14 Feb 2013Working Paper Summaries

Fostering Translational Research: Using Public-Private Partnerships to Improve Firm Survival, Employment Growth, and Innovative Performance

by Sen Chai and Willy C. Shih

The authors demonstrate that a unique Danish mediated public-private partnership model for fostering the translation of basic science into commercial applications help firms significantly decrease the likelihood of bankruptcy while substantially increasing the average level of employment. Funded firms in the study were granted significantly more patents and published more peer-reviewed papers, and the impact of these publications was significantly higher. In addition, the mediated partnership model improved the knowledge produced as well as the collaborative behavior of scientists with a significantly higher level of citations and more cross-institutional coauthored publications. Key concepts include:

Mediated public-private partnership funding affects firm performance especially in the mid-term, three to four years after funding.
From a policy standpoint, by providing a public-private partnership funding scheme coupled with strong mediation, governments are able to incentivize firms to take on more basic science research and development and make the results more successful.

Author Abstract

Scientific research and its translation into commercialized technology is a driver of wealth creation and economic growth. Partnerships between public research organizations, such as universities and hospitals, and private firms are an established policy tool around the world for the delivery of social or public services, and their use as a tool to foster the translation of basic science into commercial applications that spur economic growth and increased employment has attracted increased interest. Yet questions about efficacy and the efficiency with which funds are used is a subject of frequent debate. This paper examines empirical data from the Danish National Advanced Technology Foundation (DNATF or Højteknologifonden in Danish), an agency that funds partnerships between universities and private companies to develop technologies important to Danish industry. We assess the effect of a particular "mediated funding" scheme that combines project grants with active facilitation and conflict management on firm performance-survival, employment, and growth-and firm innovative performance-quantity, quality, and nature of patents and papers-by comparing funded and unfunded firms. To address endogeneity around selection bias, we use a qualitatively similar subsample of small and medium enterprises just above and just below the funding cutoff threshold and find convincing evidence that DNATF's mediated funding model has a compelling effect on firm performance and overall innovative performance three to four years after receipt of funds. Selection of a firm to participate helps it to stay financially viable and significantly decreases the likelihood of bankruptcy by up to 2.7 times (270%) four years after funding application. Selection also increases the average level of employment by 9.8 to 14.2 more employees for chosen firms, respectively two and three years after application. For innovative performance, selection of a firm for participation meant an increase in filed patents by up to 520%, granted patents by up to 430% and peer-reviewed publications 370%, but the effect of selection was mainly felt in quality of the innovations. Peer-reviewed citations for selected firms were 1,370% greater than those firms that did not make the cut-off. Finally, this public-private partnership model increased the level of collaboration among academic research scientists and those in private firms-participating firms collaborated 3.1 times more with colleagues in academia. This is a dramatic increase in collaboration and co-authoring across institutions, providing strong evidence for the benefits of breaking down the boundaries between institutions and enabling teams of individuals from both sides in public-private partnerships to work together alongside one another.