Impact of Regional Systems of Innovation on the formation of University Spin-offs by
Biomedical Star Scientists

V. J. Thomas1,* and Elicia Maine2

1

The University of the Fraser Valley, Abbotsford, Canada

2

Simon Fraser University, Vancouver, Canada

Abstract
Scientists in research universities can play a formative role in commercializing their inventions
for the benefit of society. University spin-off formation is increasing in importance as an
alternative to licensing, and can be impacted by both micro and macro-level factors of the
regional system of innovation. However, there is limited understanding of the ways in which
these factors can interact to enable the formation of university spin-offs. In this study we
examine how the productivity of two biomedical star scientists in co-founding university spinoffs can be supported or constrained by other elements of the regional system of innovation.
Recommendations are made for research universities seeking to foster entrepreneurship through
university spin-off formation.

Keywords: Star scientists; University Spin-offs; Regional Systems of Innovation; Anchor
Companies; Technology Entrepreneurship; Innovation Policy; Science Policy; Academic
Entrepreneurship; University Entrepreneurship; Science Commercialization; Biomedicine; Lifesciences; Biotechnology; Technology Transfer

*Corresponding author

JEL Codes:

O31, O34, O38, M13, I230

1

Author Biographies
V. J. Thomas (jon.thomas@ufv.ca) is the BC Regional Innovation Chair in Canada-India
Partnership Development at the University of the Fraser Valley, Abbotsford, Canada. He holds a
PhD in Technology Management and Strategy from the Indian Institute of Technology (IIT)
Delhi. His research uses publication and patent data in novel ways to unpack and compare
science and technology commercialization across universities, industries and regions. His
research has been published in Nature Nanotechnology, Journal of Engineering and Technology
Management, World Patent Information, and Scientometrics.

Elicia Maine (emaine@sfu.ca) is a Professor of Innovation & Entrepreneurship at Simon Fraser
University in Vancouver, Canada. Professor Maine is also Academic Director of an
interdisciplinary program in Science & Technology Commercialization aimed at teaching PhD
Scientists and Engineers how to turn their inventions into innovation. She teaches “Managing
Technological Innovation” in the Management of Technology MBA program, “Managing
Innovation” in the Executive MBA program, and “Lab to Market” in the Science & Technology
Commercialization program at SFU’s Beedie School of Business. Dr. Maine’s research interests
are in managing technological innovation and in science & technology entrepreneurship,
publishing her research in leading journals, such as Research Policy, R&D
Management, Nature Nanotechnology and Nature Materials. Dr. Maine holds a PhD in
Engineering & Technology Management from the University of Cambridge, and master’s
degrees in Technology & Policy and in Materials Engineering from the Massachusetts Institute
of Technology. She is active as a speaker on innovation policy and the commercialization of
science.

2

The Impact of Regional Systems of Innovation on the formation of University Spin-offs by
Biomedical Star Scientists

Abstract
Scientists in research universities can play a formative role in commercializing their inventions
for the benefit of society. University spin-off formation is increasing in importance as an
alternative to licensing, and can be impacted by both micro and macro-level factors of the
regional system of innovation. However, there is limited understanding of the ways in which
these factors can interact to enable the formation of university spin-offs. In this study we
examine how the productivity of two biomedical star scientists in co-founding university spinoffs can be supported or constrained by other elements of the regional system of innovation.
Recommendations are made for research universities seeking to foster entrepreneurship through
university spin-off formation.

Keywords: Star scientists; University Spin-offs; Regional Systems of Innovation; Anchor
Companies; Technology Entrepreneurship; Innovation Policy; Science Policy; Academic
Entrepreneurship; University Entrepreneurship; Science Commercialization; Biomedicine; Lifesciences; Biotechnology; Technology Transfer

1

Introduction

Scientists in research universities can play a formative role in commercializing their inventions
for the benefit of society. Scientists can engage in commercialization by licensing their
inventions to large incumbent firms or by forming university spin-offs. Incumbent firms are
generally not keen to license these early stage inventions as significant time and money is
required for further development, the technological uncertainty is high, and incumbent
organizational incentives constrain radical innovation (Maine and Seegopaul, 2016; Pisano,
2010). These incumbents prefer to wait for a small university spin-off to demonstrate the
feasibility of this technology before considering sub-licensing or acquisition. Thus, research
universities are increasingly choosing to embrace initiatives designed to facilitate spin-off
formation.
Many research universities now support spin-off formation, though not all are equally
successful. Spin-offs from MIT and Stanford have been estimated to generate $1.9 trillion and
$2.7 trillion in annual global revenue (Roberts et al., 2015; Eesley and Miller, 2012)
respectively. The regional economies surrounding these universities have also benefitted from
increased job creation. Thirty nine percent of all alumni founded firms are located within 60
miles of Stanford (Eesley and Miller, 2012) and the Kendall Square neighborhood of MIT has
120 biomedical firms within a 1.5 kilometer radius (Ledford, 2015). This success is leading more
universities and regions to identify ways to support university spin-off formation.
3

Biomedical university spin-offs emerge from academic research labs led by scientists.
Some scientists choose to publish with limited or no patenting, while others may embrace
commercialization by publishing, patenting and licensing their inventions. Scientists may also be
more directly involved in commercialization as co-founders of university spin-offs (Gurdon and
Samsom, 2010), generally located in close proximity to their academic institution (Zucker et al.,
1998). There is a great variation in the productivity of scientists along this spectrum of invention
to innovation (Stephan et al., 2007). We define star scientists as researchers who have an above
average patent and publication output, and are also listed as a co-founder on a university spinoff.
In this paper, we investigate the impact of regional systems of innovation on the
formation of university spin-offs by star scientists. Using two purposefully selected case studies,
we demonstrate how the productivity of star scientists in co-founding university spin-offs can be
supported or constrained by elements of the regional system of innovation. In Section 2, we
review the literature on regional systems of innovation and star scientists with an emphasis on
their role on university spin-off formation. We describe the methodology we follow in Section 3,
followed by the two case studies in section 4. We discuss our findings in section 5 and offer
conclusions in the final section.

2

Theoretical background

A regional system of innovation (RSI) is defined as a system “in which firms and other
organizations are systematically engaged in interactive learning through an institutional milieu
characterized by embeddedness” (Cooke et al., 1998). Originating from earlier research on
National Systems of Innovation (Lundvall, 1992; Freeman, 1995; Nelson, 1993; Edquist; 1997),
the regional systems of innovation concept emphasizes three aspects. The first term “Interactive
learning” describes the interactive processes through which knowledge is combined by different
actors in the productive system. The second term “milieu” highlights rules, standards, values,
and human and material resources. The third term “embeddedness” includes all economic and
processes created within and outside firms. The increasing recognition of the RSI concept has
been tempered by researchers critiquing its lack of clarity (Markusen, 2003). Others have argued
that a top-down, macro-to-micro view pervades RSI analyses, which leads to insufficient
attention to the micro and meso level explanations for regional innovation (Iammarino, 2005;
Werker and Athreye, 2004). An integrated micro-to-macro view is needed to better understand
the dynamics of regional systems of innovation.
From the micro perspective, star scientists in research universities have an important role
in improving the innovative performance of a region (Niosi and Banik, 2005). Star scientists
have been found to impact the origin and growth of the US biotechnology industry (Zucker et al.,
1998). These highly productive scientists can contribute to regional innovation through tacit
knowledge sharing, or through more formal mechanisms such as licensing or university spin-off
formation. University spin-off formation is driven both by micro-level as well as macro-level
factors. Micro-level factors include the characteristics of the inventions (Shane, 2001a),
inventors psychological make-up (Roberts, 1991), and their intellectual human capital (Zucker et
al., 1998). Macro-level factors such as technology regimes (Shane, 2001b), and university
intellectual property policies (Kenney and Patton, 2011) can also play an important role in
4

supporting spin-off formation. Post formation, biotech firms can grow rapidly through patenting,
venture financing and strategic timing of alliances (Niosi, 2003), along with proximity to strong
relevant clusters (Maine et al., 2010).
Anchor companies have been recognized as valuable members of regional systems of
innovation. The presence of an anchor company may generate several positive feedback loops.
Such companies, because of their extensive networks of scientific collaboration and significant
R&D resources, not only provide employment, but can also act as magnets for scientific and
managerial talent (Agrawal and Cockburn, 2003). Several smaller companies may often find
sustenance by servicing the business needs of such larger companies. The presence of an anchor
company may increase the technology transfer deal flow at local research universities and
scientist-entrepreneurs may find them to be willing partners on R&D projects.
While there are significant positive impacts of the presence of large anchor companies in
regional systems of innovation, not much is known about the impact of the failure of an anchor
company or its decision to leave a region. This is an important question, as the impact of failure
of an anchor company may vary by the breadth and depth of a regional system of innovation. A
large RSI which has multiple anchor companies may be less affected by the failure/ absence of
one anchor company (Niosi and Zhegu, 2010). This is in contrast to the experience of a smaller
RSI which may be much more dependent on the presence and continued growth of a single
anchor company. The failure or absence of an anchor company may generate negative feedback
loops which may impact the smaller RSI in several ways: funding from private and public sector
investors may become less forthcoming for scientist-entrepreneurs in the region, there may be a
flight of top level scientific and managerial talent to other regions, and several smaller
companies may lose their most significant client. Another important though less tangible impact
on the smaller RSI, may be the effect of the failure of an anchor company on the collective
entrepreneurial culture of a region for a number of years.
The literature also does not differentiate between an anchor company which has been
established in a different region, versus an anchor company which has emerged from the same
RSI. Large anchor companies with operations in multiple countries and regions, may choose to
leave an RSI without having failed or become bankrupt. There are numerous examples of large,
regional R&D centers of anchor companies being completely closed or relocated to another
region. However, the failure of a local anchor company may be more severe for smaller RSIs
which are dependent on their continued survival and success. In such instances, the
entrepreneurial ambitions of budding and experienced scientist-entrepreneurs may be tempered
by this failure, and finding investors and potential employees may become difficult. In such
circumstances, university spin-off formation can become even more challenging.
Thus, the relationship between anchor companies and scientist-entrepreneurs in regional
systems of innovation may be affected both by the breadth and depth of the RSI, as well as the
origins of the anchor company in the RSI. Both positive and negative feedback loops can become
reinforcing, success of an anchor can attract further resources and thus create potential for further
success and spin-off formation, and failure may constrain the innovation potential of an RSI for
multiple years, until another successful anchor company is established.

5

3

Methods

The biomedical star scientists selected for our study are exemplars of publishing, patenting and
founding an above average number of science-based ventures. The research universities to which
these star scientists belong are also recognized as leading institutions in their respective national
and regional systems of innovation. We collect detailed information on the publications, patents
and university spin-offs co-founded by these two star scientists in differing regional systems of
innovation. We supplement this with secondary data on the research universities (MIT and UBC)
and the regions (Massachusetts and British Columbia) in which these star scientists are
embedded. Combining this data with interviews with the star scientists, lab members, and patent
personnel, we are able to link the performance of these biomedical star scientists in university
spin-off formation to the university IP policies, entrepreneurial culture, and access to financing
and highly qualified personnel in two biomedical regional systems of innovation in North
America.
We begin by searching the USPTO database for the name of the star scientist under
“inventor” and the institution as an “assignee” until 31 st December 2015. For collecting
publication data, we combine the publication list on the scientist’s lab webpage and compare it
with Google Scholar. This data is also taken until 31 st December 2015 for consistency. Other
sources like the Web of Science and PubMed may not offer complete coverage of all scientific
publications and can underestimate publication output. The data on the number of university
spin-offs co-founded have been compiled by the author from multiple sources such as company
webpages, annual reports, press releases, SEC filings, published CEO interviews and firm media
reports. The data on current lab members has been compiled from the official lab websites of the
star scientists. Lab members include graduate students, postdoctoral fellows, visiting researchers
and technicians while excluding managers and other associated members. University and
industry association reports are used to compile the metrics for the institution and region. We use
this data to examine how the productivity of two biomedical star scientists in co-founding
university spin-offs can be supported or constrained by elements of the regional system of
innovation. In doing so, we conduct a case study which examines not only the star scientists, but
the environment to which they contribute to and draw on, for their productivity (Dana and Dana,
2005).

4

Case data and analysis

4.1 MIT, Biomedical Star Scientist A, and the Massachusetts Regional System of Innovation
University - MIT
The Massachusetts Institute of Technology was incorporated on 10 th April 1861. Its motto “Mens
et manus” which translates to “Mind and hand”, encourages faculty, students and staff to develop
strong ties with industry (Roberts and Eesley, 2009). This entrepreneurial culture has not
detracted from the quality of science and engineering generated by the MIT community. It lists
86 Nobel laureates among its current and former members (MIT, 2016a).
The entrepreneurial ecosystem at MIT has a long history. The early emphasis on
involvement with industry was further accelerated through the exigencies of the war effort in the
6

1940s. Research groups were reorganized and university research redirected to support the
development of practical devices for winning the war. Policies permitting faculty members to
engage in active consulting for about one day a week, approving faculty part-time efforts in spinoff formation, and pioneering technology entrepreneurship research legitimized the
entrepreneurial culture at MIT. Other institutions such as Harvard University, Northeastern
University, University of Massachusetts and Tufts University also played important roles in
nurturing the technology based community in Boston and Route 128.

Table 1a: University – MIT
Metric
Established (year)
University Operating Revenue (USD)
University Endowment (USD)
Undergraduate Students
Postgraduate Students
Faculty
IP Ownership
University Equity Share (%)
Invention Disclosures (Fiscal Year 2016)
Industry Sponsored Research (USD) in 2015
US Patents issued (Fiscal Year 2016)
Number of Licenses granted (FY 2016)
Companies started in Fiscal Year 2016

Value
1861
$3.4b
$13.1b
4,527
6,804
1,863
MIT
5
800
$134m
279
110
25

Data Source
MIT (2016a)
MIT (2016b)
MIT (2016b)
MIT (2016a)
MIT (2016a)
MIT (2016a)
MIT (2016c)
Wong et al. (2015)
MIT (2016a)
MIT (2016a)
MIT (2016d)
MIT (2016d)
MIT (2016d)

Entrepreneurship support and training initiatives within MIT have now expanded
significantly beyond the initial policies encouraging consulting and spin-off formation. Formal
entrepreneurship training at MIT began in 1990 with the founding of the Martin Trust Center for
MIT Entrepreneurship and the launch of the MIT 50K business plan competition. Widespread
student and faculty participation in training and mentorship programs (such as the Venture
Mentoring Service, the MIT Enterprise Forum, and 63 entrepreneurship and innovation credit
courses) has resulted in 40% of MIT alumni having launched two or more companies (MIT
Innovation Initiative; Roberts et al., 2015; Bulovic and Murray, 2016). The MIT Innovation
Initiative, launched by President Rafael Reif in 2013 and co-chaired by associate deans from the
faculties of engineering and management, gives strategic oversight to the development of
entrepreneurship initiatives at MIT. Seed funding is broadly available to de-risk technologies and
develop prototypes (Bulovic and Murray, 2016).
The MIT Technology Licensing Office (established 1932) has been one of the earliest
organizations supporting entrepreneurship at MIT (Roberts et al., 2015). Interviews with
personnel at the MIT TLO highlight some of the nuances in MIT’s approach to the management
of intellectual property while supporting the sharing of research in the public domain. Critically,
the MIT TLO will pay for patent costs even when there is no money to be made.

7

“at MIT, if it will make a difference in a small market, if it will have impact
to the benefit to some cause they believe is worthy, they will file. On the flip
side, could be a really important market and an enormous market, but the
science is so fundamental, they don’t feel they should try to establish a
monopoly. They will put the technology in the public domain. We don’t
pursue this activity for income.”
Foster, 2014
The MIT TLO also confirms that incumbent firms are generally not interested in early
stage inventions, preferring to wait for start-ups and spin-offs to validate the technology (Foster,
2014). Thus the technology licensing office engages with the inventors to assess if all rights
should be assigned to one start-up or if there should be field-of-use licensing. A field-of-use
license grants the licensee a limited subset of uses, so that the licensor is free to work with other
companies to commercialize other elements of the invention.
MIT’s IP policy vests ownership to MIT for intellectual property developed by faculty,
students, staff and others participating in MIT programs, including visitors, with the significant
use of funds or facilities administered by MIT (MIT, 2016c). However, contrary to a large
number of universities in the US, the UK and Canada, MIT takes at most a 5% equity stake in
spin-outs (Wong et al., 2015; Hen, 2010). Such policies, when combined with an entrepreneurial
culture, accessible financing from public and private sources, and a vast pool of skilled highly
qualified personnel, can sustain university spin-off formation and lead to huge value creation.

Biomedical Star Scientist A
Even in such a munificent and supportive environment, both at MIT and in Massachusetts,
founding science-based university spin-offs is not an easy task (Reif, 2015). The scientific
uncertainty and regulatory hurdles inherent in the biomedical domain makes spin-off formation a
significant challenge for most academic entrepreneurs. In such a situation, star scientist A from
MIT, has managed to co-found 32 university spin-offs based on research from his lab in
collaboration with labs within MIT and other regional research institutions. These university
spin-offs have gone on to raise over US$2 billion in venture financing (Thomas et al., 2016).

Table 1b: Biomedical Star Scientist A
Metric
Publications (till 31 December 2015)

Value
1535

Issued US Patents (till 31 December 2015)
University Spin-offs Co-founded
Current Lab Members

387
32
104

8

Data Source
MIT Star Scientist A’s Lab Website
and Google Scholar
www.uspto.gov
Author’s compilation
MIT Star Scientist A’s Lab Website

Table 1b shows the total number of scientific publications and issued US patents over a
40 year period starting in the mid-70s, with star scientist A as a co-author and a co-inventor. A
core element of this extremely high level of productivity in publications and patents is the large
number of graduate students, postdoctoral fellows and visiting researchers in his lab at MIT.
These lab members not only contribute to the publications and patents, but some of them also
engage in the co-founding of university spin-offs based on the technologies they have developed
during the course of their projects (Murray, 2004). Thus, an important role of star scientist A is
his ability to match lab members to interesting research projects aimed at large unmet needs.
Once the project starts to deliver scientifically robust results, star scientist A and the concerned
lab member collaborate with the MIT TLO to protect the invention through multiple broad,
blocking patents. While the patents and publications are getting filed and granted, the star
scientist also links the lab member to his broader social network in the region consisting of
venture capitalists and experienced business professionals to officially launch the university
spin-off. In his co-founding role, star scientist A generally joins as a member of the scientific
advisory board (SAB) and as a member of the board of directors of the university spin-off. In this
manner, he follows MIT policies by limiting his involvement to about one day of the week, while
continuing to support the spin-off in an advisory capacity.

Regional System of Innovation – Massachusetts
Positive feedback loops continue to play a decisive role in the development of an entrepreneurial
culture at MIT and in the surrounding regions. Successful entrepreneurship efforts by early role
models led to greater involvement in entrepreneurship by faculty peers. High technology
companies and venture capitalists began to locate in close proximity to the research institutions,
and are now deeply embedded in the Greater Kendall Square neighborhood of MIT (Sharp,
2014). With over 120 biomedical firms within a 1.5 kilometer radius, this cluster is one of the
largest and densest biomedical clusters in the world (Ledford, 2015).

Table 1c: Regional System of Innovation – Massachusetts (USA)
Metric
VC Investment in Biotech (USD) 2015
IPOs (2015)
Biomedical Companies with over 500
employees
Employees in largest Biopharma company

Value
$2.1b
13
18

Data Source
MassBio, 2016
MassBio, 2016
MassBio, 2016

5000

MassBio, 2016

Local anchor biopharmaceutical companies such as Genzyme (now Sanofi Genzyme) and
Biogen, each employing several thousand researchers, were co-founded by MIT professors.
Large multinational pharmaceutical companies such as Eli Lilly and Merck chose to have
significant research presence in Boston. With 4 of the top 5 NIH funded independent hospitals in
Massachusetts, extensive public and private (VC) investment is available to faculty, students and
staff at research institutions in this region (MassBio, 2016). As shown in Table 1c, the Boston
9

Biomedical cluster is very strong, with 18 biomedical firms larger than 500 employees, over
$2Bn of Biotech VC investment in 2015, and 13 IPOs.

4.2 UBC, Biomedical Star Scientist B, and the British Columbia Regional System of
Innovation
University – UBC
The University of British Columbia was established in 1908 as public research university. It has
over 61,000 students in three campuses, Vancouver (Point Grey and Robson Square), and
Okanagan. It is consistently ranked among the top 20 public universities in the world and has 7
Nobel laureates among current or former faculty and alumni (UBC, 2016a). The economic
impact of UBC has been measured at C$12.5 billion and over 180 companies have been spun-off
from UBC research (UBC Overview and Facts 2015/16, 2016). Among research universities in
Canada, it has one of the highest numbers of patents applied for and issued per year, and the
highest income from licensed intellectual property (Toope, 2013; AUTM, 2015).

Table 2a: University – UBC
Metric
Established (year)
University Revenue (CAD)
University Endowment (CAD)
Undergraduate Students
Postgraduate Students
Faculty
IP Ownership
University Share of Net Revenue
Invention Disclosures
Industry Sponsored Research (CAD) in 2015
US Patents Issued (2015)
Number of Licenses Granted (2015/16)
Companies started in 2015

Value
1908
$2.3b
$1.4b
50,654
10,459
5,334
UBC
50%
133
$53.2m
22
39
13

Data Source
UBC, 2016a
UBC, 2016a
UBC, 2016b
UBC, 2016a
UBC, 2016a
UBC, 2016a
https://uilo.ubc.ca/
UBC, 2013
UBC, 2016c
UBC, 2016c
AUTM, 2015
UBC, 2016c
UBC, 2016c

There are several entrepreneurship initiatives at UBC which provide seed funding, office space,
mentoring and accelerator and incubator services. The UBC intellectual property policy states
that the university owns all university research products with the creators getting a non-exclusive
license for non-commercial mobilization (UBC, 2013). This policy also states that 50% of the net
revenue will be retained by the university. For most biomedical ventures, this would not be in the
interest of inventors nor future investors and may constrain university spin-off formation.

10

Biomedical Star Scientist B
Like Star Scientist A, Star Scientist B is a prolific “Pasteur Scientist” (Baba et al., 2009)
meaning that he conducts breakthrough research relevant to known problems. Over a prolific 40
year career, also starting in the mid-1970s, Star Scientist B has co-authored 325 scientific
publications, co-invented 60 issued US patents, and co-founded 11 university spin-offs (Table
2b). These ventures have successfully commercialized 3 FDA approved drugs, novel drug
delivery methods, and a range of instrumentation. He has also played key leadership roles in
both the university and the regional system of innovation.

Table 2b: Biomedical Star Scientist B
Metric
Publications (till 31 December 2015)
Issued US Patents (till 31 December 2015)
University Spin-offs Co-founded
Current Lab Members

Value
325
60
11
11

Data Source
UBC Website and Google Scholar
USPTO
Interview data
UBC Lab Website

Star scientist B took an active role in the leadership of his university spin-offs, reducing
his academic commitments to half-time after becoming a full professor. His motivation for
founding ventures was both to commercialize inventions from his lab and to provide jobs for
PhD students who graduated from his lab. Star scientist B understood many of the constraints to
science entrepreneurship in the BC regional system of innovation and has been effective in
leading initiatives and influencing stakeholders to help move inventions further towards
commercial viability. Once Star scientist B returned to a full-time academic role (after more than
2 decades spanning the worlds of academia and entrepreneurship), he confined his role in the
ventures to the membership of scientific advisory boards. Graduates from his research lab and
those of his collaborators generally lead his university spin-offs.

Regional System of Innovation – British Columbia
British Columbia (B.C.) is a leading province on the west coast of Canada and is home to a
significant life sciences cluster of which UBC is arguably the most important player (Salazar et
al., 2008). B.C. received C$450 million in venture capital investment in 2015, as shown in Table
2c. Nearly 84% of the firms in B.C.’s life sciences sector have less than 10 employees (PwC,
2015).

Table 2c: Regional System of Innovation – British Columbia (Canada)
Metric
VC Investment (CAD) 2015
IPOs (2015)

Value
$450m
1
11

Data Source
CVCA, 2016
LifeSciences BC, 2016

Companies with over 500 employees
Employees in largest Biopharma company

1
515

LifeSciences BC, 2016
LifeSciences BC, 2016

Access to capital and highly qualified personnel is a significant challenge for life sciences
start-ups and university spin-offs (PwC, 2015). Even in such an environment, UBC has
continued to form several spin-offs each year with most of them belonging to the life sciences.
Despite some initial success, only one biomedical spin-off, QLT, had reached the threshold of
500 employees by 2005. We briefly describe the formation, growth and reversal of UBC’s first
life sciences university spin-off QLT Inc. and another B.C. biomedical venture which in-licensed
technology from UBC.
QLT was formed in 1981 by Dr. Julia Levy, along with other co-founders, around
photodynamic therapy technology spun out of UBC. Developing their initial product, Photofrin,
in collaboration with Johnson & Johnson, QLT needed early risk capital, and went public on the
Vancouver Stock Exchange in 1986, raising $3M in its IPO. When Johnson & Johnson planned
to shut down development work on QLT’s technology, Levy and company raised more money,
partially throughan alliance partnership with American Cyanamid, to acquire all rights to
Photofrin (GCS Research Society, 2001), and conducted expensive clinical trials, reaching FDA
approval for the use of Photofrin in treating a range of cancers in 1995. Concurrently, QLT was
also developing a drug for wet age-related macular degeneration (AMD) called Visudyne, based
on technology exclusively licensed out of UBC in 1988, which achieved FDA approval in 2000.
By this time, Photofrin was providing steady revenues, and was sold off profitably, with QLT
making its bet on “2nd generation” technology Visudyne (Collett and Mann, 2005). Sales of
Visudyne spread to more than 50 countries, making QLT one of only 14 profitable publicly
traded biotechnology companies (International Directory of Company Histories, 2005).
However, competition from Genentech and completely unexpected prescription behavior by
retinal specialists who started prescribing Avastin off-label for AMD, led to a rapid drop in
Visudyne sales (Jacobs, 2006). This was followed by problems with other drug candidates after
which QLT declined further. After a 2016 merger with Massachusetts pharmaceutical company
Aegerion, QLT continues to survive in Vancouver as Novelion (Shore, 2016), developing
innovative ocular products, but at a small fraction of its former size.
Angiotech also experienced rapid growth in the mid-2000s. It had developed a drugeluting stent called Taxus with technology in-licensed from UBC. With a sale of C$1.4 billion in
its first nine months on the US market, Angiotech rapidly grew to into a $2 billion plus market
capital company (Hon, 2011). However, this growth rapidly reduced as the Angiotech’s partner
Boston Scientific reported in a study that patients implanted with Taxus stents had a slightly
higher but statistically significant risk of developing late stent thrombosis. With declining
revenues and interest payments from a loan taken to acquire a medical device manufacturer,
Angiotech also started facing tough times. In both these examples, life sciences companies
emerged from B.C. based on highly innovative research but were unable to sustain profitability
over the long term.
Following the financial crisis of 2008, the life sciences industry in B.C. was left without a
large, profitable anchor company. This environment is slowly improving with 6 life sciences
IPOs in B.C. 2014 and renewed interest from public and private funding sources. The one
12

surviving anchor today, STEMCELL Technologies, had a conservative path to success, after
spinning out of the BC Cancer Agency and UBC in 1993, and only surpassed 500 employees in
2014. STEMCELL Technologies, is privately held by the founders, scientists Dr. Allan Eaves
and Dr. Connie Eaves, and has purposefully accepted no VC financing. Thus BC’s biomedical
RSI is recovering with the development of a new anchor company, but this needs to be compared
to 18 large incumbent companies in Massachusetts with over 500 employees (Tables 1&2). The
total VC investment in these small life sciences companies in B.C. is a fraction of the funding
available in Massachusetts and the rest of the USA.

5

Discussion

Scientific inventions at universities have the potential to address many of the world’s most
pressing challenges, and university leadership is increasingly acknowledging both their
opportunity and their responsibility to facilitate science entrepreneurship (Leih and Teece, 2016;
Reif, 2015). There is also the potential for financial value creation, at the scientist, university,
firm, regional and national levels (Zucker et al., 2002; Booth and Salehizadeh, 2011; Christini,
2012; Maine and Seeegopaul, 2016). New industries can be created by scientific inventions
(Schumpeter 1942; Nelson and Winter, 1982; Utterback, 1994; Maine et al., 2014a; Maine et al.,
2014b), and knowledge based economies built around them (Freeman, 1982; Lundvall, 1992;
Nelson, 1993; Agrawal et al., 2014). Despite these social and economic benefits to encourage
science-based university spinoffs, the challenges for scientists, universities, and regional systems
of innovation inherent in commercializing science can be daunting (Langford et al, 2006; Pisano,
2010; Sen, 2014; Maine et al., 2015; Maine and Seegopaul, 2016).
In this study we adopt an integrated micro-to-macro view of regional systems of
innovation and analyze the productivity of two biomedical star scientists in the formation of
university spin-offs. Collecting data at the level of the research lab, the university and the region,
we compare and contrast two differing biomedical regional systems of innovation, at the levels
of the star scientist, the university, and the regional system of innovation. This case study
comparison contributes to the academic entrepreneurship, science entrepreneurship, and science
policy literatures, through a more integrated examination of science-based academic
entrepreneurship. Our case study analysis demonstrates how successful entrepreneurship can
lead to positive feedback loops which can lead to job creation and spin-off formation. The
constraining and enhancing roles university policies and regional innovation policy are also
discussed. Our study responds to the call for more attention to micro and meso level explanations
for regional innovation to complement the more pervasive macro explanations (Iammarino,
2005; Werker and Athreye, 2004).
Case study A demonstrates a positive feedback loop between the star scientist, the
university, and the regional system of innovation. The high levels of productivity in patents and
publications of star scientist A can be explained in part by the large number of lab members in
his research lab. In addition, with patent filing a significant expense for scientists and/or research
universities, MIT’s policy of filing a patent if they feel the technology is valuable and based on
research using university funds and facilities, also contributes substantially to the number of US
patents issued to star scientist A. A large number of broad, blocking patents also play an
important role in spin-off formation as patents can act as a signaling mechanism to venture and
13

angel investors (Hsu and Ziedonis, 2006; Maine and Thomas, 2017). Venture capitalists are also
far more likely to fund spinoffs in which the university has taken a smaller equity stake, such as
the 5% stake typically retained by MIT, and when the Technology Licensing Office (TLO) is
motivated to get the technology out into society. The long-time head of the MIT TLO, Lita
Nelson, explained the TLO’s criteria for patenting, licensing, and equity share determination:
“We protect the intellectual property — mostly through patents, so as to provide a good
‘dowry’ to incentivize entrepreneurs to start companies. Then, we emphasize ‘getting the
deal done fairly’ rather than ‘getting the best deal’. We can do this because we have
excellent support and understanding from MIT’s senior administration. Together we
understand: ‘Impact, not income’: It’s not about the money. Sure, we like it when our
ships come in, but the primary focus is getting the deal done so that the technology gets
developed.” (Chandler, 2014).
The entrepreneurial culture of Massachusetts, and the greater Kendall square cluster in
particular, is the result of several decades of university leadership, entrepreneurial experience
and innovation policies. With early entrepreneurial successes at MIT leading to a virtuous cycle
of experimentation, learning and innovation, star scientist A has found (and contributed to
developing) a fertile arena with access to financing and personnel from multiple sources. This
enables him to contribute to the regional economy through tacit knowledge sharing, mentoring,
licensing and spin-off formation. In the longer term, both the university and the regional system
of innovation benefit from their early stage support of the star scientist in his patenting and
formation of spin-off ventures.
In contrast, Case study B has not yet developed a positive feedback loop between the star
scientist, the university, and the regional system of innovation. Indeed, the publications, patents
and spin-offs generated by star scientist B are even more impressive for having been in an
environment with limited university resources supporting technology transfer (for instance,
compare total US patents issued at each institution, as shown in tables 1a and 2a), comparatively
low levels of venture capital (for instance, compare life sciences VC investment in each RIS, as
shown in tables 1c and 2c), and without the alliance partnerships, anchor companies, and range
and depth of highly qualified personnel of a more developed regional system of innovation. The
regional system of innovation has been negatively affected by the failure of two biotechnology
anchor companies, which rose to great heights only to fall in rapid succession in the mid-2000s.
These examples highlight the fact that regional systems of innovation are equally susceptible to
negative feedback loops particularly in regions with limited resources.
Innovation policymakers and university leadership can play active roles in creating the
conditions for positive feedback loops between star scientists, research universities, university
spinoffs, and the regional system of innovation. Innovation policy at the national and regional
levels should support the formation and growth of university spinoffs (Thomas et al., 2016), the
interaction between large and small science-based firms with university research labs and each
other (Agrawal et al, 2014), the development of highly qualified personnel, and access to early
stage financing (Jenkins, 2011). University leadership can reconsider their technology transfer
practices (Bubela and Caulfied, 2010), support entrepreneurial culture through such initiatives as
entrepreneurship training to scientists and university-wide business plan competitions (Roberts et
al, 2015; Maine, 2013; Leih and Teece, 2016), incentivizing faculty members to form spinoffs by
awarding targeted commercialization funding, taking a relatively small share of equity from
14

university spin-offs (such as the 5% equity claimed by MIT), and by building research
partnerships with anchor companies. This will better align the longer term incentives of the star
scientist with both that of the university and the regional system of innovation.

6

Conclusions

We have analyzed the impact of the regional systems of innovation on the university spin-offs
co-founded by two biomedical star scientists, one from MIT in Boston Massachusetts and the
other from the University of British Columbia in Vancouver, British Columbia. We show that
elements of the regional system of innovation, such as the entrepreneurial culture, university IP
policy, availability of financing and trained personnel, and the surrounding innovation
intermediaries play an important role in sustained university spin-off formation. The productivity
of star scientists and the formation of university spin-offs are thus, dependent upon the context in
which they are embedded (Dana and Dumez, 2015). The relationship between star scientists and
the formation and concentration of biomedical spin-offs in a region is iterative and multi-faceted.
Universities desirous of fostering entrepreneurship in regions with limited resources can take the
following steps: 1) focus on developing technology transfer and IP policies which support
inventors and which align the longer term interests of the scientist-entrepreneur, the university
and the regional system of innovation; 2) provide targeted funding for faculty and student
research with commercial potential; 3) build research partnerships with local anchor companies
to generate positive feedback loops; and 4) encourage an entrepreneurial mindset among STEM
students through entrepreneurship training and business plan competitions. Developing an
entrepreneurial culture within universities can contribute not just to university spin-off formation
but can fuel growth in the regional, national and global economy.

15

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