Selling University Technology: Patterns from MIT

Many research universities engage in efforts to license inventions developed by university-affiliated inventors. However, no systematic explanation of the conditions under which university inventions will be licensed or commercialized has been provided. Drawing on transaction cost economics, I provide a conceptual framework to explain which university inventions are most likely to be licensed, commercialized, and generate royalties, and who will undertake that commercialization. I test this framework on data on the 1,397 patents assigned to the Massachusetts Institute of Technology during the 1980-1996 period. The results showthat (1) university inventions are more likely to be licensed when patents are effective; (2) when patents are effective, university technology is generally licensed to noninventors; (3) when patents are effective, licensing back to inventors increases the likelihood of license termination and reduces the likelihood of invention commercialization; and (4) the effectiveness of patents increases royalties earned for inventions licensed to noninventors. The implications of these findings for innovation management and strategy, entrepreneurship, and university technology commercialization are discussed.