The Kept University

Commercially sponsored research is putting at risk the paramount value of higher education—disinterested inquiry. Even more alarming, the authors argue, universities themselves are behaving more and more like for-profit companies

Corporate underwriting of research is by no means confined to the medical sciences. In his book The Heat Is On: The High Stakes Battle Over Earth's Threatened Climate (1997), Ross Gelbspan documents how, over the past several years, fossil-fuel companies have bankrolled numerous academic studies that downplay the threat of global warming—distorting, Gelbspan argues, the public-policy debate. And last June controversy erupted at the University of Florida following the disclosure that Charles Thomas, a criminologist at the school who advised the state on prison policy, had pocketed $3 million in consulting fees from the private-prison industry, in which he also owned stock. (Thomas's views on private prisons are quoted frequently in The Wall Street Journal and The New York Times, and he has trumpeted the virtues of "full-scale privatization" in testimony before Congress.) "I'm really kind of astounded that the state university system would tolerate something like this," said a member of the state ethics commission, which slapped Thomas with a $20,000 fine.

SOME would argue that such relationships, far from being unseemly, are in keeping with the utilitarian strain that runs through the history of American higher education. Certainly, in comparison with their European counterparts, U.S. universities have always displayed a pragmatic bent. Whereas in Europe universities took pride in pursuing knowledge for its own sake and in remaining aloof from the outside world, in America educators from Thomas Jefferson to John Dewey have argued that universities ought to be engaged in the world, and that knowledge exists to be put to use. When Congress passed the Morrill Act, in 1862 (which gave rise to America's public land-grant universities, including Berkeley), it specifically instructed the states to establish schools that would teach "agriculture and the mechanical arts ... in order to promote the liberal and practical education of the industrial classes," rather than the classical curriculum.

Thus it is hardly surprising that, as the historian David Noble documents in his book America by Design (1977), the rapid growth of the U.S. industrial economy at the turn of the century coincided with a surge in university-industry collaboration. Engineering and chemical giants underwrote research in exchange for the services of academic scientists; universities established industrial-research centers to furnish corporations with personnel; some schools even went into business themselves, with the University of Minnesota operating its own mine and New York University running a macaroni factory. Such entanglements inspired the radical economist Thorstein Veblen to comment acerbically in 1908 that "business principles" were transforming higher education into "a merchantable commodity, to be produced on a piece-rate plan, rated, bought, and sold by standard units, measured, counted and reduced to staple equivalence by impersonal, mechanical tests."

World War II, however, ushered in an era of public support for higher education. The role of university scientists in the Manhattan Project and other wartime initiatives—such as the development of penicillin and streptomycin—convinced public officials that academics were uniquely capable of undertaking crucial research initiatives. As corporations slowed their funding of academic research, public money filled the role: from 1953 to 1968 public support grew by 12 to 14 percent annually. Whereas funding for scientific research from all sources totaled $31 million in 1940, federal funding alone reached $3 billion in 1979, much of it dispensed by the National Institutes of Health and other new agencies. This influx of federal dollars reflected a growing appreciation for the basic, undirected research that universities perform. "New products and new processes do not appear full-grown," Vannevar Bush, President Franklin Roosevelt's chief science adviser, declared in 1944. "They are founded on new principles and new conceptions, which in turn are painstakingly developed by research in the purest realms of science."

The Bayh-Dole Act changed this, and not simply by creating incentives for corporations to invest in academic research. What is ultimately most striking about today's academic-industrial complex is not that large amounts of private capital are flowing into universities. It is that universities themselves are beginning to look and behave like for-profit companies.

The University as Business

THE Office of Technology Licensing at Stanford University occupies the third floor of a drab concrete building located just off the main loop that circles the palm-studded Palo Alto campus. This unprepossessing spot is the hub of a commercial enterprise that is the envy of universities across the country. The OTL's mission is to commercialize discoveries made by professors and to manage Stanford's growing patent portfolio. In the main lobby, encased in handsome wooden frames along the walls, are displays highlighting the various patents and products the office has recently helped bring to market. One describes a valve that creates high-resolution images on the surface of a silicon chip, another a new case-management system for heart failure that the university is hoping to license to the nation's hospitals.

"We're receiving about two hundred and fifty invention disclosures a year, roughly one in four of which is patented," says Jon Sandelin, a senior associate at the OTL. Sandelin says that Stanford earned $61 million from its technology-transfer activity last year—a success he credits to creating the right entrepreneurial environment. "You have to understand—initially the department chairmen and school deans weren't thrilled by having this new activity that was diverting the attention of their faculty away from teaching and research," he explains. "So how do you offset that? You make them stakeholders—you make them beneficiaries."

Once professors and their departments learned that they could earn a cut from inventions, Sandelin says, they became more enthusiastic about bringing their ideas to the OTL. To reinforce the message, the OTL conducts aggressive outreach, organizing lunches with department heads; publishing a newsletter, Brainstorm,that touts the latest faculty discoveries; and dangling incentives in front of would-be inventors. In 1990 Stanford established a Research Incentive Fund to help professors convert academic concepts into "prototype products." "Got an idea for the next great whatchmacallit but don't have the funds to move from hypothesis to thesis?" a recent issue of Brainstorm asks. "This fund might just be your answer."

Traditionally, universities regarded patents as being outside their orbit, generally believing that proprietary claims were fundamentally at odds with their obligation to disseminate knowledge as broadly as possible. Today nearly every research university in the country has a technology-licensing office, and some have gone further. Johns Hopkins Medical School, for example, has established an internal venture-capital fund to bankroll commercially promising lines of research. The University of Chicago, renowned for its classical tradition, has created an affiliated non-profit, the ARCH Development Corporation, whose mission, in part, is to launch start-up companies based on faculty innovations. The dean of Chicago's medical school, Glenn D. Steele Jr., recently removed many faculty department heads and bluntly told Business Week that he plans to begin "insinuating the place ... with entrepreneurial people"—a clear statement that commercial acumen is becoming an important qualification for new faculty.

SURPRISINGLY, two decades after Bayh-Dole was passed, no independent assessments of its economic impact have been made. But the Association of University Technology Managers, a consortium of over 300 universities and research institutions that engage in technology transfer, does publish an annual statistical survey of its members. In 1998 alone, the AUTM reports, 364 start-up companies were formed on the basis of a license to an academic invention, bringing the total since 1980 to 2,578. The group estimates that overall, university technology-transfer activities generated $34 billion that year, supporting 280,000 American jobs.

"There's clearly a kind of ferment going on at U.S. universities," says Lita Nelsen, the director of technology licensing at MIT. "When I went to MIT as an undergraduate, in 1964, the Kendall Square area was a bunch of vacant lots with a greasy old diner, and that was it. Now if you look out my window, it's brick high-rise buildings filled with little start-up companies—everything from Lotus down the street, to Neurometrics across the alley, to Biogen and Sapient. The old mills with broken windows have been refurbished into high-tech incubators." The clustering of computer-engineering and biotech firms around academic-research centers in Silicon Valley; Austin, Texas; Route 128 in Massachusetts; and the Research Triangle, in North Carolina, derives in large measure from the synergy between universities and industry that Bayh-Dole has fostered.

No sector of the economy better illustrates the potential benefits of this synergy than biotechnology, a multibillion-dollar industry that grew out of university research labs. Garry Nolan, an assistant professor of molecular pharmacology at Stanford, epitomizes the new generation of professor-entrepreneurs. A few years ago Nolan founded Rigel, a biotech firm based in San Francisco that has pioneered a promising new method for identifying the proteins involved in asthma, allergies, immune disorders, and other health problems. "We've already attracted a hundred and fifty million dollars in investment from various drug companies interested in our work," Nolan says. "There's almost no greater and more immediate feedback than when you find a commercial entity interested in what you're doing."

Walter Powell, a sociologist at the University of Arizona who has tracked the growth of the biotech industry worldwide, believes that the close links between universities and industry are a principal reason why U.S. firms now dominate the biotech market—a lesson America's competitors are taking to heart. "You're seeing other countries moving in the same direction," Powell says, pointing out that the University of Munich has been involved in spinning off at least five private companies in Germany in the last two years alone. Lita Nelsen says her office at MIT has been overrun with visitors from other countries, including Japan, which recently passed its own version of the Bayh-Dole Act.

The surprising twist, however, is that although university licensing offices are churning out patents, most of these offices are themselves barely breaking even. "Everybody was waiting for a hundred million dollars a year out of their technology-transfer offices," Nelsen says. "The reality is that hardly any schools earn anywhere near that." Although some academic achievements—such as the discovery of recombinant DNA and the development of the hepatitis B vaccine (developed jointly at the University of California and the University of Washington)—have generated millions, most have not, and Nelsen says it is impossible to predict which will be lucrative.

Far from restraining universities, however, the difficulty of turning a profit seems to have made them more aggressive. A growing number of schools, for example, are buying equity stakes in the very companies that stand to profit from their faculties' research—a practice that both raises the potential for conflict of interest and is financially risky. In the 1980s and early 1990s Boston University poured $85 million (nearly a fifth of its endowment) into Seragen, a biotech firm specializing in cancer research, which several BU professors had founded. Convinced that the company would generate windfall profits, BU President John Silber also personally invested heavily in Seragen and persuaded numerous professors and trustees to do likewise. But from 1991 to 1997 Seragen lost almost $150 million. The university, which at one point owned 91 percent of the company's stock, was accused of egregiously mismanaging the school's endowment to prop up the company and to protect the trustees' investments.

Presented by

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus


The Absurd Psychology of Restaurant Menus

Would people eat healthier if celery was called "cool celery?"


This Japanese Inn Has Been Open For 1,300 Years

It's one of the oldest family businesses in the world.


What Happens Inside a Dying Mind?

Science cannot fully explain near-death experiences.


Is Minneapolis the Best City in America?

No other place mixes affordability, opportunity, and wealth so well.

More in National

More back issues, Sept 1995 to present.

Just In