New Forms of University-Industry Collaboration in Finland: Key results of the National Survey

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1 No. 2/2015 New Forms of University-Industry Collaboration in Finland: Key results of the National Survey Are universities able to utilize firms unused intangible assets? What are the impacts of industrial collaboration on universities key activities? Name of the project: Open innovation on the borderline of the university -enterprise cooperation (Open-UNIC) Name of the project: Researchers: Open Kautonen innovation Mika & on the Muhonen Reetta borderline of the University of Tampere university -enterprise cooperation Lehenkari Janne & Hyvönen Jukka (Open-UNIC) Technical Research Centre of Finland Tuunainen Juha University of Helsinki Kutvonen Antero Lappeenranta University of Technology The paradigm of open innovation has emerged as a new way to manage the increased amount of boundary-spanning knowledge flows in and out of the innovation process. Basically, open innovation refers to inbound and outbound enterprise activities devoted to intangible assets. Most of the open innovation literature has concentrated on business-tobusiness transactions. This study advances research on open innovation as a new source of value creation in the university-industry collaboration. The common research focus on firms commercializing publicly-funded research is turned around here by focusing on the role of universities as utilizers of unused intangible assets of companies patents and ideas in organized and managed research and student projects. This study is highly relevant in the Finnish context where the funding of the universities and polytechnics (higher education institutions, HEIs) is widely discussed in the name of new funding models and the ongoing comprehensive reform of state research institutes and research funding (VNK 2014; OKM 2014a; 2014b; OKM and TEM 2012). HEIs are expected to strongly contribute to, among other things, their regions economic development and transformation through smart specialization and to generate wider societal impacts not only by teaching and research but through their third mission. To be able to function towards such demanding goals, HEIs clearly have to manage their external relations and gain from these in order to further feed back to their social and economic environments. The Open-UNIC study puts emphasis on those impacts and benefits the universities may gain from industrial collaborative relationships. In addition, it analyses also outbound processes (e.g. spin-offs, licensing out, innovation competitions) that are the usual targets of the university industry collaboration. However, our special interest here is on impacts of collaboration on the universities educational and research activities. This policy brief is based on the national survey of key stakeholders (N=140) conducted as a part of the collaborative Open-UNIC project ( ) funded by Tekes through its innovation research call in The preliminary quantitative results map the status quo of open innovation and other key industrial collaboration practices among the Finnish universities and polytechnics. The study will be continued by analyzing interaction, learning and contractual practices of university-based open innovation projects with case study methodology. The final conclusions of the project will be drawn together towards the end of Consortium coordinator: Janne Lehenkari Technical Research Centre of Finland

2 Introduction: new perspective on the use of intangible assets The open innovation approach is needed to manage the increased amount of boundaryspanning knowledge flows Globalization, pervasiveness of information and communication technologies and the buildup of knowledge society and related policies have led to growth and redistribution of knowledge and highly trained labour supply. The foundation of competitiveness is dependent on valuable knowledge resources that are distributed widely across the globe, across actors in the value chains and across highly-skilled individuals in multiple organizations. Against this background, the paradigm of open innovation has emerged as a new way to manage the increased amount of boundary-spanning knowledge flows in and out of the innovation process (Chesbrough 2003). Like the concept of the national innovation system of the 1980s and 1990s, the concept of open innovation (OI) today is an umbrella term that encompasses and integrates a range of existing research activities that test, expand and refine the non-fixed research framework of open innovation (Huizingh 2011; See also Kutvonen et al. 2013). As such, OI encompasses a wide range of modes of technology transfer and universityindustry collaboration. However, most of the OI literature focuses on business-to-business transactions while research on open innovation activities in public-private partnerships (PPP) is on an early stage. Furthermore, universities are typically seen in the role of suppliers of knowledge without discussing other potential roles and objectives that universities may have in OI partnerships or networks. (Kutvonen et al ) A new perspective: Universities utilizing firm-based knowledge This study advances research on open innovation as a new source of value creation in the university-industry collaboration. The common research focus on firms commercializing publicly-funded research is turned around here by focusing on the role of universities as utilizers of unused intangible assets of firms. The present study advances empirical knowledge on the new modes of collaboration while simultaneously elucidating the complex relationships between universities industrial collaboration and the two basic tasks of universities, i.e. research and teaching. By doing that, it produces new knowledge on the university-industry collaboration where universities are utilizing firm-based knowledge as one of the starting points of their research and development activities. From the policy point of view, Open-UNIC contributes to innovation policy target of fostering the better use of firms intangible assets for the value creation and renewal of the Finnish economy and closer integration of R&D activities by universities, research institutes and businesses (cf. Research and Innovation Council 2010, 30-31). Besides this policy brief, survey outcomes are and will be reported also through academic publications, such as conference papers and journal articles (see Kautonen et al. 2014). Due to often long publishing processes, some of these may occur during the next few years.

3 The Open-UNIC Survey: data and implementation Our data is based on a nation-wide survey of 140 experts in charge of R&D management in the Finnish universities and polytechnics In the Open-UNIC study, a nation-wide survey was conducted focusing especially on new forms of collaboration between the Finnish higher education institutions (HEI) and industry with a focus on bidirectional and networked modes of collaboration, such as open innovation. The survey New Forms of HEI-Industry Collaboration forms a central source of research data in this project. The main themes of HEI-industry collaboration addressed by the survey: Development trends - New forms of collaboration - Impacts The survey was conducted in May-June 2013 and it covers almost all of the universities (13 of 14 universities + National Defense University) and polytechnics (22/24) in Finland. The method applied was telephone interviews (N=140) which enabled the use of a long questionnaire and open questions. The target group consisted of people in charge of R&D management. In case of polytechnics, Directors of R&D were interviewed, while in the case of universities the respondent group consisted of Vice Rectors, Deans, Heads of Departments and research services and industrial liaison officers. A preceding round of 12 pilot interviews were conducted to identify the relevant respondents and to test the questionnaire. Response rate of the Open-UNIC Survey was 30,4 percent. The resulting sample provides a good starting point for analyses as it is not biased in any important dimension but instead covers the target groups very well. Besides analyzing the current and emergent trends of university-industry collaboration, this policy brief discusses the challenges of combining the basic tasks of HEIs, i.e. research and teaching. It contributes to map the state-of-the-art and challenges of open innovation practices in Finnish universities and polytechnics. In addition to the descriptive statistical analysis, factor and variance analyses were conducted to find out about the distinctive collaboration patterns. University industry collaboration is intensifying by becoming more versatile and covering new sectors, firms of varying size and new disciplines Key results According to the majority of the respondents, university industry collaboration has increased and become more versatile by expansion to cover new sectors, firms and disciplines during the last three years. There are also new forms of engagement with the industry, such as idea competitions, new institutional arrangements for incubation activities and shared facilities. The representatives of the Finnish HEIs commonly share the view that researchers have obtained significant ideas and knowledge from industrial partners and thus these relationships are to a great extent bidirectional in terms of knowledge flows. Also entrepreneurship-friendly atmosphere among HEI students has become better than before. Concerning teaching, courses and activities related to industrial collaboration have become an important part of curricula in many HE institutions. When looking at the regional significance of industrial collaboration in the case of HEIs, there is a significant difference between HEIs roles, according to the survey results. In the capital city region, the role of collaboration is less pronounced in facilitating emergence of new industries compared to other regions.

4 In the following, the survey statements related to the university-industry collaboration are presented that have the highest share of those agreeing (Likert scale, 4-5): University researchers have received significant ideas and knowledge from firms and those are used as inputs of universities own research activities Students and researchers are more interested in establishing own businesses than earlier Researchers direct contacts to firms are an important precondition to launch cofinanced R&D projects or other activities subject to a charge together with firms. (68%) From industrial collaboration, our researchers have received significant ideas and knowledge that are further developed as a part of our own research activities. (61%) Our former or present researchers or students have established successful spin-off firms (for which knowledge has to a great extent been generated in our HEI). (59%) Various kinds of industrial collaboration has become a permanent part of our curriculum. (55%) Our HEI is active in participating to or promoting business incubation activities. (55%) Industrial partners represent various sectors and sizes of firms more often than before. (55%) There are more scientific disciplines involved in industrial collaboration. (54%) Students have become more interested than before to establish their own businesses. (52%) Our HEI has actively organized or sponsored idea competitions etc. among students in order to generate innovative ideas or to solve problems. (50%) As part of our curriculum, there are courses related to innovation management. (51%) According to the survey, majority of the respondents (56%) did not consider industrial collaboration affecting excessively institutions educational or research activities. However, when looking at the results of the survey s open questions, industrial collaboration does not fit together with the basic tasks of research and education without some troubles. In the factor analysis that was conducted, three main factors were identified. The first factor ( Commercialization ) consists of four items (see Appendix 1) of which three are related to activities and investments to commercialize university IPR either in general or by generating revenues from it or by promoting new businesses. The fourth item concerns procedures related to IPR management. This factor deals with formal, financial aspects of university industry relationships that are mostly outbound by their character. The second factor ( Bidirectional knowledge transfer ) is, as the term implies, about the manifold processes and practices of industrial collaboration of the universities in which knowledge and ideas tend to move to both directions. Among the items of this factors, there are also many that are informal and non-financial by their character. The third factor ( Strategic recruitment ) is made up of only one item but indicates a strong factor loading alone. This is an inbound process to strengthen a university s research capacity in its important field of specialization by recruiting from the industry. As such this represents an interesting, fairly recent phenomenon for most of the Finnish HEIs. Although universities and polytechnics have much in common in terms of universityindustry collaboration, there are also considerable differences. The pillars in figure 1 illustrate the deviation from mean average according to three factors (see appendix 1 for the factor components). According to the survey findings, the most significant dissimilarity is that while the universities have, during the last three years, concentrated on commercialization and IPR management, the polytechnics have focused more on two-way interaction with the industry. There are no substantial differences between different types of HEIs in relation to strategic recruitment activities (figure 1).

5 This is interesting in the light of some other research findings that indicate that the universities focus on IPR management has not much affected their revenues. Licensing revenues of all the Finnish universities added up to 1.6 million in 2005 (Kankaala et al. 2007) and there are implications that this amount has not significantly increased after that (c.f. OKM 2012). It may be, nevertheless, that these activities had not yet materialized and will occur during the forthcoming years. In the light of our findings, this may be the case: only 13 per cent of the respondents claimed their institution had considerably increased their revenues from selling their IP whereas as many as 41 per cent argued there is still much unused commercial potential hidden in their ownership. However, a cautious stance may be taken since in Europe overall license incomes equal to 1.5 per cent of the research expenditures of the European public research performers (European Commission 2012). The difference between universities and polytechnics: universities have recently concentrated on commercialization activities while polytechnics have focused more on twoway interaction Strategic recruitment is an important factor in fostering industrial collaboration and emphasizing the importance of personal contacts Commercialization Collaboration and Open Innovation Recruitment 0,5 0,4 0,3 0,2 0,1 0-0,1-0,2-0,3-0,4-0,5 universities (n=37) polytechnics (n=40) FIGURE 1. Three factors on university industry relations by HEI type. The three generated factors on patterns of university industry interactions produce also statistically significant impacts distinctive for each three factors (see Appendix 2). These seem to be sound and logical and lead to clear implications for policy and practice. Commercialization, not surprisingly, has led to increases in revenues from selling the university IPRs. Yet HEIs recognized much greater potential hidden in their IPRs and had taken actions to also promote IPR commercialization by increasing competences related to innovation management among their students as well by generating new businesses through incubation activities. A distinct impact of Collaboration and open innovation is that it had led to curricula arrangements that take into account industrial collaboration in various ways (e.g. joint curricula planning, visiting lecturers from the industry, teaching innovation management, or new collaborative platforms on the university industry interface). Furthermore, bidirectional knowledge transfer has a statistically significant relation to processes in which HEI researchers receive important ideas and knowledge from industrial collaboration that they are able to use in their own research further on. This highlights an embodied, tacit nature of much knowledge generated in R&D collaboration that demands enhanced capacities to absorb and exploit those ideas and knowledge. These kind of two-way interactions seem to have fostered also HEIs internationalization and incubation activities.

6 The third factor, strategic recruitment, is related to the HEIs ability to nurture successful spin-off firms, according to the factor analysis. This stems from the practical businessorientation of the recruits with industrial background. Dysfunctional structures seem to be the biggest problem in universities for industrial collaboration Lack of time and funding makes collaboration challenging for polytechnics and companies alike There are also some problems in industrial collaboration. In both types of HE institutions, dysfunctional structures, such as unsuitability of funding structures and contingency of contacts are considered as big challenges (in universities, this represented the most important obstacle with 34% of this opinion). Some of the respondents are of the opinion that funding policy of TEKES has become more impatient compared to earlier times. This makes it more difficult to create new industrial partnerships. Furthermore, according to some respondents views, TEKES and the EU structural funds have incentivized companies to price R&D services that they acquire from HE institutions too aggresively. According to some of the HEI representatives view, different goals and missions of universities and companies make collaboration challenging (19% of this opinion). Moreover, it is a question about different operational practices and organizational cultures (18%). Some respondents conceived universities as bureaucratic and stiff institutions when compared to agile business life. Obstacles of industrial collaboration in polytechnics focus on scarce resources. 40 percent of respondents report the lack of financial resources or difficulties in time management. Different operational practices (38% agreed) cause challenges in collaboration with fastmoving business life also for polytechnics. In this respect, some respondents noted that scheduling practices are different. For instance, in polytechnics plans are made for one year at time, which makes collaboration difficult. 27 per cent of the respondents in the polytechnics considered that structural problems inhibited industrial collaboration.

7 Conclusions There are distinctive differences in interaction patterns and outcomes of industrial collaboration among the Finnish HEIs that deserve policy discussion In case of the Finnish universities, there is an increasing interest in commercializing IPRs while the Finnish polytechnics are more oriented to develop bidirectional processes of collaboration, open innovation and joint knowledge creation with firms. This is related to the underlying assumption that the research activities of universities generate commercially viable IPRs, whereas more applied R&D is conducted in polytechnics where IPRs remain in firms possession all the time. If the universities are wished to move closer to the industry and this collaboration is expected to generate more positive impacts on research and teaching, it seems viable that the universities also develop their activities in line with more bidirectional dimension (like the polytechnics do) instead of focusing narrowly on outbound commercialization activities. Obstacles of industrial collaboration of universities are more related to underdeveloped collaboration structures, such as contingency of contacts and unsuitability of funding structures, while in the case of polytechnics they are more often related to scarce resources such as time and funding. One way to explain the differences between the HEIs is the phase of development in industrial collaboration. It is possible that the universities, in general, have not yet encountered the problems that the polytechnics are already facing in industrial collaboration. As it is known, however, the Finnish universities are a heterogeneous group of institutions in terms of industrial engagements. The noted distinctive interaction patterns (commercialization, bidirectional knowledge transfer, and strategic recruitment) with their distinctive outcomes deserve policy discussion to evaluate their significance and what actions are needed in the future. Among the HEIs, it is also important to begin to carefully plan and manage better utilization of those IPRs generated by them or through industrial collaboration as these may contain a big future potential. Industrial collaboration does not seem to disturb the performance of research and teaching, the basic tasks of the universities Policy challenges and opportunities Industrial collaboration is more versatile in Finland than it used to be with more industrial sectors as well as scientific disciplines involved and more SMEs as partners. This is likely to make the landscape of knowledge transfer more dynamic than before. Polytechnics seem to conduct industrial collaboration more in terms of two-way interaction than universities but their proportion of total R&D investments is small. The possibility to design appropriate policy measures to further support industrial collaboration of universities is hampered by insufficient level of knowledge about researchers direct contacts with firms. However, a study of ETLA (Tahvanainen & Nikulainen 2011) indicates that the majority of the Finnish HEI researchers are motivated by other factors than purely commercial ones: the most important motivation is inventions potential to serve the society, followed by researchers own ambitions and future research funding prospects. Therefore, incentives for industrial collaboration and commercialization need reconsideration and a perspective wider than that provided by economic approach only. Our results show that the R&D management of the Finnish HEIs commonly shares the view that researchers have obtained significant ideas and knowledge from industrial collaboration. HEIs intentionally recruit experts from industries to strengthen their research capacities. This evidently further intensifies the interactive processes that are taking place at the university-industry interface and may lead to successful, industrially-oriented research projects or even establishing spin-off firms. The strategic recruitment supports the possibilities of HEIs to benefit from knowledge and resources of the partner firms. The role of HEIs in the capital-city region of Finland is different from the rest of the country due to the larger size of the regional economy and the number of actors there. Regarding Tekesin this Ohjelmatoiminnan finding, policies strateginen supporting tuki university-industry -yksikkö tuottaa innovaatioympäristöä collaboration could palvelevaa take into account tutkimusta a teemakohtaisilla heterogeneity hauilla. of the regional needs and development paths.

8 Also students and researchers are more interested in establishing their own businesses than earlier. Intense collaboration, such as joint premises and infrastructures (e.g. laboratories) of university researchers and private R&D staff, tend to lead industrial collaboration becoming more integrated part of the HEIs curricula. In the light of this study, this can be considered as one way to support HE institutions to strengthen their engagement with industrial partners. According to our survey results, industrial collaboration does not seem to disturb the performance of research and teaching, the basic tasks of the universities. When looking at the results of the open questions of the survey, however, it is obvious that there are some challenges between different cooperation practices of HEIs and industry. Our study will scrutinize these challenges more carefully in case studies. Literature Currently, one of the most remarkable policy challenges in university-industry collaboration is how to support the Finnish HEIs in industrial collaboration. Even though there are some steering mechanisms, such as funding instruments that require industrial partners, the key challenge at the moment seems to be the university funding model of the Ministry of Education and Culture which focuses on rewarding scientific publishing. The question remains whether there are incentives enough encouraging researchers to go into industrial collaboration. Chesbrough, H. (2003). Open Innovation: The new imperative for Creating and Profiting from Technology, Harvard Business Press, Boston, MA, European Commission (2012). Interim Findings 2011 of the Knowledge Transfer Study Principal authors: Anthony Arundel and Nordine Es-Sakdi (UNU-MERIT, forchapter 2), Franz Barjak, Pieter Perrett and Olga Samuel (FHNW, for chapter 3) as well as Stefan Lilischkis and Tobias Hüsing (empirica, for chapter 4). Bonn/Maastricht/Solothurn. Huizingh, E. (2011). Open innovation: State of the art and future perspectives. Technovation, 31, 2 9. Kankaala, M., Kutinlahti, P. & Törmälä, T. (2007). Tutkimustulosten kaupallinen hyödyntäminen kvantitatiivisia tuloksia. Sitra reports 72. Helsinki: Sitra. Kautonen, M., Muhonen, R., Charles, D., Hyvönen, J., Kutvonen, A., Lehenkari, J. & Tuunainen, J. (2014). Open Innovation in University Industry Collaboration: Towards Mutually Benefiting Relationships, Conference Proceedings of the XXV ISPIM Conference Innovation for Sustainable Economy & Society, Dublin, Ireland, 8-11 June Kutvonen, A., Lehenkari, J., Kautonen, M., Savitskaya, I., Tuunainen J. & Muhonen, R. (2013). University-industry collaboration and knowledge transfer in the open innovation framework. In T. Kliewe et al. (eds.) University-Industry Interaction Conference: Challenges and Solutions for Fostering Entrepreneurial Universities and Collaborative Innovation, OKM (2012) Tutkimustulosten hyödyntäminen yliopistoissa ja ammattikorkeakouluissa 2011 korkeakoulujen raportoinnin mukaan. Yhteenvetomuistio, OKM/KTPO, OKM (2014a) A proposal for revising the funding model for universities as of OKM (2014b) Ehdotus ammattikorkeakoulujen rahoitusmalliksi vuodesta 2014 alkaen. oulutus/ammattikorkeakoulu_uudistus/aineistot/liitteet/amk_rahoitusmalli.pdf%20%20 OKM and TEM (2012) Suomi osaamispohjaiseen nousuun. Tutkimus- ja innovaatiopolitiikan toimintaohjelma. Helsinki, OKM. Research and Innovation Council (2010). Research and Innovation Policy Guidelines for Helsinki: Research and Innovation Council of Finland. Tahvanainen, A.-J. & Nikulainen, T. (2010). Commercialization at Finnish Universities: Researcher s Perspectives on the Motives and Challenges of Turning Science into Business, The Research Institute of the Finnish Economy, Discussion papers No. 1234, ETLA: Helsinki. VNK (2014). Government Resolution on Comprehensive Reform of State Research Institutes and Research Funding. URL: ( ).

9 APPENDIX 1 Three factors on university industry relations and factor loadings. Result from a factor analysis. More often than before, industrial partners source knowledge and technology by commissioning R&D or other projects from us Industrial partners make some of their resources available for our researchers or students without immediate reward Our HEI intentionally recruited experts from the industry to strengthen a certain strategically important field of research HEI activated to commercialize its inventions and technology by selling and licensing it HEI activated to commercialize its inventions and technology by promoting a birth of new spin-offs and businesses Researchers and students make intensive use of ideas coming from industry in planning research and development projects Researchers direct contacts to firms an important precondition to launch co-financed R&D projects or other activities subject to charge together with firms Researchers and students share same premises or infrastructure (e.g. laboratory) with firms HEI actively organized or sponsored idea competitions etc. among students in order to generate innovative ideas or to solve problems More often than before, our HEI invest in commercial exploitation of IPR (e.g. patents) HEI has clear rules how to spread the economic benefits and risks in industrial collaborative projects Commercialization Bidirectional knowledge transfer Strategic recruitment,096,421,139,139,519,078,101,098,992,897 -,043,035,733,179,182,115,608 -,030,140,273 -,014,132,594,092 -,034,622 -,036,655,196,030,465,344 -,070 Extraction Method: Unweighted Least Squares. Rotation Method: Varimax with Kaiser Normalization.

10 APPENDIX 2 University industry relations (three factors) and their association with impact variables Impacts/outcomes Agree * Commercialization Disagree ** Bidirectional knowledge transfer Agree * Disagree ** Strategic recruitment Agree * Disagree ** Incomes from selling IPR increased considerably 0,97-0,14-0,26 0,07 0,31-0,04 Many IPRs with commercial potential not yet exploited 0,36-0,24 0,14-0,09 0,13-0,05 HEI active in participating to or promoting business incubation 0,20-0,37 0,18-0,32 0,06-0,12 Former or present researchers or students established successful spin-off firms 0,13-0,24 0,05-0,17 0,18-0,38 Established spin-off firms often decay due to a lack of funding or other important resources 0,29-0,08-0,10 0,10 0,07 0,06 In the region, a new industry emerged for which HEI significantly contributed to through education or R&D 0,18-0,14-0,06 0,03 0,07 0,16 From industrial collaboration, researchers received significant ideas and knowledge 0,02-0,17 0,15-0,51 0,10-0,30 Courses related to innovation management as part of curriculum 0,14-0,34 0,02-0,04 0,07-0,09 Industrial collaboration has too much impact on HEI s research or educational activities -0,36 0,07-0,01 0,01-0,35 0,05 Various kind of industrial collaboration has become a permanent part of curriculum -0,05 0,07 0,27-0,62-0,01 0,03 Industrial collaboration significantly contributed to internationalization of HEI -0,05 0,10 0,18-0,21-0,06 0,08 Note. The bold figures indicate that the two groups agree and disagree differ statistically significantly in terms of factors scores (p<0.05). *Average of factor score in units which answered 1) fully agree 2) somewhat agree. **Average factor score in units which answered 3) neither agree nor disagree, 4) somewhat disagree, 5) fully disagree.