Against the One-way-street: Analyzing Knowledge Transfer from Industry to Science

The expansion of higher education has lead to a continuously increasing number of jobs that deal with scientific problems and methods (Gibbons 1994). In science based industries like the biotechnology industry knowledge has become the most important production input. Since knowledge as a productive factor has different properties than a scarce production factor new economic concepts have been introduced within the last two decades. These new concepts emphasize the interactions between organizations which permanently produce and absorb knowledge so that knowledge flows occur between all actors in all directions. As a consequence knowledge should not only flow between firms or from public research organizations to firms but also from firms to public research organizations. The empirical literature has mostly neglected this topic so far. This paper analyzes differences in the factors that influence the occurrence of knowledge flows within industry and from industry to science in the biotechnology sector. The knowledge flows are modeled via a backward patent citation analysis on the basis of EPO patent data. We then use an quasi-experimental framework that compares the identified citing and cited patents with a combined sample of control patents. On basis of this combined sample we estimate a weighted bivariate probit model on the citation probability of science and industry. We find considerable differences in the citation probability of science and industry. Cultural closeness has a positive effect on the citation probability from industry to industry while the citation probability of scientific institutions is not affected by cultural distance. Moreover many inventions in the biotechnology sector that are protected by patents obviously seem to be not profitable at a first glance but feature great value for future scientific research because the economic value has only a positive effect on the citation probability of industry. Cooperation between firms and research institutions on a patent application seems to have a signal effect for other research institutions regarding the potential usefulness for own research and thus results in a higher citation rate from science. Our results suggest that knowledge transfer in the biotechnology industries indeed is not a one-way street between public research organizations and firms but works in both directions. This result qualifies present-day biotechnology industries as science-based industries par excellence as the division of labor in research activities between firms and public research organizations blurs the ancestral boundaries between applied and basic research.

Fier, Heide and Andreas Pyka (2010), Against the One-way-street: Analyzing Knowledge Transfer from Industry to Science, ZEW Discussion Paper No. 10-048, Mannheim.