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American universities are besieged by critics who argue either that higher education is too expensive, that years in college do not yield adequate measurable results, or that academia is too resistant to technological change. If only universities could develop new business models the way corporations do, and if only they could do so quickly! The message of Elizabeth Popp Berman’s book Creating the Market University: How Academic Science Became an Economic Engine is quite simple: been there, done that. A sociologist, Berman performs the historian’s task of demonstrating change over time, and in this case it is significant change over a short period of time.
The book never formally defines the population of institutions that warrant the label “market university,” but it becomes clear that this is about America’s roughly 250 research universities. Berman picks up the story in post-World War II America, where research universities acted as what she calls an “economic resource” which industry could use. She writes that “before the 1970s universities [provided] fundamental science that firms would draw upon as needed to solve industrial problems and make technical advances.” Then came the rapid transformation: “By the early 1980s . . . universities also saw science as having the potential to actively drive economic growth by serving as a fount of innovation that could launch new industries or transform old ones. . .” Universities transformed themselves into “economic engines” by assuring that research made it to the market place. The catalyst for this transformation, Berman ably demonstrates, came primarily from policy change by the federal government.
Why the sudden change? During the 1970s, America suffered its greatest financial downturn since the Great Depression. Quite a contrast to the go-go years of the 1960s. Berman notes that in 1969, the United States had 649 initial public offerings; during the first half of 1975, just one. That alone would not be cause for panic but for contemporary studies indicating that a disproportionate amount of technological innovation and job creation came from new firms. Meanwhile, universities lacked sufficient incentives to bring promising research to the marketplace, and would-be entrepreneurs (including faculty and graduate students) lacked capital they needed to launch and grow an enterprise. Hence, the search for new policy that might increase the number of high-tech start-ups.
Berman focuses on three sets of related activities that grew rapidly on campuses in the 1980s and 1990s: faculty entrepreneurship, [End Page 174] university patenting, and university-industry research centers. She traces the changes in those areas to particular policy changes that occurred in a very short period of time (1977–1982). Among the list, four stand out. The first was the Revenue Act of 1978, which reduced the capital gains tax from 49 to 28 percent, stimulating venture capital investment. The second was the Department of Labor’s 1978 clarification of the Employment Retirement Security Act (ERISA), which increased the willingness of pension funds to invest in venture capital. The third was the 1980 Bayh-Dole Act, which allowed universities to patent inventions funded by the government. The fourth was 1982 creation of the Court of Appeals for the Federal Circuit, specializing in patent law, thereby strengthening intellectual property rights. These four, combined with lower profile actions, enabled the transformation of the research university.
Although the book describes policy changes affecting a swath of industries, the primary lens through which the book presents this phenomenon is the biotechnology industry. This is partly because biotech was so new: “the real practical breakthrough [the ability to replicate recombinant DNA]” came in 1973, first commercialization in 1976, and the initial public offering of Genentech in October 1980. The main reason the choice of this industry makes so much sense is because expertise “could only be found in academia.” In that respect, biotech differed from electronics, where universities imported breakthroughs such as the transistor from industry.
This is a great book for wonks. On page after page, data regarding academia, high-tech innovation and entrepreneurship stand up, and...