Public research enterprises: The changing landscape

Despite fostering US productivity growth, public sector contributions to university research budgets have steadily declined over the last few decades. As a result, the need to actively seek alternative sources of funding has become increasingly imperative. Private industry frequently offers a viable alternative, now accounting for over 70 percent of national research and development budgets, not only because of its financial resources but because of the dramatic synergies of knowledge assets that arise from successful alliances with universities. Fostering the formation of public–private research partnerships (PPRPs), legislation emerging from the US Senate in the form of the Bayh–Dole Act granted patent rights from federally funded research to universities and small businesses. This legislation created incentives for universities to select areas of research that are likely to result in commercially valuable innovations. The task of PPRP formation is complex and delicate, with many contentious issues arising such as conflict of public and private interests, setting research priorities, ownership and access to intellectual property, and academic researcher publication delays. At the center of the PPRP controversy is the absence of a framework for structuring research agreements and for assessing the inherent merit of such contracts. We present a four-stage framework for analyzing the structure of contracts for PPRPs, recognizing that the essence of PPRPs is a set of “control rights” rooted in incomplete contracting and financial control rights theory. Our framework shows how control rights can be effectively identified, valued, and allotted between research partners.