Trends in academic capitalism

A convergence of trends in academic, industrial and investment environments provides a basis for optimism in the translation of frontier science into social and economic outcomes.

This paper examines key trends and potential impacts for a revamped research economy.

Globalisation

• Concepts of knowledge based economic development that bring the knowledge, productivity and regulatory spheres of society into new configurations are increasingly being recognised in multi-national institutions such as the European Union, the World Bank and the United Nations.
• Interest at the supra-national level invites policy development above the confines of independent states and facilitates a discussion around research priorities and the dissemination of risk on a global scale. Issues that were previously contextualised around matters of national priority are being expanded, and international benchmarks are emerging which improve commitment to research integrity and funding.
• Increasingly, the competitiveness of a state’s economy is being recognised as acutely linked to the strength of its research commitment.

Interactive charts by the OECD

• Traditionally, proximity has been considered a critical component of an effective partnership, with the effect of policy development aimed at encouraging engagement opportunities within local communities. Like many other parts of the economy, geographic proximity is no longer a mandatory component of success in this field. This is particularly evident from global efforts to coordinate research programs in areas that typically struggle to justify public support, in niche fields such as rare diseases, and in relation to challenges that require effort beyond domestic limits. For example, the European Union has approved EUR90M funding rare diseases research, encouraging national funding organisations to collaborate together in the E-Rare program, setting up European Reference Networks for rare diseases and complex conditions, and initiating the International Rare Diseases Research Consortium together with the National Institutes of Health in the USA.

Quantitative metrics

• The goal of measuring scientific productivity has given rise to quantitative performance metrics, including publication count, citations, combined citation-publication counts (e.g., h-index), journal impact factors (a tool created for librarians to use in indexing content), total research dollars, and total patents. These quantitative metrics now dominate decision-making in faculty hiring, promotion and tenure, awards, and funding.
• Whilst this approach marks an evolution from pure bibliometrics, it remains irrelevant as an indicator of quality, or suitability.
• Calls for a fit-for-purpose assessment tool are growing amongst those willing to engage in reasoned analysis, whilst others recognise the intense cost involved in the system as a sufficiently expensive deterrent from investing in substantive change. Instead, they advocate for a lottery to be used to allocate funding, looking to realise benefits from a reduction in the cost of preparing applications and then reviewing them.
• Despite efforts to heed those calls, the systems to hold decision makers accountable for acting accordingly have not been designed.

Hyper-competition

• Ever increasing competition for static or reduced public research funding has become persistent to the point that applicants have become skilled in designing research that stands a moonshot chance of being funded, instead of that which reflects a meritorious hypothesis that should be explored.
• There is a steady shift toward operating public universities on a private business model.
• Each of these trends is creating perverse incentives to undermine the integrity of research being designed, pursued and translated.
• Read our analysis of the publicly funded research profile here.

Shareholder activism

• The rise of hedge fund activism is linked to a stagnation of R&D spending with R&D expenses at surviving target firms declining by more than 50% (expressed as a percentage of sales). Read more.
• Investors prefer share buybacks to research programs. It marks a telling divide that these activists, who applaud the reduction in R&D spending as an innovation efficiency, and cite patent filings and the ability to redeploy human and other capital toward pursuits that are aimed at shorter term profits, as evidence for such success.
• The increasing exertion of shareholder power is undermining the ability of industry participants to commit to long-term research programs. Read more.

Diversity amongst the funding community

• Increasing appetite to support investment in research is measurable. It is swiftly rising within the philanthropic, impact and capital markets investment communities.
• Questions of contemporary relevance are focused on how best to capture, deploy and benchmark performance of this capital. A common language has not emerged to traverse these groups. It is rare to find investors with both profit and not-for-profit experience, rarer still to find a combination of financial and scientific acumen. If these interests could be harmonised, the potential to enhance returns, qualify risks and manage translation has been demonstrated.
• These groups are aware that their ability to work together (and with the public funding bodies) is fundamentally important. This conversation is yet to be properly explored although there is a trend toward strategic placement of philanthropic capital.
• Meanwhile, grantors are becoming increasingly focused on measuring the efficiency with which their capital is deployed. Read more.

Bifurcation of science funding

• Research funding is predominantly sourced from public grants and charitable donations. Usually, it’s only after research yields ideas that are proven novel and effective that the for-profit actors engage (typically by licensing patented technologies).
• The early organised investment models (Carnegie, Rockerfeller etc) that emerged as key research funding sources (outside government) have evolved and are beginning to reach a scale that has global relevance. Many question whether the Chan-Zuckerberg Initiative is the new model for philanthropic investment in science and have observed that the control over the shape of the research agenda being addressed sits in the hands of an unelected few at an unprecedented scale.
• It is a long time since the people funding science were also the people undertaking that pursuit — however there is a noticeable trend toward closer alignment.

The ability to correct market failure

• Traditionally, governments have internalised the cost of funding research because it was seen as a form of market failure, typically referenced to high setup costs, public-good characteristics and nonlinear complex dynamics. Whilst some aspects of these characteristics are fundamentally difficult to address, there is a trend to view market power, increasing returns, information asymmetries, and other deviations from the competitive market-norm as driving forces of innovation-based competition in which non-government actors are well placed to participate.
• For example, the strategy of the Laura and John Arnold Foundation is to “systematically examine areas of society in which underperformance, inefficiency, concentrated power, lack of information, lack of accountability, lack of transparency, lack of balance among interests, or other barriers to human progress and achievement exist”. The LJAF then applies a rigorous and comprehensive entrepreneurial problem-solving approach to these areas, considering all possible strategies, tactics, and resource allocations to effect solutions. This mission is expressed in a form more familiar in the corporate world than the policy teams of government actors deciding on research funding strategies.
• The dynamic of the typical conversation about whether universities and research institutes should be recognised for their direct contribution to the commercial impact of their research usually involves resistance by universities (who prefer to consider their participation as a general public good contribution) and appeal to policy makers (who look to reduce universities reliance on the public purse for funding support). With the maturing market, this is changing.
• As our ability to capture and analyse data improves, things considered general are being particularised. Costs that governments accepted as external to specific private sector actors are being specified and allocated to direct market participants. Analogies can be drawn between the public good that a strong research investment is seen to provide (above any specific industry actor) on the one hand, and the public cost of pollution (created by industry participants, but for which the cost of the consequence is the responsibility of the state). Recent litigation in the US is opening the door for nuisance claims to be made against emitters of carbon dioxide and other greenhouse gas emitters. As we improve the ability to take measurements, the potential to internalise the economic impact of scientific discovery (to for-profit actors) increases.

The pace of discovery

• Discovery has stalled! The pace of discovery (measured by patent applications) has never been so fast!
• Calls for research to better understand whether and why science has slowed per dollar spent are gaining momentum outside the ivory towers which traditionally speak on behalf of research when funding is concerned.
• The gap between discovery and application is widening.
• It has become difficult to ignore critics of the current system who question the sustainability of a system reliant on the measuring of metrics that are easily measured (such as citation and patent counts) instead of those that are meaningful indicators of socio-economic impact and call for a fresh look to be taken at the allocation of funding responsibility for scientific research.

Strange bedfellows

• Traditionally, R&D teams held their research visions as closely guarded secrets. They would prefer to run out money trying to explore a hypothesis than collaborate with a potential competitor. That’s changing.
• Collaboration amongst competitors in some fields is becoming essential. Markets respond to it positively. Novel intellectual property approaches that accommodate this shift are gaining acceptance.
• Many see regulators as effective research partners.
• The consortia model brings new challenges and opens new opportunities to reframe the pipeline.

Public assets

• The public sector is recognising that its data is an asset.
• In Australia, efforts are being made within the health sector to promote the export potential (inviting US clinical trials) of our system. That involves consideration being given to issues around information barriers that would allow industry partners to access public health data, whilst protecting user privacy. Australia’s new MyHealthRecord marks a turning point in establishing clear lines of connection between consumers and evidence-led health policy.
• A recent audit of knowledge assets in the UK found that they are both undervalued and underexploited in the public sector. Despite considerable investment in research, software, data, and expertise, the value of intangible assets reported in government accounts is just £34.5 billion or 2% of total public sector assets in 2017. Given intangibles account for between 52% and 84% of the value of publicly listed companies, there is a significant need for better intangible asset registries and investment strategies.

Intangibles

• Investment goes where the value grows.

• Markets are trying to develop indicators of value in the intangibles pipeline. Patents are a challenge. Pre-IP is even more difficult.

To him that will, ways are not wanting!

The convergence of these trends represents an opportunity to thread diverse constituents into alignment. In doing so, we can improve research integrity, funding and impact.

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