Research conducted by university researchers for industry constitutes one of the main channels through which knowledge and technology are transferred from science to the private sector. Since the value of such inputs for the innovation performance of firms has been found to be considerable, it is not surprising that firms increasingly seek direct access to university knowledge. In particular, industry funding for public sector R&D has been steadily increasing in most OECD countries. The growing amount of industry funded research, however, spurs concerns regarding possible long-run effects on scientific output. While some policy makers argue that the potential of universities to foster and accelerate industrial innovations is not yet fully exploited, others are concerned with the distraction of academics from their actual research mission. Whereas from a private-sector perspective, the benefits from collaborating with academia are found to be unambiguously positive, the effects on the scientific sector are not as clear cut. Science may benefit from the initiation of new ideas from industry or the use of industry funds for hiring additional researchers or investing in lab equipment. On the other hand, traditional incentives in scientific research characterized by knowledge sharing and rapid disclosure of research outcomes may be distorted. Moreover, commercial interests may induce scientists to select research projects on the basis of their perceived value in the private sector and not solely on the basis of scientific progress. Previous research has provided little empirical evidence on the effects of industry funding for university research on scientific productivity at the level of the individual researcher. This study aims at filling this gap by studying the effects of industry sponsoring on professors' scientific productivity. Our data contains information on laboratory and funding characteristics as well as on publication and patent output for 678 professors at 46 different universities in Germany covering a broad range of research fields in science and engineering. The results show that a higher budget share from industry reduces the publication output of professors in terms of both quantity and quality in subsequent years. In turn, industry funding has a positive impact on the quality of applied research if measured by patent citations. Industry funding may thus still have beneficial effects by improving impact and quality of more applied research. We believe the results from this study are provocative for policy analysis and public funding authorities. An increasing reliance on industry funding compared to stagnating core funding may indeed affect the development of science in the long run if publication output is reduced. On the other hand, industry funding may be very valuable for professors' applied research and the success of their patenting activities.
Hottenrott, Hanna and Susanne Thorwarth (2010), Industry Funding of University Research and Scientific Productivity, ZEW Discussion Paper No. 10-105, Mannheim, published in: Kyklos. Download