Select Committee on European Union Minutes of Evidence


Written evidence from Professor Roos, Massachusetts Institute of Technology, Director, Engineering Systems Division, Associate Dean for Engineering Systems

TECHNOLOGY BASED ENTREPRENEURSHIP IN THE UNITED STATES

  1.  There are many factors that have contributed to the success of technology-based entrepreneurship in the US. Of primary importance are the US research universities. I was somewhat surprised in reading the Green Paper on Entrepreneurship in Europe that there was no mention of the very important role of research universities. For this reason, I will focus on that topic.

  2.  US research universities educate the next generation of entrepreneurial leaders, develop new knowledge that is the basis for start-ups and facilitate the formation of new companies. World class research universities in California, Massachusetts, Texas and North Carolina are responsible for the major concentrations of entrepreneurial activities and the resulting economic development close to the universities. To illustrate the role and impact of research universities, I will briefly describe the MIT entrepreneurial experience and how it has contributed to improved competitiveness and economic development in the US.

  3.  MIT has had a significant economic impact through companies formed by its alumni and faculty. A Bank of Boston study conducted in 1997 found that MIT graduates had founded 4,000 companies, which employ 1.1. million people and generate $232 billion worth of sales. The new companies are primarily knowledge-based organizations in software, manufacturing, electronics, biotechnology, instruments, machinery and consultancy. Although the major economic impact has been in the Boston metropolitan area, the benefits have been distributed broadly. There are five states with over 20,000 MIT-related jobs and 13 states with over 10,000 MIT related jobs.

  4.  An internal study by MIT of alumni from the classes of 1979, 1984, 1989 and 1994 (1,700 responses representing 40 per cent of the alumni) found that 19.6 per cent of the alumni had formed one company and 5 per cent of the alumni had formed two or more companies. The data suggests that MIT graduates are forming an average of 300 firms per year.

  5.  A recent study, "Engines of Economic Growth" provides a detailed report on the economic and social impact in 2000 and 2002 of MIT and seven other research universities on the greater Boston economy. The study found that in 2000 the eight universities provided:

    —  $7.4 billion boost to the regional economy.

    —  Innovating research that resulted in 264 patents, 280 commercial licenses of technology and 41 start-up companies.

    —  Continuing education for 25,000 non-degree candidates.

  6.  Twenty-five of the 50 early stage start-ups that attracted the most investment in 2002 were connected to one or more of the eight universities. University alumni and faculty members have founded major local firms such as Analogic Technologies, Biogen, Staples, Teradyne, Delphi Communication Systems. International companies such as Amgen, Cisco, Merck, Novartis, Pfizer and Sun Microsystems are locating major facilities in the Boston Metropolitan area to gain access to the research universities.

  7.  Entrepreneurship and working with industry are a fundamental part of the MIT culture as reflected by the MIT founding charter, mens et manus. Equal value is placed on scholarly basic research as well as the real world applications of that research. An entrepreneurial culture is pervasive throughout MIT starting with the undergraduate experience. In addition to taking traditional courses, most MIT undergraduates participate in UROP (Undergraduate Research Opportunity Program) and UPOP (Undergraduate Professional Opportunity Program) where students get a first hand experience working on a research project or working for industry. As a result of these experiences, MIT undergraduates are exposed to the real world implications of their studies. These students represent the next generation of national leadership which is so critical in ensuring the US will maintain its pre-eminent position in entrepreneurship and competitiveness.

  8.  An entrepreneurial activity of particular importance to MIT undergraduates and graduate students is the US $50,000 Entrepreneurship Competition. The competition is designed to encourage students in the MIT community to act on their talent, ideas and energy to produce tomorrow's leading firms. Now in its fourteenth year, the Competition has awarded hundreds of thousands of dollars in cash and business start-up services to outstanding teams of student entrepreneurs who submitted business plans for new ventures showing significant business potential. The refinement process of the Competition, its network of mentors, investors and potential partners, and the cash prizes awarded have helped many of these teams to act on their dreams and build their own companies and fortunes. As the world leaders among university entrepreneurship competitions the Competition has facilitated the birth of over 60 companies with an aggregate value of over $10.5 billion. These companies have generated over 1,800 jobs and received $175 million in venture capital funding.

  9.  In addition to its educational mission, MIT has an extensive research program. Over 20 per cent of MIT's research funding comes from industry. In FY 2002, industrial research support totalled $100 million. 683 companies supported MIT research of which 22 companies provided $1 million or more and 170 companies provided $100,000-$1,000,000. As a result of these industrial research relationships, MIT has been granted over 150 patents in each of the last five years.

  10.  Companies are decreasing the number of universities they interact with and deepening the relationships with those that remain. MIT has initiated eight new major industrial partnerships during the last decade funded at a level of $3-5 million/year. These partnerships are large scale, broad-based, long-term strategic relationships.

  11.  The transfer mechanism of research results to industry has changed over the past several decades. Technology transfer of university research results to industry was traditionally viewed as a linear process, where faculty published scholarly papers that industry used to transform the research into viable products. Today, industrial research at MIT is a two way interactive knowledge exchange process involving close working relationships with industry in a partnership mode.

  12.  MIT has several research centres that focus specifically on entrepreneurship and competitiveness. These include:

    —  Deshpande Centre for Technological Innovation—the Centre helps emerging technologies to evolve, by funding novel early stage research, and by connecting MIT's innovators with venture capitalists and entrepreneurial companies.

    —  MIT Entrepreneurial Centre—The Centre provides content, context and contacts that enable entrepreneurs to design and launch successful new ventures based on innovative technology.

    —  MIT Centre for Technology, Policy and Industrial Development—The Centre focuses on global industrial sector studies in the automotive, aerospace, material, telecommunications and pharmaceutical industrials. These industry studies examine competitiveness and involve principle stakeholders from industry, government, labour and the financial community. MIT acts as a facilitator and honest broker. Results of the industry studies have had a major impact on both industry strategy and government policy.

  13.  MIT has established infrastructure and support for its industrial relationships. The following organizations are explicitly charged with creating long-term relationships and intermediating with industry:

    —  MIT Industrial Liaison Program. A central office to coordinate industrial relationships, arrange campus visits, organize corporate seminars, etc.

    —  MIT Technology Licensing Office—Commercialization of MIT research is accomplished through invention disclosure, patents and licensing and formation of startup ventures.

    —  MIT Venture Mentoring Services—MIT faculty and alumni who have successfully established companies advise MIT faculty who are engaged in startups.

  14.  Industry influence is ever-present on the MIT campus. For example, MIT has:

    —  Departmental MIT Visiting Committees—Every MIT department has an oversight committee with whose membership includes senior industry executives. These committees insure that Departments understand industry's perspective.

    —  MIT Corporation—a group of senior individuals including many from industry which acts in a similar manner to Board of Directors, providing oversight to the MIT administration.

    —  Industry campus visits—Industry researchers come to MIT for short visits or extended stays to work with the faculty.

  15.  These organizational units and activities from an intellectual supply chain that can effectively interact with industry to facilitate the transfer of knowledge and the commercialisation of MIT research. MIT works with entrepreneurs in a variety of industrial organizations; medium and large-scale companies as well as startups and small enterprises. In all cases, the emphasis is on establishing connectivity and mutual interaction with people at all levels of the organization. Improving human capital is a primary objective of these relationships.

  16.  How might the MIT experiences in entrepreneurship and competitiveness be of benefit to the UK? A bold program is currently underway between MIT and Cambridge University. The Cambridge MIT Institute (CMI) has been established to improve competitiveness, entrepreneurship and productivity in the UK. The CMI mission is to impact the university-industry knowledge exchange interface through the education of leaders, the discovery of knowledge, development of technologies and creation of programs for change in universities, industry and government. This is accomplished using a partnership of MIT and Cambridge and an extended network of participants. Central to these activities is the idea that human capital and management competence combined with technical knowledge is central to entrepreneurship and business growth and entrepreneurial team building.

  17.  The National Competitiveness Network (NCN) is a mechanism for CMI to work with other universities throughout the UK. NCN provides a mechanism to disseminate successful programs initiated by CMI. Initial membership in NCN includes the winners of the Science Enterprise Centres Competition to establish Entrepreneurship Centres. CMI is working not only with other universities, but also with industry and governmental organizations at the national and regional levels[1]via a series of specialized workshops and bursary schemes designed to expose UK academies and policy practitioners to MIT's Entrepreneurship Development Programme.

  18.  CMI is a model and catalyst for change in the UK. It is a mechanism to foster improved university-industry relations and to educate the next generation of entrepreneurial leader. These objectives are not easily accomplished. A trust relationship must develop between universities and industry, which has not existed in the past either in the US or the UK Government can play a vital role both in supporting the research universities in entrepreneurial initiatives and in fostering improved university-industry relationships.

  19.  The UK needs a research university system that respects entrepreneurial activities, provides educational programs to develop the next generation of entrepreneurial leaders, supports research leading to the discovery of new knowledge and forms partnership relations with industry to facilitate the commercialisation of new technologically based products.

Professor Daniel Roos

10 April 2003




1   A description of CMI programs and activities may be found at the CMI website: http//www.Cambridge-mit.org Back


 
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