU is tinkering with how to take on big research questions, and then to answer them more successfully than it and others have done in the past.

Speaking in regards to the wide universe of researchers, Ann Barker, one of ASU’s newly hired, new-think administrators said, “It’s not that we can’t [solve major problems].  It’s that we don’t.”

Barker contends the shortcomings can be cured with a more directed approach to research that begins with asking questions that are big enough to matter, choosing the right people to find the answers even if that means outsourcing some of the work to other institutions, and drawing up enough resources to get the job done.

The steak will come in the form of answers to those big questions.  Rick Shangraw, who as the head of ASU research was Barker’s boss until he took responsibility last fall for the university’s foundation, says that means making progress on high-profile objectives such as sustainable energy and reductions in disease.  As well as toward improving the economy.

Shangraw doesn’t go this far, but one might be so bold as to set financial objectives for the research portfolio, and then track – as corporations have to do – whether the promised return on investment has been achieved.

The trickiest part is in measuring the return.  The ultimate beneficiary is not the coffers of the universities, which take in a pittance from licensing the technology they develop.  The ultimate beneficiary is in local economic development, and that will take many years to play out.

– Perfecting the mechanisms for exporting technology.

Some universities are much better than others at getting their discoveries out of the labs and into the hands of industry.  The first step is having discoveries that are worthy enough to transfer.  The next step is having the will, the policies, and the resources to transfer them.

Heretofore neither the UA nor ASU has been particularly adept in this regard.  Operating with twice as much research money than ASU, the UA over a five-year period from 2006 to 2010 ranked 52nd nationally in the disclosure of inventions, 61st in patents awarded, 49th in licensing technology to outside concerns, and 32nd in company startups that come from that technology.  Even with the handicap of much less research funding, ASU ranked close to the UA on each of those dimensions.

ASU is seeking to further improve its performance under the aegis of a program called Arizona Technology Enterprises.  Last fall the UA began playing catch-up with an effort it calls Tech Launch Arizona.

Win-Win Or Lose-Lose

The aim is economic development, explains Len Jessup, who as dean of the Eller College of Management heads the UA’s new program.

“This is an exciting time for the city and the state,” Jessup said.  “We’re at a strategic inflection point.  The state is poised to take off.  There’s such a great opportunity here, especially at the UA and ASU, to strategically develop this Sun Corridor.”

Succeed at that, and the universities might convince Phoenix they are indeed assets to the state, particularly if they can prove they’re putting money in the pockets of Arizona residents.  That would be a win-win.

Fail in it, and the universities will be back where they started.  While economic development organizations around the state continue subsidizing lower-skilled jobs offered up by out-of-state companies, the universities will grovel for appropriations from a Legislature that continues to regard them as liabilities.  That unfortunately is a lose-lose.

– Richard Gilman

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  1. Richard Gilman on said:

    Dr. Gerner should know of which he speaks. Gerner, a longtime professor of cellular and molecular medicine at the University of Arizona, was director of the Arizona Cancer Center’s gastrointestinal program. Honored by the UA with its 2010 Innovation Award, he today is a professor emeritus. His discoveries led to the founding of Cancer Prevention Pharmaceuticals, which last month was named a winner of the Arizona Innovation Challenge sponsored by the Arizona Commerce Authority.

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