University-Firm Collaborations; Factors for Formation and Benefits

Abstract:

As their economies develop, emerging markets are expected to place increasing emphasis on university-firm collaborations, which have been shown to play an important role in enhancing firms’ innovative performance. Discuss the factors that may affect firms’ ability to form and benefit from academic collaborations in the context of emerging markets.

Introduction

There has been a rise in collaboration between universities and firms with both parties altering how they approach this relationship into account different the concerns requirements and abilities of all stakeholders (Miller, McAdam and McAdam, 2014).

The number of firms are growing that are implementing innovative practices where they try and utilise both internal and external knowledge in order to explore innovation in along with commercial or scientific agents (Yamin and Otto, 2004). As such in the firm’s innovation process universities play a notable role by providing a high yielding environment to support the firm’s effort to explore and benefit from new ideas and techniques (Guerrero and Urbano, 2010), especially in the context of emerging economies where governments try and promote university-firm partnerships through subsidies in order to enhance economic development and enhance innovation (Guerrero, Urbano and Herrera, 2017).

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The triple helix model development model describes how knowledge transfer interacts focusing on establishing strong links between firms, the government and universities (Schofield, n.d.). There are other various reasons for the rise of university-firm collaborations.  Industry potentially saves on cost related to Research and Development which can be expensive, gain access to technology and knowledge including highly qualified human resources such as researchers and students which can be profitable and the need to develop a specific expertise in-house (Rybnicek and Königsgruber, 2018). Bekkers and Bodas Freitas (2008) estimate that nearly 10 percent of new products or processes are due to academic research. Whereas, Universities benefit from industrial funding including licensing or patenting income, real life case studies and industrial facilities (Barnes et al. 2002). Additionally, they benefit due to cost sharing and have access to talented professions. Consequence such a collaboration increases national growth due to increased innovation and competitiveness, Furthermore, Firms may view Universities as a cheaper for Research and development,compared to alternative financing sources (Aschhoff and Sofka, 2009).

 

Formation and benefits of University-Firm Collaborations

The strategic purposes of University-Firm collaborations include acquiring new external knowledge, technological rejuvenation, skill absorption and development of radical or long-term innovations (Guerrero, Urbano and Herrera, 2017).

Bellucci and Pennacchio (2016) looked at  University-firm collaborations  across Europe’s and found that the environment they are present in can explain the level of success for innovation and establish that firms are more probable to collaborate with academia when are looking for radical innovations in developed countries.

One of the main reasons why Universities partner with companies specially in emerging markets is due to government subsidies and incentives in order to promote exchange of knowledge and funding gained from partnering with firms. This is done so that countries do not lag behind in terms of new radical or incremental innovation and to stimulate economic development (Bozeman, 2000).

Figure 1: Potential benefits from academia-industry interactions (adapted from Link and Tassey, 1989; Landry, Amara and Ouimet, 2007, Etzkowitz & Dzisah, 2008).

Joseph and Abraham (2009) found that the number of firms that collaborated were low in India due to economic, business and technology factors there is a rise in partnerships in Emerging Countries between industry and academia. While, there has always been a strong University-Firm partnership model in developed countries like the USA, UK, Canada, Singapore, etc, Emerging countries like India have realised the benefits this partnership can bring to both parties. Firms are facing increased pressure to innovate and present cutting-edge technology to ensure they have a competitive advantage, as such they are increasingly looking toward Universities to do that (BW Education, 2018).

For example, in India in 1991 after the launch of the New Economic Policies, there was a rise in the interaction between universities and industries.  As such, issues related to university-firm interaction is moving toward science and technology policy making, planning and management (Joseph and Abraham, 2009). As such due to such reforms there has been a change in the economic environment with firms, universities and public laboratories facing higher competition due to this increased liberalization. Government support is progressively reducing particularly in social activities such as the education sector and Research and development. Hence, the academic system is gradually financing not only their research and development through partnerships with firms but even some of its teaching activities.

With the Indian economy opening up after 1991, the industrial sector is realising that due to the increase of competition, they cannot complete with products specially if they want to compete with international firms who have more sophisticated processes and higher quality products. As such they are looking toward Universities to help them and gain new sources of knowledge (Joseph and Abraham, 2009).  

The formation of University-Firm collaboration is affected by various factors which in turn affect the gains from this relationship.

In emerging countries, there is not a strong base to build upon for high quality research, as such University-Firm partnerships are not as efficient as those in developed countries. While firms are interested in partnering with Universities in Emerging markets, they face a high number of challenges in terms of expectations, communication and reaching agreements. As such to understand such partnerships in Emerging markets it is necessary to address the expectations, services to be undertaken as well as understand there will be other factors influencing the partnership influenced by the environment, profiles of individuals/partner, and purposes (Guerrero, Urbano and Herrera, 2017). Furthermore, universities in emerging markets face limitations in quality and quantity of those resources and capabilities, however, they receive government support in order to promote increase innovation through subsidies in order to make science more relevant to industry’s need.

(Alcalde and Guerrero, 2014) found that the industry in which the firm is present in plays a role in the type of partnership that will be formed between Universities and firms as depending on strategic cause, firms usually collaborate with different types of organizations. The role of universities in exploratory innovation is more significant in science-based collaborations. Whereas, commercial innovation deal with a fast return on investment, risk reduction, and enhancing flexibility, quality, and market adaptability. As such firms will need to choose the correct for the area they operate in and want to focus on (Chung, Bae and Kim, 2003).

Literature broadly divides factors that affect the success of partnerships into internal, i.e. factors that can be controlled, and external, i.e. which cannot be’ control. External factors refer to the political, economic, social, legal and technological conditions of the country. Although these factors are beyond the control of both stakeholders, they should be identified in order to mitigate external risks (Madu, 1989). The internal factors are related to organizations, individual, the process and assets of each party, i.e. university, industry and the government (Barbolla & Corredera, 2009).

Duan (2010) identifies different internal factors of success for knowledge transfer at an organisational level between different organisations that can be used as a basis as factors should be considered for the formation of University-Firm collaborations and how these factors will affect the extent of success from such collaborations particularly in Emerging Markets. These success factors are as follows:

Relationships

When Universities and Firms partner, the relationship between not only the organisation but also at an individual must be set up in a way to make working arrangements easy. Without a good relationship, the project cannot be successful as it will impact the productivity of work in particular if scientific knowledge transfer or sharing of ideas is involved. People/Organisations who have good relationships with one another are more likely to work well together and will be more willing to collaborate. This is truer in the case of Emerging markets specially in South East Asia. For example, Guanxi, which is very important to Chinese life, and is prevalent throughout South East Asia. It involves a relationship between organisations or persons, not only to family and friends but also to social connections based on mutual interest and benefit. Such a reciprocal relationship helps establish a harmonious and productive environment.

 

Motivation

Motivation is a key factor that has been identified that leads to the success of University-Firm collaborations and transfer of knowledge between them (Duan, 2015).  Firms should recognise the need of specific knowledge to solve a problem and/or to be promoted and a need or desire to seek or accept knowledge from outside for firms. It also acts as a prerequisite to have a common reason for collaboration. Therefore, all parties involved should be aware of the necessity to adjust their knowledge according to new requirements imposed by globalisation.

Level of Knowledge

The level of knowledge of all partners must be at a similar level for the partnership to be beneficial. Even though firms collaborate with Universities due to lack of expertise in a particular area, if there is an adequate knowledge base the transfer of this new knowledge between organisations becomes easier. This factor deals with the problem of knowledge absorption capacity. If the recipients’ knowledge level is too low, they may have difficulty to understand and implement knowledge from academia. Furthermore, if partners are not on the same level and one partner is weaker or less developed, the collaboration tends to rely mainly on the stronger partner, who may dominate or control the partnership. Therefore, the parties need to understand where they stand and if they can do what is needed.

Objectives and focus

 Having clear Objectives and the focus of the collaboration is probably the most  important factor to consider for both Universities and Firms. Having clear common               objectives and focus should be a priority and as such the methodology for the same               should be negotiated among partners. The needs, requirements and problems of the               targeted regions should be made known when the partnership starts and both               parties must know what is to be done. Thus, the necessary elements and success               factors for such a cooperation must be well thought out internally before it is               communicated with other parties.

Selection of appropriate partners

 Selection of the appropriate partners ensures effective knowledge transfer and  mainly the future implementation of this know-how in the target               areas.  Furthermore, partners with a similar structure. Mohnen and Hoareau (2002)               found that firms that cooperate with universities are usually big and are from the               scientific sectors, patent and receive government support. As such, firms which are               SME’s excluding start-ups, rely less on collaborations with universities. Another               paper by Mansfield and Lee (1996) finds that firms prefer to work with local               university researchers. Problem to University-Firm partnerships can arise if there is               lack of information and a mismatch between industrial needs and academia’s               strategy and contrasting view.

Trust and Openness

 Trust and Openness is important for knowledge exchange as without trust, openness               and good communication knowledge transfer won’t be possible and trust among               partners will allow problems and unforeseen obstacles to be overcome.               Furthermore, factors such as IP rights might hinder how much Universities and Firms               trust each other which might lead to a strain on the relationship between               stakeholders (Source).  Furthermore, Openness facilitates positive dialogue as               openness and acceptance of new methods and differences in approach is important               for the success of the collaboration. Furthermore, with the lack of IP protection and               the importance of the reputation of an organisation or individual in Emerging               countries, both parties need to trust and be open with each other and that parties               will act in good faith (Source).

Channel of knowledge transfer

 The correct channel of communication must be chosen to transfer knowledge  between the firms as both parties may not understand either what is needed out of               the collaboration or how to implement the knowledge that has resulted from it.               University-Firm collaborations are deal with the absorptive capacity of new               knowledge along with access to R&D public funding, qualified/specialized               personnel,               and technological capabilities. Furthermore, (Svensson, 2007) highlights that the               transfer of knowledge depends on the level of development of the country. As can               be expected if the country is less developed, there is a lower absorptive capacity               and               therefore needs additional activities such as capacity building and training.As               emerging countries such as India, China, Brazil become more developed the level               of education is increases and as such there is an increase of absorptive capacity.

 The way knowledge is transferred to firms from Universities make a difference in the               absorption of this new knowledge and as such communication of this in the form of               workshops, networking events, seminars, case studies, partnership building               activities, etc. must be correctly identified.

Barriers that may hinder University-Firm Collaborations

While the number of University-Firm partnerships are on the rise, it does not come without its own set of challenges. Contrast on the mission and objectives, organizational differences, which leads to an impact on the level of funding, academic incentives and different focus of research, different time scales (industry are usually looking for short term versus academia’s long-term orientation) are just some of the factors that can cause a problem.

While academics are driven by interest and scholarly distinction, industry is profit-driven problem-solving and results. Another difference that can hinder collaboration is the cultural differences in the way both parties focus on different issues. Cultural factors are those that each party understand the type of work that needs to be done by them. While Universities focus on exploration and researching a vast array of areas, a firm’s R&D would focus more on applied problem solving.

As such, this can potentially lead to problems owing to different values and misperception. One of the main areas regarding barriers literature discusses is related to intellectual property and its ownership and utilisation. (Siegel et al., 2003) discusses how academics might put an inflated value to their ideas, hindering the collaboration. However, while firms may think so specially in Emerging Markets, Universities will usually negotiate the value of the IP and negotiate at market rates (Schofield, n.d.). As such Universities are becoming intelligent coming to partnerships and try to now make use of their knowledge commercially (Bruneel, D’Este and Salter, 2010). High transaction costs of contractual agreements in Emerging Markets can also cause difficulties relating to the partnership (Joseph and Abraham, 2009). Furthermore, there are various other factors that determine the ability to form and benefit from University-Firm collaborations. These include experience and skills of stakeholders, existing relationship between collaborative partners and their reputation and local networks of the knowledge (Svensson, 2007).

Conclusion

University-firm collaborations are progressively playing a key role in Emerging countries for innovation and knowledge transfer ecosystems. It is critical to understand what makes university-firm collaboration effective and potential barriers to ensure maximum benefits.

Knowledge characteristics play a notable role in affecting university-firm collaborations. Partners’ mutual confidence, focus, perception of industry desires and objectives, alignment of mutual desires and research targets are contributing elements to a successful partnership. At a higher degree of evaluation there are three wide areas affecting successful University-Firm collaboration: internal, environmental and relational/cultural. Internal elements are related to organizational, individual, resources, these usually are partly controllable. External factors include market conditions, politics, monetary and legal risks, which can be mitigated through due diligence. Relational/cultural elements can eventually enhance or inhibit the success and are needed for growing possible collaborative options.

University-Firm partnerships in the emerging markets have additional challenges such as market stability, local education, capabilities, knowledge absorption capacity and cultural value systems(Schofield, n.d.). There should be a focus on knowledge characteristics and its translational capacity, organizational structures, processes, market-related risks and the alignment of goals. Furthermore, openness and trust as key success factors.

The factors proposed above ((i) relationships, (ii) motivation, (iii) level of knowledge of partners, (iv) selection of partners (v)objectives and focus (vi) Selection of appropriate partners openness and trust, (vii) Channel of knowledge transfer) can be successfully utilized while making decision for evaluating potential research collaborations for Universities and firms alike. At a practical level, the developed framework can help evaluate the probability of success and potential challenges. The framework can be used to consider all levels of analysis: (i) type of knowledge to be researched and transferred, (ii) internal(individual, organization, process and resources) relating to all stakeholders involved in collaboration and (iii) external or environmental level. In emerging countries, progressive corporations are greater likely to collaborate with universities to improve radical improvements as opposed to develop incremental innovations. The access to government subsidies is key in university partnership and is greater in inter-industry/University collaborations than in exclusively science-based collaborations. In Emerging countries, specially India, it was noted that firms are increasingly turning R&D oriented probably due to them being aware of the need to be innovative to in order to survive in the competitive environment. The Indian firms were found to be generally inward looking and depended on its own knowledge from its manufacturing process and look at customers as the major sources of knowledge for innovation. The evidence in India suggest that universities did not have an important role as sources of information either in terms of suggesting new projects or help completing the existing ones prior to 1991 but over the years it has been increasing. The same can be said about other Emerging Markets who have now understood the importance of such collaborations to have a competitive advantage.

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