53521 Chile Fostering Technology Transfer and Commercialization 2009 Chile Fostering Technology Transfer and Commercialization Abbreviations and Acronyms ASEXMA Asociación de Exportadores de Chile IDA Industrial Development Authority CIMM Mining and Metallurgic Research Center IIRS Industrial Research and Standards CNIC National Innovation Council for INECON Ingenieros y Economistas Consultores Competitiveness (Consejo Nacional de INIA Agriculture and Livestock Institute Innovación para la Competitividad) IP Intellectual Property CODELCO Corporación Nacional del Cobre ISI Information Sciences Institute CORFO Chilean Development Agency MECESUP Mejoramiento de la Calidad (Corporación de Fomento de la de la Educación Superior Producción) NIIP National Institute of Industrial Property CPC Confederación de la Producción NIS National Innovation System y del Comercio OECD Organization for Economic CRUCH Consejo de Rectores de las Universidades Cooperation and Development Chilenas OTRI Oficina de Transferencia de Resultados DICTUC Dirección de Investigaciones Científicas de Investigación y Tecnológicas de la Pontificia PCT Patent Cooperation Treaty Universidad Católica de Chile PRO Public Research Organization FIC National Innovation Fund PSU Pruebas de Selección Universitaria For Competitiveness (Fondo de R&D Research and Development Innovación para la Competitividad) SAG Servicio Agrícola y Ganadero FONDEF Fund for the Promotion of Scientific SIMFONEC Science Ideas to Market, Focused and Technological Development on Enterprise and Commercialization (Fondo de Fomento al Desarrollo SMEs Small and medium enterprises Científico y Tecnológico) TTO Technology Transfer Offices GEM Global Entrepreneurship Monitor UDT Unidad de Desarrollo Tecnológico HEIF Higher Education Innovation Fund UTEN University Technology Enterprise Network ICI Inter-ministerial Committee WEF World Economic Forum on Innovation WIPO World Intellectual Property Organization Vice President: Pamela Cox Country Director: Pedro Alba Sector Director: Marcelo Giugale Sector Manager: Lily L. Chu Task Manager: Esperanza Lasagabaster Table of Contents ABBREVIATIONS AND ACRONYMS ii ACKNOWLEDGEMENTS iv EXECUTIVE SUMMARY v CHAPTER 1: INTRODUCTION 1 CHAPTER 2: A DIAGNOSTIC Of TECHNOLOGY TRANSfER AND COMMERCIALIzATION IN CHILE 7 2.1 Benchmarking Chile’s National Innovation System 8 2.2 NIS gaps that retard technology commercialization 11 2.3 Conclusions 22 CHAPTER 3: fOSTERING TECHNOLOGY COMMERCIALIzATION IN CHILE: OPTIONS fOR CONSIDERATION 23 3.1 Improving IP management: institutions, regulations, and practices 27 3.2 Developing strategic partnerships for applications oriented research 34 3.3 Accelerating the formation of new technology firms 38 3.4 Developing the skills base for technology transfer 40 3.5 Stimulating firms’ interest in technology and innovation 41 3.6 Nurturing universities’ third mission--contributing to economic growth. 42 3.7 fostering an entrepreneurial culture 45 3.8 Evaluating, learning, and adjusting 48 3.9 Conclusions 48 CHAPTER 4: CONCLUSION 49 ANNEX I: fOSTERING TECHNOLOGY TRANSfER AND COMMERCIALIzATION IN CHILE: SUMMARY Of PROPOSED RECOMMENDATIONS 54 REfERENCES 59 Acknowledgements This report was prepared by a World Bank team led by Esperanza Lasagabaster with contributions from Jose Luis Guasch, Tanja faller, and consultants Kieran Comerford from Ireland and Bob Hodgson from the United Kingdom. Micky Ananth (World Bank) provided editorial support. The team would like to thank Eduardo Bitrán, President of the National Innovation Council for Competitiveness (CNIC), Leonardo Mena, Executive Secretary of the CNIC, Marcia Varela, member of the Secretariat of the CNIC, Alistair Brett, Karen Beresford, Lily Chu (World Bank), Michael f. Crawford (World Bank), Itzhak Goldberg, Jose R. Lopez Calix (World Bank), William Maloney (World Bank), and Alfred Watkins (World Bank) for their valuable comments. iv Executive Summary Chile is an economy rich in natural resources and their and commercialization or technology brokering and efficient exploitation has proved the right strategy constitutes the focus of this report. to grow successfully over the last few decades. More recently, in the broader context of increasing The report responds to a request by the CNIC, through globalization and competitive pressures, it has chosen its Technical Secretariat, to review Chile’s technology as its main development driver the contribution that transfer and commercialization system and identify arises from innovation and the adoption of higher levels practical steps to accelerate the development of of technology to enhance productivity growth and to an effective and dynamic system. The findings and add to national competitiveness. Following extensive conclusions expressed herein do not necessarily reflect technical analysis this effort has focused on priority the view of the CNIC members or its Secretariat. A clusters of economic activity that offer increasing summary of the main findings and conclusions follows. opportunities for Chile’s exports in competitive global markets. A Diagnostic of Technology Transfer and Commercialization in Chile In this context, the President of Chile established the National Innovation Council for Competitiveness Empirical evidence suggests that Chile not only (Consejo Nacional de Innovación para la Competitividad, underperforms on innovation inputs such as R&D CNIC) to provide the vision and lead the thinking on expenditures, but there are also inefficiencies in the these issues. The CNIC has charted a broad strategy that way in which innovation resources are utilized within proposes new directions in the national research and the national innovation system. Patenting by Chileans development effort, to improve the relevance and quality in the United States, which is the most advanced of the supply of innovative ideas. Concurrently, efforts market for research based innovations and is used as are being made in the industry system to encourage an international reference point, is almost negligible the private sector to increase its investment in research despite some increases during the last decade. An and development, which has historically been low, to econometric analysis based on data from 1963 through generate a strong practice of innovation on the demand 2000 and covering a wide range of OECD and non-OECD side and so improve productivity and competitiveness. countries also confirmed that the relative efficiency of In line with modern theories on innovation systems, transforming Chilean R&D investments into commercial the strategy is also concerned with the stimulation and patents stands below the OECD average. enhancement of the intermediaries who are working to link the research system and the industrial system and to While many factors and incentives have affected Chile’s facilitate information flows in both directions. This for capacity for technology transfer and commercialization short hand has been referred to as technology transfer and the efficient application of its innovation-related Executive Summary v resources, the main ones can be classified into four key clusters. In addition, they face the challenge of an aging areas: insufficient articulation between the productive staff and retention of young qualified staff. sector and knowledge centers, underdevelopment of the institutional and incentive framework for intellectual The formation of new knowledge-based firms has property management, weak public technology received considerable attention in Chile over the last institutes, and inadequate institutional and financing few years, but efforts have not been successful on a mechanisms to encourage the formation of new broad enough scale to achieve impact. This process is technology firms. notoriously challenging worldwide, even more so in emerging markets such as Chile. The difficulties concern The relationship between industry and knowledge the articulation of funding form the research idea to centers, i.e., universities and research centers, lies at the various development phases that a new enterprise the heart of many innovation networks, but despite undergoes as well as the provision of incubation support some encouraging recent developments, these alliances during the early stages of the new venture. In Chile, are at an incipient stage in Chile. Differences in culture the attention has been focused on incubators based between industry and universities, which have been at universities rather than on the broader incubation common in many OECD countries, are also present in process that revolves around the entrepreneur and the Chilean context but in a more acute form. Existing the business idea, explaining the weak impact to date. incentives in Chilean universities have not favored Articulation of funding to support these new ventures collaboration either. In addition, until recently, public has also proved difficult. initiatives in support of innovation had not recognized the importance of these linkages so public funding for Fostering Technology Transfer and these efforts had been quite limited. Commercialization in Chile: Options for Consideration In Chile, there is little appreciation and inadequate understanding of the value of the intellectual property (IP) Considering Chile’s current endowments and drawing system by universities and businesses to the detriment of on other international experiences, the report proposes technology transfer and its potential economic impact. several strategic directions and recommendations Use of the IP system is a central and ever growing to create a milieu in Chile that will be more prone to aspect of the knowledge economy in advanced OECD technology transfer and commercialization (Figure countries and almost all research performing groups 1). Changing the culture and incentives of key actors pay careful attention to the potential of their results for in the innovation system and building the necessary commercialization. The present practice in Chile differs institutions and competences will be a long-term effort. markedly. Broadly speaking, the IP incentive framework As the Association of University Technology Managers of most universities falls short of prevailing policies in (AUTM 2002) noted OECD countries, and where an adequate framework “commercialization of activities can take a significant is available, there is a permissive attitude towards IP amount of time…because of the time needed to develop management but it is not actively encouraged. Public a portfolio of intellectual property to license, build up a policy towards universities did not encourage it either. body of expertise and develop a culture of technology Consequently, necessary competences have not been transfer within the institution—as well as giving licenses developed with technology transfer offices (TTO) in the time needed to develop and market products.� universities running on minimal budgets and staff. The above also applies to other intermediaries in the system such as public technology institutes and private Public technology institutes can make valuable specialist providers and to the need to change the contributions to the technology transfer process as well. innovation culture of the business community. The performance of Chile’s public technology institutes, however, is uneven. For the most part, they have not That said, progress can be made with strong public evolved with the needs of the productive sector and commitment and consistency in public policies. Changes have not responded to the challenges of Chile’s priority can start now. Market failures in innovation in general, vi Executive Summary and technology markets in particular, justify public technology institutes; interventions. Within about 10 to 12 years, Chile cannot • Accelerating the formation rate of new technology only increase its R&D and human capital for innovation firms; levels, as committed in the national innovation strategy, • Developing the necessary skills and competences to it can also narrow its gap (relative to OECD countries) on support the above; the efficiency of R&D use relative to technology transfer • Strengthening technology extension services and and commercialization outcomes such as patenting stimulating its demand; and licensing and increase the number of knowledge- • Nurturing ‘universities’ “third mission� of contributing based firms that emerge locally (see Annex I for a set of to economic growth; and indicative performance indicators). • Fostering an innovative and entrepreneurial culture. There is strong public commitment to increase funding Improving IP management system. Intellectual property to stimulate innovation, but improvements in the is the bedrock on which licensing can take place and technology transfer and commercialization system will new technologies can be developed and benefits not only involve an increase in funding but also changes captured by Chileans firms. Without it, the appropriation in incentives, funding reallocations and institutional of innovations is limited and so are the benefits of building. It would be desirable for funding allocations commercialization, all of which leads to a reduced rate to help stimulate changes in institutional incentives and of innovation effort. All forms of intellectual property to be more closely linked to performance. Constant (patents, copyrights, designs, trademarks, and plant communication on the importance of technology transfer breeders´ rights) can be licensed. IP management, and commercialization to Chile’s competitiveness and however, is a complex process that can only thrive if celebration of successes will also be important to foster there is a strong institutional, regulatory and incentive a change in culture at universities and the business framework, and current IP incentives and competences community. The CNIC can play a leading role in helping in Chile are not in line with practices prevailing in more define a long-term strategy for technology transfer and advanced knowledge economies. commercialization and the Inter-ministerial Committee of Innovation in helping secure its implementation. Closing this gap involves (i) promoting the development of a strong network of TTOs at universities and other Increased funding will need to go hand in hand with private intermediaries, (ii) generating awareness and a strong evaluation framework, especially since policies demand for IP services, (iii) improving the efficiency of and programs to foster technology commercialization public institutions responsible for approving, registering will entail learning and experimentation. Adjustments and enforcing IP rights, and (iv) signing of critical IP in some of the programs are likely to be necessary, and international agreements. It also requires the nurturing others should come to an end as market gaps are closed. of a new culture in universities as further discussed Thus, the monitoring and evaluation framework will be below. crucial in guiding the policy-making process. Developing strategic partnerships for applications The report proposes complementary interventions in oriented research between the business community and seven areas to stimulate the development of a more knowledge centers. Strategic partnerships that pursue dynamic technology transfer and commercialization a medium- to long-term research agenda relevant to system. A brief summary of them follows (see Annex I priority economic clusters are necessary to sustaining with matrix summarizing recommendations). an internationally competitive position. There is a need to nurture and expand the best of the existing strategic • Improving the institutions, regulations and partnership experiences in Chile and foster new ones practices to foster an efficient and more dynamic IP in other key cluster areas. Public funding for the first management system; large scale public-private strategic alliances will come • Developing strategic partnerships for applications to an end within about one-two years, and thus to oriented research and enhancing the potential of provide continuity, the next public funding program for Executive Summary vii Figure 1: Key Elements of a Technology Commercialization and Transfer Model Favorable Business Regulations IP-Regulations and Enforcement Entrepreneurial Culture Public Sector Nurturing the Third Mission Technology Institutes Universities Private Enterprises Angel Investor Networks VC-Funds Strategic Technology Alliance for R&D Start-Ups Skills Development TTO-Networks Deal-Flow Facilitators Technology- Licensing Technology Broker Source: Authors’ elaboration. strategic partnerships could be launched within that institutes can be improved. Prior to devising a strategy period or shortly thereafter. for them, it is important to distinguish between (i) those whose primary public mission is to contribute to The experiences of existing strategic partnerships in technology transfer and (ii) those whose primary public Chile and similar international initiatives have provided mission is to generate information on issues of national valuable lessons that would need to be incorporated in strategic interest and/or develop standards for producers the design of the next public funding program. Special and consumers. The report is focused on the former. attention will need to be paid inter alia to linking the objectives of such partnerships to the needs of the Greater collaboration with the productive sector would productive sector, fostering the formation of a critical help the public technology institutes to identify sectoral mass of researchers to secure impact, moving from a priorities and increase their relevancy and impact on project oriented culture to a sustained longer-term technology transfer. The institutions could enhance effort, and inviting international peer reviewers to the their “intelligence services�, quality and relevancy of selection process. To avoid duplication, it would be research, commercialization of research outcomes, and desirable that efforts to promote strategic partnerships provision of new technology packages. Improvements for applied oriented research be led by a single public in these areas would imply changes in their governance funding agency but implemented in collaboration with and incentive framework (including funding incentives) other relevant agencies. InnovaChile might be suited to and the formulation of a new medium-term strategic lead these efforts given the commercial orientation that plan with clear performance targets linked to their core needs to underpin such initiatives. mission. Enhancing the capacity of public technology institutes. Accelerating the formation rate of new technology The performance and impact of Chile’s public technology firms. The formation of new firms based on the findings viii Executive Summary of R&D work constitutes an important pillar of Chile’s which implies both specialist degrees in universities to commitment to advance as a knowledge economy. train those entering the profession and professional Born global firms or those with an export focus merit associations to organize accreditation and continuous special attention. Assistance packages to these fast professional development. InnovaChile can seed the growth companies are needed in the area of incubation development of these initiatives. and early stage finance and venture capital (VC) capital along with greater efforts to promote an active deal Nurturing universities’ “third mission� of contributing to from research ideas. The greatest financing gaps economic growth. Changes in the culture and practices for new technology ventures are in the early stages. in universities need to underpin Chile’s innovation CORFO could consider sponsoring a pilot private- focused development strategy. Chilean universities today public technology venture fund, primarily focused on are timidly engaged with the third mission, meaning early stage finance, to provide a demonstrative effect. activities related to the needs of society in general and Current global conditions, however, suggest that such the productive sector in particular. Progress achieved an initiative could be postponed for a few years until in highly recognized research universities (for example financial conditions improve. Continuing to seed the in the United Kingdom and Finland) over the last two development of angel investors will also be important. decades suggests that such change of culture is possible and the public sector can help catalyze the process. Improving incubation services and promoting a more active deal flow from the research base is also critical. Similarly, the CNIC and the Government of Chile can put As a first step, InnovaChile is starting to formulate a in place an awareness campaign and series of incentives program to benchmark incubators in terms of capacity to encourage Chilean universities to engage more actively and outcomes to encourage performance improvements. with the business community as a way of contributing to It would be desirable for the benchmarking process to the country’s economic development and thus to social distinguish among incubators with a focus on born progress and standard of living of its population. The global ventures and those with a national or regional CNIC, for example, could convene a special Committee focus due to differences in services required, but seek with the participation of the Ministries of Education to promote excellence in both. This initiative could be and Economy, university rectors, and private sector taken a step further in the medium term. InnovaChile representatives to discuss issues related to the third could seed the development of a market of deal flow mission and propose initiatives to address them. Vice- promoters that would actively seek ideas from the chancellors of internationally recognized universities research base with commercial potential and prepare could be invited as senior advisors to the Committee. them to the stage where they can be presented to early- Over time, budgetary transfers to universities would stage VC funds or other financial agents. need to include incentives linked to the third mission. Developing the necessary skills and competences. The Stimulating firms’ demand for technology and innovation. expansion of activities in the three aforementioned Working on the demand side of technology transfer and areas will require a deepening of skills and competences commercialization is as important to the effectiveness of related to technology management and brokering as the innovation system as is the efficiency of the linkage well as more specialists in patent law. A two-pronged with the supply side. The overall objective is to expand approach can be followed to accelerate the development the number of firms in Chile that use knowledge as the of such critical skills. First, there is a need to fill the most main competitive strategy. Addressing this need has to immediate gaps in competences through a pragmatic be tailored at two levels. The first is for leading clusters approach such as (i) attracting diaspora and contracting whose orientation is predominantly the competitive international specialists in the field, (ii) building alliances international market. Here, the aforementioned tools with equivalent agencies/intermediaries overseas, and to promote strategic alliances for applications oriented (iii) offering internships for Chilean staff in overseas research are the most relevant. At this stage, however, agencies. In parallel, there is a need to create a some firms around leading clusters are still far from professional cadre of specialists or technology managers, the technology frontier, which points to the need for Executive Summary ix combining these strategic alliances with technology extension services in some of the clusters. The second is for other firms who lie outside the priority clusters. The most frequent response to this challenge is to combine shared-cost grant schemes to stimulate the demand side and to link this effort to accredited suppliers who have been vetted for the quality of services they offer. InnovaChile has a grant scheme of this type that could be further promoted and is planning to complement it with the further development of suppliers of technology extension services. Fostering an innovative and entrepreneurial culture. Initiatives to stimulate technology transfer and commercialization will be more effective if rooted in a broader entrepreneurial culture. While some individuals are born with a higher propensity toward entrepreneurship, students are more likely to undertake an entrepreneurial career the more exposure and learning they have to entrepreneurship and entry- level entrepreneurial skills. International experts on entrepreneurial education point out that the primary and secondary levels can start to teach entrepreneurial attitudes, while post-secondary education can further nurture these attitudes and substantially improve the skills for entrepreneurship. It would be desirable for Chile to develop a plan on entrepreneurship education, starting with the tertiary level and expanding it to other levels over time. Universities in Chile, for example, could start teaching entrepreneurship throughout various disciplines and across the campus, not only in business schools. Entrepreneurship teaching could subsequently be gradually expanded to secondary levels. Initiatives to enhance entrepreneurship skills will need to go hand in hand with other efforts to enhance science education from the primary level on. x Executive Summary Chapter 1: Introduction Chapter 1: Introduction Chile is an economy rich in natural resources and their on the demand side and so improve productivity and efficient exploitation has proved the right strategy competitiveness. to grow successfully over the last few decades. More recently, in the broader context of increasing In line with modern theories on innovation systems, globalization and competitive pressures, it has chosen as the strategy is also concerned with the stimulation and its main development driver the contribution that arises enhancement of the intermediaries who are working to from innovation and the adoption of higher levels of link the research system and the industrial system and to technology to enhance productivity growth and to add to facilitate information flows in both directions.1 This for national competitiveness. Following extensive technical short hand has been referred to as knowledge transfer analysis this effort has focused on priority clusters of and commercialization or technology brokering and economic activity that offer increasing opportunities for constitutes the focus of this report. Chile’s exports in competitive global markets. There are three (four) main complementary approaches In this context, the President of Chile established that can be adopted to transfer advanced science and the National Innovation Council for Competitiveness technology knowledge into productive use: management (Consejo Nacional de Innovación para la Competitividad, of intellectual property; strategic partnerships for CNIC) to provide the vision and lead the thinking on applied oriented research; creation of new knowledge- these issues. The CNIC has charted a broad strategy based firms; and specialist technical advice (Figure that proposes new directions in the national research 1.1). All have been used widely in the advanced OECD and development effort, to improve the relevance and knowledge economies and can be adapted to the quality of the supply of innovative ideas. Concurrently, realities of Chile´s innovation system. Each one of these efforts are being made in the industry system to strategies is further discussed below. encourage the private sector to increase its investment in research and development, which has historically • Managing intellectual property: The first, been low, to generate a strong practice of innovation and most frequent approach, is the use of the 1 Early theories conceived innovation as primarily a science push process. This was followed by a second wave of theories with a focus on the demand side—demand theories. Since the late 1980s and early 1990s, the literature stimulated by the seminal work of Nelson, Lundvall and others, has understood innovation as a more complex and multidimensional process where information flows in multiple directions and networks and channels encouraging the information flows and linking agents between the demand and supply become crucial. 2 Chapter 1: Introduction Intellectual Property (IP) and patenting system Indeed, the use of the IP system is a central and ever to create ownership of a knowledge asset that is growing aspect of OECD knowledge economies, then offered to the commercial sector for licensing. where almost all research performing groups pay The IP process grants a legal monopoly in the use careful attention to the potential of their results for of a novel idea for a significant time to enable the commercialization. Several distinct strategies have inventor to gain a sufficient reward for their prior emerged to cope with the particular demands of this work in developing the novel idea. These legal process. These and their relevance to Chile will be processes first establish the legal asset and then discussed in Chapter 3. the IP is utilized creating value and return to the inventor.2 • Developing strategic partnerships for applied oriented research between knowledge centers In Chile the IP system has been little used, although and the private sector: The second approach, levels of use have recently shown signs of rising from which is becoming much more common practice the very low previous base. Chilean universities have in advanced OECD economies, is the creation of not been very active in seeking to establish IP rights medium- and long-term strategic alliances between and, with a few exceptions, have had little success the research and business communities where new to date in the second process of generating revenue knowledge is created with a specific application in from the exploitation of IP assets. This is a key area mind. This area is best suited to alliances between where practice could improve substantially in Chile significant concentrations of knowledge creators in order to foster the transfer of knowledge into the and users. Hence, it aligns well with the focused productive sector. cluster-based development strategy which Chile Figure 1.1: Key Elements of a Technology Commercialization and Transfer Model Favorable Business Regulations IP-Regulations and Enforcement Entrepreneurial Culture Public Sector Nurturing the Third Mission Technology Institutes Universities Private Enterprises Angel Investor Networks VC-Funds Strategic Technology Alliance for R&D Start-Ups Skills Development TTO-Networks Deal-Flow Facilitators Technology- Licensing Technology Broker Source: Authors’ elaboration. 2 There are many aspects to the patent and licensing process which are elaborated in the following sections, but for simplicity of exposition, it is dealt with here as a simple uniform process. Chapter 1: Introduction 3 is pursuing. So far in Chile, the development of development of a strong entrepreneurial and innovative strategic partnerships is at an early stage with culture and a university culture that fosters engagement the most visible elements of it being the research with the business community as a way of contributing to consortia that have been set up over the last few economic development and social progress (Figure 1.1). years. The Government of Chile can draw many lessons from these early experiences that will prove Technology brokers and other intermediaries play a useful in further promoting strategic partnerships crucial role in all the four strategies described above. along a cluster-based framework. In the management of IP, for example, the services are most often provided by a Technology Transfer Office • Creating new technology firms: The third (TTO) at the knowledge generating institution. In approach, and one that overlaps with the related some cases, these offices call on private IP specialists areas of entrepreneurship, is the creation of new but they generally develop the capacity in house since knowledge-based firms by means of an incubation it constitutes their core business. Chapter 3 elaborates process. Here, the new entrepreneur takes forward on strategies to develop these competence levels in the innovation into the business world by solving all Chile. In the strategic partnerships, internal brokerage the problems of application and commercialization services are often developed as an integral part of the within the new firm. This is a crucial area that has partnerships’ work. In other circumstances, some of received much attention in advanced knowledge these specialists are found in the large corporate partners economies, and best practice approaches have been or private providers are brought since the complexity of accumulated through many years of experience. This the technology transfer process requires a great depth strategy has received support in Chile over the last of expertise. In the knowledge-based firm incubation few years. The attention has unfortunately focused strategy, the usual model is to collaborate with specialists on incubators based predominantly in universities from service firms rather than to try and build all these rather than on the broader incubation process and services into the incubator management team. Broadly has not brought about successful results on a large speaking, the aforementioned strategies for technology scale. There are, however, a few examples of good transfer and the supporting intermediaries are at an practice. Considerable attention is given in the early development stage in Chile. following chapters on how to improve and make this effort more effective. There is also scope for promoting a more entrepreneurial culture as well as a university culture that gives • Specialist technical advice: The fourth approach legitimacy and fosters collaboration with the productive is based on linkages between academics and sector and the community as a key responsibility along businesses operating in their fields through advisory with teaching and knowledge generation. Many OECD positions taken in specific firms. In this instance, the countries have developed a range of (financial) tools knowledge is embodied in the specialist and the to encourage the faster adoption of this responsibility dissemination method is through personal transfer. along with continuous advocacy. In some places, the This is a well established practice in areas such as legitimacy debate is still on-going, but in others (e.g., engineering and medicine. Being essentially personal, the United Kingdom or Finland), it is now accepted. it has fewer implications for technology transfer and Similarly, the Government of Chile can encourage and commercialization policy, other than ensuring that a accelerate the development of an efficient technology suitable balance of rewards and responsibilities is set transfer and commercialization system through for those who participate in it. appropriate regulations, institutional support, financial incentives, and communication of best practices. The above cannot succeed in a vacuum. The experience The experience of other public funding programs for of advanced knowledge countries has shown that their innovation highlights the need to pay careful attention success relies on the existence of intermediaries or to program incentives during the design phase and technology brokers that can facilitate the technology program evaluation ex-post in order to learn and feed transfer and commercialization process, and the the policy-making process. 4 Chapter 1: Introduction This report responds to a request by the CNIC, through its Secretariat, to review Chile´s knowledge/technology transfer and commercialization system and identify practical steps to accelerate the development of an effective and dynamic system. The overall objective is to expand the number of firms in Chile that use knowledge as its main competitive strategy. The remainder of the report is structured as follows. Chapter 2 conducts a diagnostic of Chile’s current system, and Chapter 3 provides recommendations to upgrade technology transfer and commercialization practices and incentives in Chile considering its current endowments and lessons learned from international reference models. Chapter 4 summarizes the conclusions of the review. Chapter 1: Introduction 5 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile The extensive analysis conducted on Chile´s national process innovations and the level of patenting activities. innovation system suggests that the system is The first is a very broad measure of innovation that can underperforming in terms of innovation outputs as capture R&D as well as non-R&D sources of innovation measured by various proxies. This performance gap (e.g., through acquisition of new machinery, training, and appears to stem from two problems: innovation organizational changes) and innovations that constitute inputs are less than adequate and the presence of an adoption of technologies available outside Chile. inefficiencies in the transformation of these investments Total innovation effort and R&D investments of Chilean into commercially and economically meaningful ideas, firms are less than 1 percent and 0.3 percent of sales3, in particular transforming knowledge into innovation. respectively, compared to an average of 3.7 percent This explains why the national innovation strategy has and 1.2 percent for Europe (Figure 2.1), respectively, identified technology transfer and commercialization—a towards the beginning of this decade. Progress in core element of an effective national innovation system- the first benchmark will be critical in the short to -as a key area for public intervention. This chapter seeks medium term since Chilean firms can achieve important to analyze the gaps and obstacles in Chile´s national increments in productivity and competitiveness even if innovation system that are slowing the process of they do not represent technological improvements at technology commercialization. This analysis is preceded the international level. by a brief review of the key performing features of Chile’s national innovation system drawing from the The second measure, level of patenting, is more existing literature. focused and generally a more useful benchmark to gauge national trends in research based technological 2.1 Benchmarking Chile’s National innovation, although international comparisons need to Innovation System be interpreted with some caution since the propensity to patent differs across economic sectors4. While Empirical evidence indicates that Chile faces a gap in monitoring the first benchmark will be important in the innovation. Success in innovation outcomes can be short to medium term, progress in patenting will become tracked by several indicators measuring different aspects increasingly important for Chile over time since limiting of innovation. The two most common international itself to the adoption of existing technologies could lock indicators are the level of Chilean firms with product or the country in a lower level of income in the long run.5 3 The figures for Chile correspond to the average of the two innovation surveys covering the periods 2003-2004 and 2005-2006. 4 Economic sectors display differences in the relative efficiency and modes of appropriating the benefits of innovation. 5 Blomstrom, Kokko and Sjoholm (2002) argue that a similar logic encouraged Singapore into a more knowledge generation stance from its previous greater reliance on knowledge adoption through foreign direct investment and licensing. 8 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile For this reason, Spain has been aggressively upgrading its R&D capacity and other countries such as Ireland Figure 2.1: Innovation Effort of Firms (% of turnover 2000) and China have moved from a reliance on knowledge adoption through foreign direct investment to a greater 2.5% emphasis on knowledge generation. 2.0% The level of patenting by Chileans in the United States (Figure 2.2) is almost negligible despite increases during 1.5% the last decade. (The United States is the most advanced market for research based innovations, providing a 1.0% strong reference point compared to figures for different 0.5% national markets where practices vary.) Data from the Intramural R&D Department of Industrial Property in Chile shows that, 0.0% Machinery and Equipment during the period 1995-2006, less than 15 percent Spain Training for Innovation Italy Finland Avg Europe Licenses, patents and introd of innov of patent applications and less than 10 percent of Chile Argentina patents approved corresponded to Chilean residents, Source: Authors’ elaboration based on enterprise innovation surveys in firms or institutions. Individuals and then companies Europe and Chile. received the most patents awards, while universities received only 6 percent of patents (Table 2.1). This contrast significantly with the experience of innovative Figure 2.2: Patents Registered in the US: Chile and economies, such as Korea, Singapore, Taiwan, Israel, Comparator Countries by Inhabitants (1995 and 2007) Ireland, Sweden, where the level of patenting has grown significantly and their respective governments 10 1995 USPTO patents per billion GDP identified it as a priority and supported it accordingly. 8 2007 Licensing receipts over the last five years have been 6 0.5 percent of GDP, half the levels of more advanced knowledge economies with a strong natural resource 4 base such as New Zealand. 2 0 What explains Chile’s underperformance in innovation zil a o ile rea d ai n d d da tin xic an lan lan Bra Ch na outputs? Chile’s underperformance in the outcomes of Sp Ko l Me en Fin a Ire Ca Ze Arg w Ne innovation is both the result of a lackluster performance Source: USPTO and authors’ estimates. in its innovation inputs and inefficiencies in their use. Public budget funded R&D tends to be oriented to pure academic activity and, until recently, it was not expected to result in patentable inventions. Enterprises Table 2.1: in Chile spend relatively little on innovation as a share of Patents Granted to Chilean Nationals by the turnover as noted earlier. Department of Industrial Property (1994-2005) Research analysis shows that economic structure is only Applicant Number Percent of total partly responsible for this outcome. Applying Chile’s Total 194 100.0 economic structure to other countries and using the Individuals 111 57.2 OECD average R&D levels for those sectors indicates that R&D investment in Finland and Korea would fall Firms 65 33.5 by two-thirds but countries such as Australia would Universities 12 6.2 reach 90 percent of their present level, which is about Research centers* 6 3.1 three times that of Chile (Rodriguez-Clare and Maloney, *Includes foundations. 2005). See Table 2.2. Source: Academy of Sciences. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 9 Table 2.2: Simulated Aggregate R&D Investment Rates*, (1995-99 average) Country Estimated R&D investment rate Observed rate (%) Estimated/observed (%) using Chilean structure (%) Australia 0.7 0.8 89 Canada 0.7 1.1 65 Germany 0.4 1.7 26 Spain 0.2 0.5 51 Finland 0.8 2.1 37 Italy 0.5 0.6 84 Korea 0.6 1.9 33 Netherlands 0.6 1.2 51 Sweden 1.4 3.0 48 United States 1.1 1.9 57 Average OECD 0.8 1.4 57 * Using OECD Sector Investment Rates and Chilean Structure. Source: Rodriguez-Clare and Maloney (2005). The other critical determinant of the low level of to be a very important challenge in Chile where Chile’s innovation outcomes is the large inefficiencies efforts to enhance collaboration between industry in the way in which innovation resources are utilized and universities are fairly recent as further discussed within the national innovation system, e.g., the below. relative efficiency of transforming R&D investments into commercial patents. Based on Bosch et al. (2005), The remainder of this chapter analyzes the factors Figure 2.3 presents the elasticity of patents granted in and incentives that have contributed to inefficiencies the US with respect to R&D investments in Chile and in the use of Chile’s innovation resources and slowed other comparator countries from 1963 through 2000.6 down technology transfer and commercialization. The The regression controls inter alia for exports to the US causes behind the underperformance on innovation and economic structure. inputs have been analyzed extensively in the literature on Chile’s innovation system and are beyond the scope The negative value for Chile suggests that the country of this report (Benavente et al. 2005, OECD 2007 and underperforms in patenting efficiency relative to the World Bank 2007 and 2008). Moreover, the strategy for OECD average as observed in most countries in Latin the national innovation system formulated by the CNIC America.7 Further estimations by Bosch et al. (2005) also discusses them and proposes recommendations to indicate that the main explanation for the inefficiency increase innovation inputs and close the gap with other in Latin America (measured as a whole) was inadequate knowledge economies. Rather, this report focuses on collaboration between the private sector and the the determinants of the large inefficiencies in the use knowledge generating community.8 This also appears of the limited innovation inputs. 6 The analysis uses data from the US Patent and Trademark Office since the US is the principal locus of patenting activity in the world. 7 See Bosch et al. (2005) for a detailed discussion of the methodology used. 8 This result was derived by estimating a patenting function that includes the interaction between R&D investment and a dummy variable for Latin America and several explanatory variables including the extent of collaboration between private firms and universities as measured by the Global Competitiveness report. 10 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile the Chilean context but in a more acute form. Existing Figure 2.3: Efficiency of R&D Expenditures incentives in universities and research institutions in (Results of a regression of patenting levels in the US on R&D) Chile have not favored collaboration either. In addition, until recently, public initiatives in support of innovation ARG had not recognized the importance of these linkages BRA so public support had been quite limited. The main CHL CRI shortcomings that discourage collaboration are further MEX discussed below. TWN KOR FR First, the incentives and reward structure of academics FIN and researchers in Chile has not favored collaboration. SPA The emphasis in publishing on academic journals has AUS NZ been useful in promoting research quality but has not -10% -5% 0% 5% 10% 15% 20% rewarded any productive use and commercialization. Technology transfer to local industry always requires Source: Bosch, Lederman, and Maloney (2005). both knowledge of the commercial world which is largely missing in Chile’s universities and far more direct interactions than publishing. The culture of disclosure 2.2 NIS Gaps that Retard Technology in the academic world can also often conflict with the Commercialization culture of trade secrets prevailing in the business world. As the evolutionary innovation theory argues, Second, the system has not facilitated the appropriation innovation systems are complex and dynamic milieus of benefits emerging from technology commercialization. that require the active interaction of many actors and While universities’ rules on intellectual property rights a supporting institutional framework that coevolves are becoming more open and permissive in Chile, some together with industry’s innovations (Nelson 1992). universities do not allow researchers to benefit from the While many factors and incentives have affected royalties arising from the research output or the sharing Chile’s capacity for technology commercialization of benefits by researchers is very moderate. In some and the efficient application of its innovation-related cases, university policies establish that royalties will be resources, the main ones can be classified into four key determined on a case by case basis by a board which areas: insufficient articulation between the productive generates high uncertainty to the researcher, diminishes sector and knowledge centers, underdevelopment of transparency, and creates an additional hurdle in the institutional and policy framework for intellectual the already challenging process of commercializing property management, weak public technology knowledge. Limited sharing of benefits and uncertain institutes, and inadequate institutional and financing rules discourage collaboration and commercialization mechanisms to encourage the formation of new of research ideas. Also, performance at universities and technology firms. career progression for its academic staff is still solely determined by publications and teaching. Weak articulation between the productive sector and knowledge centers Third, public attention to these issues was limited until recently and the focus of many public programs has been The relationship between industry and knowledge misguided. The principal sources of research funding centers, i.e., universities and research centers, lies at for universities –institutional funding and CONICYT´s the heart of many innovation networks, but despite funding – have traditionally given more emphasis to recent promising developments, these alliances are basic research (rather than productive or commercial at an incipient stage in Chile. Differences in culture oriented research) as is generally the case in many OECD between industry and universities, which have been countries. The missing ingredient is pre-competitive common in many OECD countries, are also present in collaborative research – sometimes called applications Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 11 oriented research and containing some pure and some (consortia, FONDEF and the Pre-competitive Program) in applied elements - which has received far more attention the 2007 budget law amounted to about 22.8 billion, from public budgets elsewhere. Applied R&D funds a moderate amount compared to more than 120 billion programs at InnovaChile (pre-competitive funds) and pesos allocated for basic research, although the latter is CONICYT (FONDEF) have received a small share of the probably an upper bound.9 budget. More importantly, the project-based emphasis of FONDEF and similar initiatives under CORFO was unlikely CONICYT has also been supporting Regional Cooperative to produce R&D with significant impact (Table 2.3). Research Consortia, which are being gradually Barring a few exceptions (e.g., a few undertakings by established in all regions in conjunction with regional Fundación Chile and collaborations between CODELCO governments, universities, and private enterprises. and Nippon Mining, large scale public-private research Broadly speaking, regional consortia have taken longer collaborations of impact were almost negligible until to become operational due to capacity constraints and 2004 when CONICYT, CORFO and FIA jointly established have demanded greater oversight from CONICYT. a program to foster such initiatives. Overall, these consortia programs have provided the first These collaborative programs have funded more than step along the road to conducting strategic research, nineteen consortia or strategic alliances for up to five years but a number of issues have emerged that will need to and were one of the first collaborative R&D experiences be addressed in future public support initiatives. First, to be launched in all of Latin America. CORFO launched there is duplication of research objectives among some another call for consortia in the energy sector in 2008. alliances (e.g., in the fruit and biomedicine alliances). Although these are positive steps, the consortia remain Second, while some alliances (e.g., in the fruit and bio- small. Overall funding to applications oriented research mining areas) were strongly aligned to the needs of Table 2.3: Main Programs to Support Technology Transfer and Commercialization Innova Chile/CORFO CONICYT IP-management • IP Protection Program • Fostering IP-Protection (PBCT) • Enterprise Innovation program (support for licensing in) Development of new knowledge-based companies • Creation and strengthening of incubators • Angel investor networks • Seed capital lines • Risk Capital for innovative SME* Strategic partnerships for applied oriented research • Consortia pre-investment and development** • Strengthening industry-science linkages** (PBCT) • Business consortia • Regional partnership initiatives • Pre-competitive innovation • FONDEF Source: Authors’ elaboration. *Executed by another department. **Initially launched as a joint initiative among CONICYT, FIA and InnovaChile. 9 This amount includes inter alia resources allocated to FONDECYT (28 billion), core funding (9), and universities (75 billion). The last is based on an estimation of the share of funds allocated to higher-education institutions that is devoted to financing R&D according to the Canadian rule. It is possible that these amounts include some level of funding for applied research. 12 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile economic sectors, others (e.g., in biomass conversion, supporting incentive and institutional framework are food, nutraceuticals and botanic drugs) were not.10 barely developed in Chile. As earlier data indicated, the level of patenting by Chileans at the international level is Third, many of them do not have a critical mass of almost negligible despite recent increases, and Chile lags researchers and R&D infrastructure to become strong OECD countries in transforming research investments technology platforms. These consortia have not yet into patents (Figure 2.3). Some universities in Chile have been able to bring together existing research capabilities started to change their policies on IP management and in Chile, since many of them have only incorporated a increased IP commercialization benefits for researchers, single university or research center. Consortia should but a culture of technology transfer has not been actively be able to integrate most of the researchers working in promoted in universities and university funding does relevant areas rather than only those from one university not provide the incentives to encourage such activities. as the academic system rarely achieves either critical mass Technology transfer offices (TTOs) in universities are or covers the full range of relevant technologies if only at a nascent stage and the capacity for provision of IP one university is involved. Public technology institutes protection and commercialization services in the private could also participate more actively in the consortia. In sector is very limited as well. addition, the consortia have not built strong alliances with international research centers in similar fields that can In addition, the less than adequate performance of complement local capacities and integrate Chile globally. the Department of Intellectual Property at the Ministry The Fruit Technology Consortium, for example, comprises of Economy and lack of endorsement of international 29 partners, including the exporters´ association, and a IP treaties made the process of IP protection more diverse group of large, medium and small fruit exporters cumbersome discouraging it. Until recently, policy- and producers. Its core activities are to develop new fruit makers did not realize the potential benefits that could varieties that can respond to the increasing requisites of be derived from IP commercialization and consequently international markers. The Pontificia Universidad Católica public initiatives to stimulate IP education, protection de Chile is the only research institution participating in this and commercialization were limited. strategic alliance. While its objectives are closely linked to sectoral needs, it lacks the critical mass to make an Technology transfer offices at universities: Leading impact (InterLink Biotechnologies 2008)11. Fourth, there universities in Chile have recently started to build is inadequate awareness and experience on management technology transfer offices (TTOs) to manage their IP of intellectual property (IP). Future initiatives will have to assets and other interface activities with the productive overcome the aforementioned challenges. sector, but their skills, experience and outcomes vary widely and are not yet performing at international levels. Fifth, while these efforts were initially launched as a The main problems identified include insufficient skills joint initiative between CONICYT, CORFO and FIA, in intellectual property and licensing; limited networks the three organizations are now managing their own of contacts both at home and abroad; very limited programs. The question arises as to whether it would funding which affects their staffing and their access be more effective for a single organization to take the to legal services and necessary contacts and travel;12 prime responsibility for these critical programs to avoid uncertainties in the royalty and reward structure applied duplication and dispersion of efforts. by some universities as noted above; lack of commercial focus by some TTOs; and difficulties in connecting to Underdeveloped IP management culture and the international patent system. Insufficient demand for supporting institutional infrastructure their services by both universities and industry also poses a challenge to the development of these new TTOs. A Patenting and licensing are critical channels to transfer pragmatic approach was followed in the case of OTRI, and commercialize knowledge, but the IP culture and where five leading universities comprising 43 percent of 10 See InterLink Biotechnologies, LLC (2008). 11 The consortium will face another challenge given that an appropriate regulatory framework for the development of GMO products is not in place (Inter Link Biotechnologies 2008). 12 Some TTOs have just two professionals. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 13 the research conducted by universities in Chile and two In part, this stance is a pragmatic one of not wishing private sector associations came together to establish a to overcommit the institution to a new agenda, but in TTO, but it has not been effective enough due to limited part, it also reflects the fact that the third mission of resources and staff.13 universities – activities related to the needs of society in general and the productive sector in particular – has not Besides TTOs, some universities have established other yet been fully legitimized.14 Giving legitimacy to these units to interface with the business community, but activities in Chile appears to be a work in progress. experiences of this type are still limited in Chile. A few The willing academics are becoming more active, but examples follow. DICTUC, a company set up 70 years the majority of academics are still to be persuaded of ago by the Pontificia Universidad Católica de Chile, is a its legitimacy. Working to consolidate the legitimacy sort of broad TTO, providing advisory and certification of this activity needs to become a priority and pursued services, training and incubation and spin offs (mainly vigorously by the country’s Rectors with the active of campus related activities). Yet, its effectiveness support of the CNIC, the Ministry of Education and the is hampered by several constraints. It has to rely on Ministry of Economy as the Chair of the Inter-ministerial funding on a project by project basis and does not have Committee on Innovation (ICI). The engagement of many experts in intellectual property and licensing even public technology institutes in IP management was also though the project team is expected to take the project minimal in the past. INIA, for example, the largest public through commercialization. Also, the company is still technology institute held no patents prior to 2002 as in the process of developing objective project selection further discussed below. criteria to enhance its commercial orientation. The Universidad de Concepción has also set up a technology Private technology brokers15: Competence in the development centre (Unidad de Desarrollo Tecnológico private sector for IP management is also scarce. There or UDT) in wood, a core economic activity of the region, is only one enterprise in Chile that currently provides and so has the Universidad Adolfo Ibáñez. UDT has technology brokering services, and its level of activity made significant progress in developing technologies on technology transactions is limited. This is consistent for license, but interesting the Chilean industry in new with the very small number of Chilean firms that either technologies is proving difficult. generate their own IP or base their business strategy on the acquisition of IP from external sources. Most Chilean Overall, TTOs appear to run on minimal budgets and firms source their technology from capital goods providers to survive through external funds they can access who offer services to install and train their staff in the use from either public or private sources. The predominant of the new equipment (Figure 2.1). Others, for example, mandate to TTOs appears to be a permissive one – staff rely on assistance from their customers, especially those are encouraged to pursue the TTO mission energetically in tight supply chains, and others build their businesses but with the proviso that there will be no additional on incremental improvements in technical practice that resources provided from the core funds of the university. are not suitable for protection through the IP system. That is, they must fund their work through external Very few rely on external licensing. resources either by participating in specific publicly funded programs or by attracting donations or building Technology markets around the world tend to be alliances with private sources. While self funding of incomplete relative to markets in products or services, their activities is a laudable aim in the medium term, but the existence of private technology brokers in some international evidence suggests that an initial period of countries has facilitated trade in technology by helping to investment is needed before the breakeven point can overcome some of the market failures (e.g., information be reached. asymmetries and cognitive aspects) that hold back 13 OTRI sponsors comprise: Pontificia Universidad Católica de Chile, Universidad de Concepción, Pontificia Universidad Católica de Valparaíso, Universidad Católica del Norte, Universidad Técnica Federico Santa María, Asociación de Exportadores de Chile (ASEXMA) and Confederación de la Producción y del Comercio (CPC). 14 The first and second missions concern the training of human resources and scholars and the accumulation of knowledge. These will be further discussed in Chapter 3. 15 Technology brokers are service providers for patent processing, IP consulting and transactions, and licensing services. However, some complement these services with other activities such as business development from patents, IP merchant banking, or patent portfolio building. 14 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile the development of such markets (Cesaroni 2004).16 IP registry institutions and IP enforcement: The First, the tacit nature of technological knowledge institutional framework for IP registry was fragmented causes information asymmetries among organizations and services did not keep up with international practices. and encourages opportunistic behavior, increasing Until 2009, the Department of Industrial Property transaction costs and reducing technology trade. (Departamento de Propiedad Industrial) under the Ministry Second, the existence of such information management of Economy was responsible for reviewing patent and problems leads some organizations to internalize it trademark applications, granting titles and certificates vertically, but this requires extensive R&D resources relative to patents and trademarks, maintaining a registry which is not a feasible option for many companies. In on patents and trademarks, and acting as the first level addition, efficient technology transfer requires some to resolve disputes regarding the validity and granting firm-level conditions and in-house absorptive capacities of patents and trademarks. Appeals against resolutions to be satisfied. issued by the IP department have been the responsibility of an independent IP Tribunal, accountable to the Supreme The experience in the United States has shown that Court. Two separate institutions – Departamento de technology brokers or agents with highly specialized Derechos Intelectuales or Intellectual Property Rights technical knowledge as well as specialized negotiation under the Ministry of Education and the Servicio Agrícola and contractual skills in knowledge processes can y Ganadero (SAG) or Agriculture and Cattle Service under help address these two market failures and allow the Ministry of Agriculture – were responsible for the companies to acquire new technologies through arm’s registry of copyrights and registry of new plant varieties. length contracts. Besides their pivotal linking role, The division of responsibilities among several institutions technology brokers have proven to be knowledge complicated the management and processing of IP rights repositories capable of transforming existing ideas into and thinly spread limited IP resources. technical solutions that respond to the specific needs of enterprises. These entities have performed below international standards according to users and INECON (2007). Less By facilitating the development of IP intermediaries and than adequate funding has adversely affected their thus licensing, Chilean firms with weaker technology performance and generated a considerable application competences and R&D constraints would gain access to backlog (estimated at about 20,000 applications at the knowledge that allows them to improve their existing Department of Industrial Property). Reportedly, it takes processes and products and, more importantly, enter about six years to grant a patent on average, where the into new product markets. Chilean firms conducting norm in other countries is 1 to 2 years. The IT system of their own R&D would also gain from a more active the Department of Industrial Property improved in recent technology market by being exposed to a wider range years, but its capacity could not support an expeditious of cutting-edge technologies that complement their handling of applications and research on patents, and technology portfolios. Some of them would face the it is not user friendly. Part of the patent database was opportunity to commercialize their own technologies, not available on electronic means and many procedures encouraging them to further invest in R&D.17,18 Given were handled manually instead of electronically. Staff the government’s interest in enhancing technology was insufficient and not experienced enough on IP and transfer and commercialization as part of the broader did not have regular access to training to maintain and national innovation strategy and the current thin market upgrade skills (INECON 2007). The lack of adequate links in technology transactions, the policy question arises as to the regions has also hindered the patenting process. to whether the government can help jump start such a In sum, the lackluster performance of the department market in technology transactions and how to do it. did not facilitate nor encourage patenting activity. 16 Market failures in technology trade can also arise from weak protection of intellectual property rights, which is addressed in the following section. 17 Using a sample of 96 chemical corporations from Europe, Japan and the United States, Cesaroni (2004) shows that the existence of dynamic technology markets affects firms’ technology sourcing decisions and their propensity to enter into new product markets. 18 Very few high-tech companies around the world, e.g. Qualcomm, rely almost entirely on their IP assets, but there are a number of well established high-technology companies such as Texas Instruments or IBM that derive an important percentage of their earnings from IP commercialization. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 15 To start addressing these gaps, Law 20.254 was enacted in 2008 and is currently in a transition phase. It faces the in 2008 converting the Department of Industrial Property challenge of becoming a modern and well functioning into the National Institute of Industrial Property, as a organization in line with best international practices in decentralized agency under the Ministry of Economy. the IP field. The IP registry system, however, remains The new structure grants the institute greater flexibility fragmented. to operate and financial independence which is expected to lead to an improved performance. The law also grants The enforcement of IP rights remains challenging even the institute greater responsibility for disseminating though the authorities have increased the number of and promoting intellectual property rights, rather than staff assigned to resolve IP rights, and coordination being a mere registry. The institute became operational among institutions engaged in IP enforcement is less than Box 2.1 International Cooperation Treaties on Intellectual Property The Patent Cooperation Treaty was set up by the World Intellectual Property Organization (WIPO) in 1970 to allow countries to cooperate in the filing of patent applications internationally. It has the benefit of simplifying and reducing the cost of obtaining patent protection in a large number of countries by postponing translation costs and decisions on the selection of countries. Since 1970 many countries have enacted the necessary national legislation to enable them to participate. There are more than 140 contracting states and Chile only became a member in March 2009. Twelve months after making the initial patent application, an application with a set of claims can be made through the Patent Cooperation Treaty (PCT) system which is accessed through national patent offices or the international bureau of WIPO in Geneva. The application is sent to an examining office, i.e., one of the major patent offices appointed by the PCT assembly, and an international search is carried out. Applications can be made in English, French, Spanish, German, Russian, Japanese or Chinese and the office will deal with the applicant in the language chosen. Thus, no translations to various languages are needed at this stage decreasing costs to the applicant. The application, together with an international search report, is then published after six months. The written opinion that accompanies the international search report is not published. The patent specification is now in the public domain and accessible on the Internet. The search report and written opinion can be used by the applicant to assess the chances of a patent grant or to refine the patent claim so as to have an easier passage through the next phase, examination in a national system such as the US or a regional system such as the European Patent Office. In practice, the PCT system allows applicants to delay for up to 30 months before making the selection of countries in which patents should be sought, appointing local patent agents in each foreign country, preparing the necessary translations, and paying national fees. In addition, if the international application follows the PCT required, the application cannot be rejected on formal grounds by the national offices. Overall, the PCT system facilitates the patenting process, in particular more speculative R&D projects where it may take time before the commercial prospects become clear. Chile´s patent office can also benefit from the treaty. Its work could be substantially reduced due to the international search report and accompanying written opinion. Madrid Protocol for the International Registration of Marks: The Madrid protocol was established by the WIPO in 1989 and 78 countries have already adhered to it. This system offers a trademark owner the possibility to have the trademark protected in multiple countries by filing a single application in his or her national or regional office, rather than translating it to multiple languages and paying the application costs in several countries. The trademark offices of countries within the Madrid protocol have a limited time to indicate the possible refusal of the trademark. If such refusal is not issued, the trademark is considered registered in those countries. The system also simplifies the subsequent management of the trademark since it is possible to renew the registration through a single step. The Hague System of International Registration of Industrial Designs. The Hague system was also established by the WIPO and operates in a similar manner to the Madrid protocol. Source: WIPO and authors. 16 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile satisfactory (INECON 2007). Penalties for infringement requisite financial capacity and expertise. In principle, appear to be low and likely inadequate to deter such the mandatory leading role of entities with the relevant behavior. Nor have there been programs to educate expertise in the application process helps InnovaChile in the Chilean public into the role of IP in international the pre-screening of viable projects. However, it could competitiveness so consumers do not exert any pressure potentially raise some conflicts of interest since these on firms in this regard. advisory entities are ultimately the service providers to the party interested in protecting his/her intellectual Adherence to international cooperation treaties property rights and they could hold the latter captive pending. Until March 2009, Chile remained one of the few to their services even if the final beneficiary is not fully countries that had not adhered to the Patent Cooperation satisfied with them. Treaty system making patent filing more burdensome. The Treaty, established by the World Intellectual Property CONICYT has also implemented some small initiatives Organization in 1970, allows countries to cooperate in to support the intellectual property process (Table 2.3). the filing of patent applications internationally, with the It has conducted competitions inviting institutions with benefit of simplifying and reducing the cost of obtaining expertise on intellectual property rights to conduct patent protection in a large number of countries (Box patenting contests. The two calls for proposals carried 2.1). More than 140 countries are signatories. Similarly, in 2004 and 2005 have led to a total of 15 patenting Chile has fallen behind in relation to international filing contests where 93 projects were selected to receive of trademarks and designs by failing to implement the financial support (up to 25 million pesos per proposal) Madrid and Hague protocols, respectively. for patenting. These contests were useful in starting to raise awareness on patenting among the research Limited public initiatives to educate and stimulate community, professionals and enterprises. Far more protection of intellectual property rights. seems necessary. Traditionally, policy-makers had not given much priority to IP protection as a means to facilitate commercialization Unrealized potential of technology institutes of knowledge, and consequently, there were very few public initiatives to educate the public, researchers and Chile has a fragmented set of technology institutes the business community and raise awareness. Direct with an uneven performance. They are generally linked funding of universities did not foster IP protection and to a ministry and mostly located in Santiago with a commercialization either, and other public funding few regional offices (Table 2.4). While they are all initiatives to stimulate demand for IP protection have classified as technology institutes, their public missions been limited and isolated (Table 2.3). and functions vary markedly. Some are more focused on technology transfer and technology diffusion, and In recent years, for example, InnovaChile initiated others are primarily focused on generating information a program that provides partial financing of costs on natural resources and other national strategic associated with the processing of intellectual property issues for regulatory purposes and, in many cases, for rights, inter alia inventions, industrial designs, plant dissemination to relevant producers as well (Table 2.5). varieties, software and other digital applications, and Over two-thirds of their funding resources come from defense of these rights vis-à-vis third parties. The program the public sector. covers up to 80 percent of the costs with a ceiling of 50 million pesos (approximately US$75,000) and allows five Many of them are perceived as inefficient and face the years for its implementation.19 Enterprises, technology challenge of aging staff and retaining young qualified centers, universities and individuals can apply to the staff since they are not able to compete with salaries program but are required to do so through an advisory in the private sector. Any effort to enhance their entity on intellectual property rights, that is, an entity performance needs first to take account of their mission that has been qualified by InnovaChile as having the and the different public goods they can offer. 19 Peso conversion 660. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 17 Table 2.4: Technological Institutes Institute Ministerial association Budget Staff (researchers) Air Photographic Service Defense 1145 257 Agriculture and Livestock Institute (INIA) Agriculture 17646 1046 (55) Agricultural Research Fund (FIA) Agriculture Chilean Antarctic Institute (INACH) Foreign Affairs 2161 28 Chilean Nuclear Energy Commission (CCHEN) Mining 6115 300 (120) Fisheries Promotion Institute (IFOP) Economy 7052 440 (89) Fisheries Research Fund Economy Forestry Institute (INFOR) Economy 2636 74 (44) Fundación Chile (Private foundation) 12241 300 (n.a.) Hydrographic and Oceanographic Service (SHOA) Defense 2870 273 (--.) Military Geographical Institute (IGM) Defense 3612 316 (--) Mining and Metallurgic Research Center (CIMM) Mining 1500 50 (45) National Hydraulic Institute (INH) Public Works 750 61 (14) Natural Resource Research Institute (CIREN) Agriculture n.a. n.a. National Service for Geology and Mining Mining 5831 313 (51) (SERNAGOMIN) National Standardization Institute (INN) Economy 73 (--) Source: Advansis and Secretariat of the CNIC. INIA, dedicated to enhancing the productivity of the Fundación Chile is the most prominent of all the agricultural sector, and Fundación Chile, a private institutes having received international recognition. It is foundation, are the two largest in terms of funding with a non-profit organization that was founded in 1976 by nearly 45 percent of total resources budgeted annually. the Chilean government and the ITT Corporation with The public sector constitutes INIA’s main client, but the the mission of transferring state-of-the art technology institution has gradually increased its interaction and and skills to priority clusters in alliance with local and the number of joint projects with the private sector. It international networks.20 It has a mixed public-private provides extensive training and knowledge dissemination sector board with 11 members, five of which correspond activities to small producers. Most of these activities, to the private sector.21 however, are oriented to traditional sectors in agriculture with very little impact on the newer export clusters Fundación Chile has created over 30 companies, with higher value added potential. R&D activities have developed technology consortia with universities and increased in recent years from very low levels, and the private companies, adapted state-of-art technology for institution has started to patent some of the outcomes. product and process innovation in the public and private Prior to 2003 it held no patents. About 5 percent of its sectors, and promoted technology diffusion to small and staff is engaged in research, but the incentive structure medium enterprises. It is best known for the pioneering constraints the institute’s capacity to retain highly of salmon firms in Chile that was critical to the take off qualified staff and thus its potential impact. of the sector, but its impact has also been important in 20 In 2005, Billiton, Escondida Mining, became a co-founding partner. 21 The public representatives include CORFO´s executive vice-president, the President of CONICYT and three other experts appointed by the President of the Republic. 18 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile other economic sectors. Today, its areas of intervention are agribusiness, marine resources, forestry, environment Table 2.5: Technological Institutes and Research Foundations and energy, ICT, and education. Fundación Chile´s early withdrawal from some of the companies it founded did not allow it to benefit from their subsequent expansion, Institute Technology Information Regulation/ transfer Services Certification which has constrained its resources and its capacity to grow in a substantial way. Air Photographic * a a Service INIA a a Financing and institutional shortcomings in the FIA * a promotion of knowledge-based enterprises INACH * a Generating new firms based on the findings of research and CCHEN * a a development is crucial to technology commercialization in IFOP * a a Chile. This process is notoriously challenging worldwide, Fisheries even more so in emerging markets such as Chile. The Research Fund difficulties concern the articulation of funding from the INFOR * a a research idea to the various development phases that a Fundación Chile a a new enterprise undergoes -- and possibly its eventual SHOA a a listing on the stock exchange – as well as the provision IGM a a of broader incubation support during the early stages of CIMM a a a the new enterprise (Figure 2.4). INH * a a CIREN * a The funding difficulties start at the early proof of concept and prototyping stages as this work is beyond the remit of SERNAGOMIN * a a the research grant funders and well before any external INN * a a investor can appraise the likelihood of commercial value *Some moderate level of technology transfer activities conducted. and proceed with the investment. Even after this stage Source: Advansis and authors. is successfully passed, there have been significant gaps in start up finance as there are good reasons why the traditional sources of funding are reluctant to play their market was close to 200 thousand million pesos in 2007 normal role. There are inevitably technology risks which compared to about 90 million pesos at the beginning of deter investment when comparing the opportunity to the decade, including public financing, but seemingly, traditional and established businesses. Additional areas only a small share of the market has been channeled to of risk include: timing – it takes longer to develop a knowledge- or technology-based companies.22 Venture novel product than an established product; commercial funds appear to have prioritized traditional businesses – even if the product does what it says, the market may areas, given their greater familiarity with them and not adopt the innovation for several reasons not least of perceived lower risk. In addition, the deal flow of which is inertia; and, experience – the entrepreneur is knowledge-based companies seems to be relatively low. new to business and the team is usually unproven. GEM estimates suggest that the deal flow is probably small compared to the available venture financing, but Not surprisingly, the financing market for new technology financing for technology-based ventures is still difficult based companies in Chile remains at a nascent stage to come across in the early stages. despite the growth observed over the last three years–a growth that is explained to a large degree by the new The Government of Chile has tried to stimulate the public financing instruments (Table 2.6). According growth of this market through reforms to the capital to GEM´s estimates (2008), the venture capital (VC) markets law as well as the provision of financing for 22 Other authors suggest estimates closer to 130-150 million pesos. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 19 Figure 2.4: Lifecycle of New Enterprises Financing Sources Seed Capital Venture Capital Capital Markets Informal Early Stage Expansion Banking Government Cash Flow Time Ideation Survival High Growth Maturity Source: Authors. seed capital, angel investors and venture capital million pesos). Project proposals have to be presented funds. The capital markets reform of 2001 liberalized through “sponsors� certified by InnovaChile. There are investments of mutual and investments funds and about 28 sponsors, most of which are incubators linked insurance companies and provided fiscal incentives to to universities. companies listed in Chile’s emerging market, but this reform had little or no impact on the venture capital The 2008 evaluation of the seed capital program industry. The capital markets reform of 2007 contained pointed to several gaps (SERCAL 2008). First, the more direct and aggressive measures to spur new program has not had a permanent monitoring process venture financing, including tax exemptions to capital of key performance benchmarks. The evaluation also gains from seed and VC funds23; and an extension of suggests that most projects were not technology based; fiscal incentives to the emerging market for another 8 performance of sponsors varied markedly; sponsors years, which could eventually become an exit strategy for appeared to apply different pre-selection criteria; and VC fund investments. It also opened the way for CORFO to further promote the VC industry by authorizing it to directly invest in VC funds (up to 40 percent of capital). Table 2.6: Evolution of Venture Capital in Chile (Thousand million pesos) Presently, CORFO has three complementary programs to support financing of new enterprises: seed capital, angel investor networks and venture capital programs. The first Accumulated investment 2001 2005 2007 two are administered by InnovaChile. The first program Seed capital 0.2 3.1 8.9 (seed capital) was established around 2002 with two Early stage VC 0.0 0.6 1.7 complementary lines to entrepreneurs and enterprises Growth VC 6.7 20.0 49.3 with less than 18 months of operation. The first line Late stage VC 84.4 77.8 146.4 offers grants for feasibility analysis (up to 80 percent of projects costs and a limit of 6 million pesos), and Total 91.3 101.5 206.3 the second line offers grants to initiate the seed capital Source: GEM (2004). project (up to 80 percent of costs with a maximum of 40 23 The incentives apply up to 2022. 20 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile they often lacked relevant expertise (SERCAL 2008)24. is equivalent to 2 and 3 times the private investment Interviews conducted by the evaluators indicated that for traditional and innovative enterprises, respectively. only 25 percent of “sponsors� prioritized technology- These lines of credit have helped finance more than based projects as opposed to projects with commercial twelve new funds during the last four years, mainly innovations and the concept of technological innovation to non-innovative projects. Following the 2007 capital also differed among them. A large number of “sponsors� markets reform, InnovaChile is considering further steps appeared to focus on their subcontracting role for and a more pro-active role, including equity investments InnovaChile, rather than on building networks to help in knowledge-based venture capital funds. link the new ventures to the market and identifying additional financing for subsequent stages. The InnovaChile has operated an incubator support program does not contain incentives to foster leverage program as a complementary tool to the three of additional financing. financing programs mentioned above, but program results have been mixed. The program offers several A second program, started in 2006, has tried to catalyze grant lines to facilitate the creation, strengthening and the formation of angel investors’ networks to provide operation of incubators.26 The program requires that financing to companies in their early stages of operation incubators be associated with knowledge, technology -- the financing stage which currently seems to face the centers or training centers, although most enterprises biggest gaps in Chile. The program finances the initial that have benefitted from them have not originated coordination and operation of angel investors networks at universities or knowledge centers. In some cases, for up to 3 years and 180 million pesos. It has supported academic directors have been appointed to lead the the operation of the Southern Angels, the first angel incubators, but many have not had sufficient time investor network set up in 2004, and four other or the required expertise for such a challenging task. networks have been established more recently.25 The Early on, the emphasis was on the creation of a large program is still at an early stage but a few observations number of incubators throughout the country but not follow. The program requires the network to show a on impact. About 23 incubators have benefited from minimum cumulative net worth of participants of the program, but their overall performance has not US$13.3 million. This has held back the participation of been strong and results have shown a wide variance. potential angel investors who felt reluctant to disclose Many of them have failed to meet the targets set in all their net worth. Also, investments of angel investors their original project proposal. Some of them have do not benefit from fiscal incentives like VC funds, even emphasized their role as ‘sponsors’ of InnovaChile’s though the former are exposed to higher risks. seed capital program discussed above rather than their role as incubators. However, a few of them such as The third program, CORFO’s venture capital program, Octantis and 3ie show promise, and their business seeks to expand financing opportunities for small models, particularly 3ie, could be considered for enterprises with high growth potential, but financing other incubators. 3ie incorporates all of the stages has been primarily channeled to traditional business of the incubation process, helps secure financing, areas rather than knowledge-based companies. The and engages pro-actively in articulation functions, program provides a long-term credit to investment and canvassing periodically the needs and demands of a venture capital funds that in turn invest the funds in few related sectors and seeking partners to provide a company through equity or debt. The credit ceiling solutions to the identified problems. 24 Performance was based on several criteria inter alia projects presented and approved by InnovaChile, successful number of projects on the basis of subsequent performance of the enterprises, and their access to networks and active market role. 25 The other four are Patagonia Angels, Incured, Valor Sur and Angeles Sur. 26 There are five financing lines. The first line supports the establishment of incubators and staff training and covers 100 percent of project costs for the incubator and up to 50 percent of costs of entities associated to the incubator, with a limit of 15 million pesos. The second line supports technology missions overseas and covers 100 percent of project costs and up to 10 million pesos per incubator. The third line supports technical assistance and covers 100 percent of the project and up to 15 million pesos per incubator. The fourth line supports dissemination activities and covers 100 percent of costs and up to 6 million pesos per incubator. The fifth line supports the formation of strategic alliances by incubators to achieve economies of scale and foster the adoption of best national and international practices and covers 70 percent of costs and 120 million pesos per incubator. Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile 21 2.3 Conclusions The diagnostic of Chile’s national innovation system points to the need to increase resources allocated to innovation as well as to improve the incentives and institutional framework that facilitates the transformation of knowledge into new commercial technologies. The latter, however, is particularly challenging due to the lack of a strong culture of innovation in the business community and limited interest of universities on the third mission to date. A number of them, however, have recently started initiatives that appear to signal a change and a desire to revisit their role with regard to their contribution to Chile’s society and economic development. Over the last few years, a number of public initiatives have been put in place to support technology transfer and commercialization. Many of these initiatives are still at an early stage but an assessment of their preliminary impact suggests that changes might be necessary to enhance outcomes. Also, for the most part, these initiatives have emerged independently and thus the need to bring them under a common umbrella to enhance their complementarity and effectiveness and to secure a more systemic and coherent approach with wider coverage, both sectoral and geographic. The national innovation strategy provides an umbrella framework to guide the elaboration of a medium- to long-term plan to stimulate technology transfer and commercialization in Chile. The chapter that follows provides strategic directions and recommendations for the elaboration of such a plan. 22 Chapter 2: A Diagnostic of Technology Transfer and Commercialization in Chile Chapter 3: fostering Technology Commercialization in Chile: Options for Consideration Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration The previous chapter highlighted that technology a rationale for public intervention. Progress made by commercialization and the necessary institutions, more advanced knowledge economies, which was incentives and competences are at nascent stage in Chile. supported by public initiatives, also provides a strong Considering Chile’s current endowments and drawing argument for public interventions. Within about 10 to on other international experiences, the report proposes 12 years, Chile cannot only increase its R&D and human several strategic directions and recommendations capital for innovation levels, as committed in the to create a milieu in Chile that will be more prone to national innovation strategy, it can also narrow its gap technology transfer and commercialization (Figure (relative to OECD countries) on the efficiency of R&D use 1.1). Changing the culture and incentives of key actors relative to technology transfer and commercialization in the innovation system and building the necessary outcomes such as patenting and licensing and increase institutions and competences will be a long-term effort. As the Association of University Technology Managers (AUTM 2002) noted: Figure 3.1: Technology Transfer and Commercialization “commercialization of activities can take a significant in Chile: Recommended Areas of Policy Intervention amount of time…because of the time needed to develop a portfolio of intellectual property to license, build up a body of expertise and develop a culture IP management: improving institutions, regulations, practices of technology transfer within the institution—as well as giving licenses the time needed to develop Developing strategic partnerships for applications oriented research and market products.� Accelerating the formation of new technology companies The above also applies to other intermediaries in the Developing the necessary skills system such as public technology institutes and private specialist providers and to the need to change the Fostering technology extension services and stimulating its demand innovation culture of the business community. Nurturing universities “third mission� of contributing to economic development That said, progress can be made with strong public Fostering an innovative and entrepreneurial culture commitment and consistency in public policies. Change can start now. Market failures in innovation in Source: Authors. general, and technology markets in particular, provide 24 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration the number of knowledge-based firms (see Annex I for not only involve an increase in funding but also changes a set of indicative performance indicators).27 in incentives, funding reallocations and institutional building. Constant communication on the importance There is strong public commitment to increase funding of technology transfer and commercialization to Chile’s to stimulate innovation, but improvements in the competitiveness and celebration of successes will also technology transfer and commercialization system will be crucial to foster a change in culture at universities Figure 3.2: Building a Dynamic Technology Transfer and Commercialization System in Chile. Summary of Key Agents and their Functions. POLICY-MAKING PRESIDENT OF THE REPUBLIC Inter-ministerial Committee on Innovation National Innovation Council for Competitiveness • Developing and implementing policies on technology • Advising the President on technology transfer/ transfer and commercializacion commercialization strategy • Fostering high-quality teaching and reseach • Overseeing implementation and evaluating impact • Promoting entrepreneurship education • Advocacy role • Advocacy role Ministry of Education Ministry of Economy Others Ministries (Chair ICI) POLICY IMPLEMENTING CONICYT CORFO//INNOVACHILE NIIP AGENCIES • Funding for reseach • Funding for new knowledge enterprises • Efficient review/ • Advanced human capital • Strategic applications oriented reseach granting of patents Enforcement • Selected technology • Facilitating development of IP service providers • Contributing to Agency transfers activities* • Facilitating development of technology patent education extension providers • Stimulating demand INNOVATION AGENTS Technology Institutes Teechnology Broker Deal Flow Facilitators/Incubators l d d h • Appliied oriiented reseach i • IP management services Help transform technological ideas • Help transform technological ideas g (including collaborations S g g • Scouting technologies into commercially viable projects into commercially viable projects Universities with private sector) f for rms t i • Mentoring Developing human capital • Developing human capital Li i d • Licensing and spiin o s • Marketing locally k ti ll External networking • External networking Creating new knowledge • Creating new knowledge h l t i • Technology extension developed technollogies l p d h gi ( ng, ng (marketing, nacing and other) ) Transferring technology to the • Transferring technology to the productive sector and society productive sector and society Tech log Technology hnol g Venture Capitalist/ Venture Capitalist/ Extension Services Extension Services Ang l Investors Angel Investors TTO´s nd technology rms gy • Fund new technology rms Protecting and managing university • Protecting and managing university IP Counseling faculty/students • Counseling faculty/students on Oth Financial Intermedi ies Other i diari O her Financi l Intermediaries knowledge commercialization knowledge commercialization Financing innovation projects g • Financing of innovation projjects g • Facilitating reseach collaborations g with and consulting for businesses • Licensing and spin o s Privates Firms (Productive Sector) Privates Firms (Productive Sector) Develop g innovations p • Developing innovations g g • Collaborating with knowledge center Commercializing innovations • Commercializing innovations Source: Authors. *This would include inter alia collaboration with CORFO on strategic applications oriented research. 27 The human capital targets set for 2021 are (i) increase in the percentage of population between 24-34 with tertiary education from 18 to 35; (ii) an increase in IALS scores; (iii) overall increase in WEF’s Higher Education and Training index (currently on position 42); (iv) an increase in full time equivalent researchers from 18,500 to 50,000; (v) an increase in the number of Ph.Ds in science and engineering from 219 to 1579 per year. The R&D targets set for 2021 are (i) an increase in total R&D from 0.68 percent of GDP in 2004 to 2.3 percent of GDP; and (ii) an increase in private R&D from 0.25 percent to 1.23 percent of GDP. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 25 and the business community. The CNIC, the Inter- Thus, the monitoring and evaluation framework will be ministerial Committee of Innovation and other critical crucial in guiding the policy-making process. public funding agencies can all contribute to this important effort. The chapter proposes complementary interventions in seven key policy areas to build a more dynamic Increased funding will need to go hand in hand with technology transfer and commercialization system a strong evaluation framework, especially since policies (Figure 3.1), which are further discussed in the remainder and programs to foster technology commercialization of this chapter. The key agents of this system and their will entail learning and experimentation. Adjustments core functions are depicted in Figure 3.2 and the key in some of the programs are likely to be necessary, and public programs in Table 3.1 below (see also Annex I others should come to an end as market gaps are closed. with a matrix of recommendations). Table 3.1: Recommended Main Programs to Support Technology Transfer and Commercialization Innova Chile/CORFO Others IP-management • Program to develop a strong network of TTOs at research centers • Pilot program to seed development of private technology brokers • Enterprise innovation (including licensing in) • IP protection and commercialization • Awareness generation and IP education (in collaboration with NIIP) Development of strategic partnerships for applications oriented research • Consortia pre-investment and development (in collaboration with • Fondef (CONICYT) CONICYT) • Pre-competitive innovation Accelerating the formation of new technology-based firms • Strengthening of incubators • Pilot program to seed the formation of deal flow facilities • Early stage financing: seed capital, angel investor networks, early stage VC fund (public-private) • Programs to foster VC funds (public-private) Developing the skills base • Program to seed the development of university degrees in technology management and professional associations in the field Technology extension services • Program to develop and strengthen capacity of technology extension providers • Enterprise innovation Nurturing universities third mission • Direct budgetary transfers to research universities linked inter alia to performance on technology transfer (Ministry of Education) Stimulating an entrepreneurial culture • Awareness generation events • Program support to help integrate entrepreneurial education throughout various disciplines in higher education institutions (Ministry of Education) • Program support to help integrate entrepreneurial education at the secondary level (Ministry of Education) Source: Authors’ elaboration 26 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 3.1 Improving IP Management: Institutions, carry out the functions of finding technical solutions for Regulations, and Practices users, finding users for new technologies, and sometimes assisting with technology packaging. Technology Intellectual property is the bedrock on which licensing brokers may carry out some or all of these functions can take place and new technologies can be developed and they can range from Technology Transfer Offices and benefits captured by Chileans firms. Without IP (TTOs) of universities, research organizations and public protection, the benefits of commercializing innovation technology institutes to private entities and individual are limited, all of which leads to a reduced rate of technology transfer and licensing consultants. innovation effort with the associated adverse impact on productivity, competitiveness and growth. All forms Technology transfer offices. There is a need to rapidly of intellectual property (patents, copyrights, designs, develop an effective network of TTOs and upgrade the trademarks, and plant breeders´ rights) can be licensed. coverage, quality and depth of services provided by the IP management, however, is a complex process that currently existing TTOs to help the academic community can only thrive if there is a supporting institutional and with IP management and foster knowledge transfer regulatory milieu, and financial support. Government generated at universities. This can include analysis of support for developing such a milieu is justified because new inventions, filing of patent applications, protecting of the extensive market failures associated with the and maintaining IP rights, and licensing of IP. TTOs can theme of knowledge. also provide assistance with the formation of spin off companies. In addition, TTOs can play an important role In the case of IP management, competences in Chile in as articulators between the knowledge and the business the private sector, government agencies, universities and community, e.g., by providing consulting services and public technology institutes are at an early development training, and facilitating technology solutions to the stage because these matters have not received much business community. attention and support in the past. The need arises to expand competences and improve incentives in this area Strengthening the capacity of TTOs demands a pragmatic by (i) promoting the development of key intermediaries approach given the small IP market by global standards. or “technology brokers�, (ii) stimulating the demand The small scale issue could be addressed through the for IP services, (iii) improving the efficiency of public development of a national network of TTOs that serves institutions responsible for approving, registering the academic community rather than only those who are and enforcing IP rights, and (iv) signing of critical IP employed by a single university as implemented in other international agreements. This section discusses possible countries that have sought to overcome the lack of critical public interventions to facilitate this process. The above mass (Box 3.1). In part this is a pragmatic response to needs to take place in an environment where universities the current scarcity of experienced professionals in this embrace collaboration with the business community field in Chile, but it is also a response to the permanent and contributing to economic progress (third mission) challenge of the IP world where costs outweigh revenues as an integral part of their mission. The range of tools in all but a very few institutions around the world even that the government of Chile can use to encourage the though the management of IP has been widely adopted faster adoption of the third mission merits a separate internationally. The issue of critical mass is particularly discussion (see section 3.6). relevant in Chile where R&D capacity is thinly spread outside the metropolitan area. It seems appropriate to IP intermediaries and “technology brokers� develop a small number, say about two (or three) TTOs in the non-metropolitan regions and a similar small Successful commercialization of technology in Chile number in the metropolitan area. Each of these offices requires the establishment and strengthening of can develop a service offer for all the universities in their linkages between technology developers and those who regions and develop specific specializations that are commercialize it. These linkages are generally referred offered across the network in a cooperative manner. to as technology brokers. In the broadest sense these Public technology institutes could join the TTO network professionals or organizations are intermediaries who most closely linked to its core business. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 27 Box 3.1 International Experiences with Networks of Technology Transfer Offices Many research universities in OECD countries are pursuing alliances as a means to offer technology transfer services in a sustainable manner. The cases of the University of London and the University Technology Enterprise Network (UTEN) in Portugal are illustrated below. The University of London has large research intensive colleges – Imperial College and University College - with yearly research budgets exceeding US$150 million and each has its own technology transfer office. The next tier of colleges in terms of size of research budget - including Kings College and Queen Mary College plus two others – have created an alliance called SIMFONEC. This alliance offers a full range of technology transfer office services to four colleges, each of whom has a significant research budget but insufficiently strong to sustain a full high quality service. Being within the same federated university and the same metropolitan area eases communications between the partners, but detailed regulations and rules of engagement have been put in place to ensure that the individual colleges and their academics receive the services needed. UTEN in Portugal took the process a step further by planning to build an integrated national system of technology transfer offices to support all the country’s research universities. The initiative was launched by the Ministry for Higher Education and Science as part of a broader strategy to increase the quality and research orientation of the universities through strategic alliances with prestigious research groups in leading global universities and research centers, especially in the United States. Alliances are being built inter alia with Harvard, Carnegie Mellon, and the University of Texas, Austin. The UTEN component draws on the expertise in technology commercialization at the University of Texas, Austin, and the Austin Technology Incubator and IC2. The strategy includes upgrading professional skills and exchange of personnel to achieve international connectivity as well as leaven experiential competences. The University of California, a multi-campus university, also set up its TTO as a centralized structure serving all of its campuses spread throughout the state. Over time, as the demands and business opportunities at the local campuses have increased substantially, many functions have been devolved to the local campuses while the central structure has remained responsible for overall coordination. Source: Cunningham and Harney (2006) and authors. One major challenge under this approach will be to networks are critical for identifying technologies and arrange accessibility across the partner institutions for finding users for technologies developed in Chile. all academic and research staff to the services that may not be located in the university where they work. An Recommendation: The government through InnovaChile adequate design together with financial incentives can could launch a program to promote the formation of a act as a powerful lever to secure that cooperation. A strong network of TTOs within the next one to two years. second challenge will be to agree on the distribution The following could guide program development. of risks and rewards for the combined operations in a • The program should envision a move and way that respects the rights of all the individual parties commitment towards the sustainability of these involved. It would be desirable for the network to have offices understanding that this process could take 7 a clear duty of active outreach to all R&D performing to 10 years. That said, it should target sustainability units as well as the business community, not least to from its inception to prevent the problems identified promote the use of IP as a key part of all research with other public initiatives. programs. Finally, this network will not be successful • The program could invite the TTOs to prepare a long- unless it overcomes the problems identified in the term development plan with clear impact indicators previous chapter of limited skills and insufficient staff, (see Box 3.2 below for illustrative purposes on lack of commercial orientation, limited funding for legal, intermediate- and long-term impact indicators). consultancy and travel expenses, and limited networks • It could support skills development, network building of contacts both at home and abroad. International at home and abroad, and outreach activities, and 28 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration could possibly finance the hiring of critical specialists As highlighted earlier, the TTOs can only thrive in a that are currently missing (including professionals university milieu that considers technology transfer with marketing skills) and specialized consultants and commercialization as a legitimate responsibility and other necessary operational costs on a declining and fosters it. While a range of interventions can be basis. used to encourage the third mission, the development • The temporary subsidization of critical staff and other of a code of practice on IP management seems to be operational costs appears necessary considering a priority and a highly complementary instrument to that it will take time for the demand of IP services the TTOs strengthening program. Currently, IP policies to expand in Chile and the lag between IP service and practices differed markedly across universities provision and revenue generation. At the same time, and only a few have incorporated policies commonly the lack of quality services for IP management will accepted in advanced knowledge economies. The stifle demand growth. code would be adopted on a voluntary basis but, if • The program could be implemented in phases, e.g., widely used, it would facilitate mobility across the two phases, where access to the next phase would academic sector; would overcome a tacit barrier to be subject to satisfactory performance during the multi-institutional collaboration; and would also previous one according to pre-defined indicators, enable a more business like approach towards work e.g., patents filed and granted, clients served, conducted with consortia involving several universities licensing agreements reached, and revenues raised. and businesses. Box 3.2 Technology Transfer Performance Indicators* License agreements: • No. of licenses executed (exclusive/non-exclusive).** • No. of licenses that included equity. • No. of licenses active on last day of fiscal year. • No. of licenses executed in fiscal year licensed to start-ups. License income: • No. of licenses yielding income in fiscal year. • No. of licenses yielding running royalties. • Total license income of the institution (% attributed to running royalties, cashed-in equity, license income of all other types). Patent-related activity: • No. of invention disclosures received.** • Total patent applications filed in Chile and US.** • No. of patents issued in Chile and US.** Start-up companies: • No. of start-ups during fiscal year that depended on licensing of institution’s technology. • No. of start-ups during fiscal year where institution holds equity. • Level of investments achieved by the aforementioned start ups Licensed technologies, post-licensing activity: • No. of licensed technologies that became available for commercial or consumer use during fiscal year. Other: • Income from negotiating new research agreements and other non-licensing duties.** *Indicators are best measured as percentage of research activities conducted at the knowledge centers forming part of the TTO network. **These could also apply as intermediate indicators. Source: Association of University Technology Managers Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 29 Recommendation: Within the next one-two years, the portfolio. This is not unusual since private technology CNIC could spearhead the development of such a code brokers tend to be active in countries with very dense with collaborations from the Ministries of Education and R&D activities, extensive protection of IP rights and IP Economy, the academic community and international management’ skills and culture, and strong demand experts with experience on IP management in universities. for innovation by enterprises--conditions that are not Inputs could also be sought from the commercial yet in place in Chile. The United States is the country community as the expected outcome is clarity in how to with the most developed market of technology brokers; handle opportunities for commercialization and on the several private technology brokers are also quite active responsibilities of the various parties involved. Similar in a few other countries such as the United Kingdom. codes have been developed in other countries. For Given Chile’s commitment to innovation and plans to example, the Government of Ireland in consultation with boost firms’ demand for R&D and technology services, stakeholders developed a Code of Practice for Managing it is rational to consider a pilot program to jump start Intellectual Property from Publicly Funded Research (Box the development of private technology brokers as 3.3)28 and a Code of Practice on the Management and part of a comprehensive technology transfer and Exploitation of IP arising from Collaborative Research.29 commercialization strategy. See section 3.6 for a further discussion on policies and instruments to nurture universities’ third mission. How can the government jump start the development of a private technology market? Developing a technology Private technology brokers: There is a need to market in Chile will prove challenging, but the experience encourage the establishment of private intermediaries of private technology brokers in other countries offers who have IP management as part of their core services, some guidance in this regard. complementing the initiatives of other technology intermediaries such as TTOs. These technology brokers • First, the number of active technology brokers in Chile could help find technical solutions for users, find users for is likely to be small, even after considering Chile’s new technologies, and sometimes assist with technology ambitious strategy to boost R&D and innovation. packaging. In some cases, these specialist providers The university research community will rely to a large also engage in business development from patents and extent on their own TTO networks, while enterprises other activities.30 Chilean firms and consortia conducting use both external services providers and their own R&D, for example, would benefit from the services of networks for IP commercialization services. The such specialist providers since they would help reduce experience of more advanced knowledge economies information asymmetries and transaction costs and also indicates that only a small subset of enterprises increase the chances of successfully commercializing seeking to upgrade their technologies engage in new technologies (licensing out). It would also expose technology licensing (Figure 2.1). Most firms that want these R&D groups to a wider range of cutting-edge to upgrade their technology approach engineering technologies that complement technologies developed firms that focus on their sector for a packaged in-house, possibly leading them to license in some of solution including capital goods embodying improved those technologies. Technology brokers could also assist technologies; firms seeking IP solutions tend to be a Chilean firms with weaker technology competences gain small subset of this larger body of firms. access to new knowledge and to improve their products • Second, firms that are most successful in IP or enter into new product markets by licensing in commercialization tend to combine external technologies and adopting new technology packages. services with some internal IP management capacity (Lichtenthaler et al. 2008). Seemingly, there is only one firm currently engaged • Third, recent attempts to overcome imperfections in exclusively in IP commercialization with a limited business technology markets through internet marketplaces 28 http://www.forfas.ie/media/icsti040407_ip_code_of_practice.pdf 29 http://www.forfas.ie/media/acsti051125_ip_code_of_practice.pdf 30 The experience of more developed technology markets indicates that the extent of functions covered by technology brokers differs. Most brokers are mainly engaged in patent processing, IP consulting and transactions, and licensing services. A few also engage in other activities, for example, more downstream activities, business development from patents, IP merchant banking, or patent portfolio building. 30 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration for technology have not succeeded (Lichtenthaler et a result, these enterprises are transforming their al. 2008). These platforms were passive by nature business model combining their internet platform and failed to provide potential licensees with more with far more active services. custom-made solutions to their technical needs by • Fourth, the origin of such market intermediaries contrast to more traditional technology brokers. As has been very diverse (Benassi et a. 2009).31 In Box 3.3 The National Code of Practice for Managing Intellectual Property from Publicly Funded Research In 2004, the Irish Council for Science, Technology and Innovation issued a national code of practice for managing intellectual property from publicly funded research. The code was built on a national consensus among stakeholders and designed as a user-oriented framework. It explains general principles for managing IP and entails tools for implementing those principles in Public Research Organizations (PROs). The code is embedded in Ireland’s wider technology-commercialization context. The code of practice was developed by consulting a wide variety of stakeholders. Stakeholders involved included, for instance, funding bodies, public research organizations, university management, technology transfer offices, the venture capital community and industry representative groups, as well as entrepreneurs, Irish companies and multinational companies based in Ireland. This participatory progress led to a common understanding on the code. In consequence, the code was widely endorsed by both, government and private sector bodies. Adoption of the code is voluntary. The code emphasizes the responsibility of the public research organization (PRO) to commercialize technology arising Principles for Managing IP from Publicly Funded Research from publicly funded research. It embeds IP in the overall effort to commercialize technology. It is recommended IP Management Activities that the PROs ensure -- where practicable -- that adequate and Commercializacion resources are provided for commercializing technology. Commercialization should be incorporated into the PRO’s IP Management Identi cation of IPR and strategic planning. Strategy IP Education Ownership The code contains 12 principles (see graph). Half are IP Management/ Disclosures Sharing of dedicated to IP management and commercialization Technology the Bene ts activities. Other principles focus on IP strategy and Transfer O ces Evaluation Con icts of technology transfer offices, as well as ownership, sharing Interest of benefits, conflict of interest and monitoring and evaluation. The code defines general guidelines for actors’ Protection Monitoring and Evaluation functions and general procedures and processes to be incorporated. For example, the principle “IP management Commercialization strategy� suggests that technology transfer offices should be established to help carry out this function. Technology transfer offices are encouraged to define and publish their Miscellaneous Reseach Materials mission priorities and policies. It further explains that the responsibilities of the technology transfer office should include (i) identifying, evaluating and protecting IP; (ii) advising on commercial and IP issues in research contracts; (iii) planning and executing commercialization strategy; (iv) marketing inventions; and (v) negotiation exploitation and other technology transfer agreements. Overall, timeliness, confidentiality and effectiveness are recurring themes through all 12 principles. In a separate implementation section, the code contains concrete advice and references materials for carrying out the principles. For each principle, the section provides necessary background information such as legal information, templates, check-lists, and key reference material. The “Monitoring and Evaluation� section, for example, presents a set of indicators. Source: http:/www.forfas.ie/media/icsti040407 ip code of practice and authors. 31 There are no complete databases on technology brokers even in those countries where they are more developed, such as the United States or the United Kingdom, but a few surveys of technology brokers have been recently conducted (see Benassi et al. 2009). Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 31 some cases, the venture founders come from IP substantial promotional activities. (The basic subsidy, management units of universities, public technology for example, could cover a percentage of costs institutes or private enterprises. In other cases, for related to training, networking development and example, the founders were entrepreneurs who promotional activities and, to be refunded, the broker went through the process of commercializing their would have to show progress against indicators own technologies and recognized the benefits of agreed in the initial business plan. Alternatively, it establishing technology intermediaries to fill clear could be a percentage of services provided such market gaps. as patents processed or value of assistance with • Fifth, the degree of sectoral specialization among technology packaging.34) The performance based fee brokers varies—some are focused on one or two would be linked to successful IP commercialization industries, especially when the industries are very transactions (e.g., 10 to 15 percent of the licensing complex such as electronics and ICT, while others agreement)35 encouraging the provider to actively cover a wider range. seek successful deals. • The program would define rigorous selection criteria Hence, jump starting the development of a technology that would concern inter alia the team’s experience, market with private intermediaries is likely to entail knowledge of Chile’s priority clusters (as defined in the interventions to stimulate both the supply and demand national innovation strategy), quality of the business sides. (The latter is discussed in the following section). plan, and local and international networking capacity. • The selection criteria could regard favorably On the supply side, InnovaChile could launch over the collaborations with established international brokers next one to two years an open competitive process to so that providers have strong access to international select a few (two or at the very most three) potential technology networks and a solid base in knowledge technology brokers that would benefit from a temporary processes and IP commercialization from the start. subsidy until the market has sufficiently developed to InnovaChile could review the performance of the make them viable. Chile’s technology base is too small provider against agreed outcomes in the business to support too many (two or three) agents, and for plan on a yearly basis and withdraw support if the program to be successful the approach has to be performance were inadequate. pragmatic. The following guidelines could be considered • From an evaluation perspective, the program could for program design. monitor progress made in terms of (i) patents • The program could cover about 5 years, and the processed, (ii) value of assistance provided with subsidy could comprise two components: a basic technology packaging, (iii) number of licensing subsidy and a performance-based component.32,33 agreements successfully reached and value of those Private technology brokers typically operate on a agreements, and (iv) new products developed or combination of flat fees and success fees since many processes changed by beneficiary companies due to transactions never result in complete deals. The licensing in of new technologies. success fee is usually a percentage of the value of the licensing agreement (5 to 15 percent). Fostering greater IP awareness and stimulating • The basic subsidy could cover some of the initial the demand operational costs given that it will take time and resources to stimulate the demand and there will Generating awareness and education on IP rights and be a need for the technology broker to conduct management would be of great value given the limited 32 The basic subsidy could also be linked to some intermediary performance indicators, e.g., promotional activities, patents processed, etc. 33 The performance based component could be a percentage of the (net present) value of the licensing agreements. Typically, licensing agreements have an up-front fee and yearly royalties. 34 The two approaches present trade offs. The first approach would be simpler to estimate. In the second case, the subsidy would be more closely linked to some intermediate performance indicators but it would be difficult to estimate. For example, InnovaChile would need to predefine the value of assistance for technology packaging (which would be very difficult) or the provider would have the incentive to artificially boost the price of such assistance. 35 This could be estimated on the basis of the net present value of the licensing agreements since such agreements typically have an up front and a royalty component. 32 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration understanding by the research, business community and that applications to the patent program be submitted the public on the matter. The CNIC could spearhead this by certified providers (instead of the final beneficiary) effort in collaboration with the Ministries of Economy should be evaluated since the former approach could and Education, the National Institute of Intellectual render the final beneficiary captive to the service Property and public funding agencies (CORFO and provider, regardless of service quality. CONICYT). It could comprise inter alia seminars for the business community and researchers with media Enhancing the capacity of institutions responsible exposure, regular articles in the press and specialized for IP granting, registry and protection technical journals, as well as dissemination of successful cases. Educational and promotional activities will be a IP granting and registration: The transformation of long-term effort but can be started now. the Department of Industrial Property into the National Institute of Industrial Property, a decentralized agency These efforts can be complemented with more specific with its own budget and more operational flexibility, interventions to stimulate the demand. Such support constitutes a positive step. The challenge is now to for the demand side can be temporarily justified on develop an institution with the capacity (skilled staff, the basis of information asymmetries and the limited IT systems, and international networks) to operate understanding of IP protection and commercialization according to best international practices within a 5 to benefits and credit access constraints. The Enterprise 7 year period. Most countries have made great strides Innovation Program and Industrial Property Rights in recent years in making patent examination more Program (Table 2.3), sponsored by InnovaChile, are transparent and in providing electronic access to files, already available to stimulate the demand for IP services, and patent applicants in Chile could have access to but there seems to be inadequate knowledge of them. similar systems. It is essential for patent applicants, their More dissemination appears necessary and the scope of advisors and attorneys to be able to search published activities supported can be improved. patent documents, the registers of filing and other details concerning the progress of filed patents, and to In particular, the Enterprise Innovation Program determine whether a patent remains in force. The time includes a financing line to support activities related to approve patents can be reduced substantially (from to licensing in, and the Industrial Property Rights’ about 5-6 years to less than a year on average) in line Program could be revised to better match funding with international standards. support for patents to projects’ needs and expanded to cover licensing out activities.36 Currently the Industrial To this end, it would be desirable for the National Institute Property Rights’ program extends patent funding for of Industrial Property (NIIP) to formulate a comprehensive up to 5 years even though it is difficult to know up institutional development plan. The Ministry of front the project’s viability and in which countries the Economy could play a vital role in providing guidance to patent should be filed. The funding could be extended the plan and monitoring its implementation. The plan in two phases in line with the project’s evolution. For would need to give priority to filling critical technical example, a patent funding scheme run by Enterprise capacity gaps observed in the past; accelerating process Ireland provides an initial sum of about US$25,000 automation initiatives; building international networks; to fund a Patent Cooperation Treaty application and and promoting IP education. Staff training could include related legal work. This 100 percent funding takes internships overseas in similar agencies. Similarly, it would the project to a stage 30 months down the road from desirable for education and promotional activities to be initial patent filing. At this stage, the project is assessed coordinated with other public funding agencies such as and 50 percent grant support can be made available InnovaChile, which are also involved in stimulating the IP for patent filing in countries that can be justified by demand. The institute’s development plan would benefit a well developed business plan and some evidence from clear performance benchmarks--both intermediate of commercial progress. In addition, the requirement progress indicators (e.g., increased competencies of staff, 36 The program, for example, could extend matching grants of up to 50 percent of licensing out costs, but these would be repaid when outcomes are successful. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 33 IT systems in place, educational activities implemented) stage. The most common and visible elements of it are and medium term indicators (e.g., time to examine the technology institutes, which have shown an uneven and grant patents and user satisfaction with services). performance, and the research consortia between Adequate funding of the institution will be necessary to universities and the business community that have been support these efforts and attract and retain competent set up over the last few years. This section proposes and specialized IP staff. recommendations for expanding the capacity and impact of strategic partnerships for applications oriented In the medium term, the integration of all IP registry research, where the (public) technology institutes functions under the National Institute of Industrial constitute a special case. The technology institutes Property, including functions currently entrusted to the need to move towards becoming entities that conduct Ministry of Education and the Ministry of Agriculture, applications oriented research and transfer it to the could be considered. Such integration would allow a productive sector in different forms (inter alia provision more effective use of scarce IP resources and benefit of consulting services, technology packages, licensing from economies of scale in the development of necessary and spin offs) and incorporate greater participation from international linkages. the productive sector in their boards. IP enforcement: Enforcement of IP rights is essential Strategic partnerships led by the business for the public to respect them and for the business and community: The research consortia between research community to value them. Thus, the process universities and the business community launched of strengthening the capacity of customs and the over the last few years took time to develop but have Investigating Brigade for Economic Crimes (Brigada provided a useful learning experience. The experience of de Investigadores de Crímenes Económicos) on IP consortia has reached an important stage where some enforcement needs to continue. In addition, penalties of them recognize the merits of sustainable programs of may need to be revised to act as effective deterrents. applications specific R&D to address challenges in their These two matters, while necessary, are beyond the clusters. The requirement to establish a legal entity has scope of this report. provided a foundation upon which a sustainable effort can be built. In particular, this requirement induced the Accelerate signing of international IP cooperation parties to face the often difficult issues of collective treaties decision-making and sharing of value created from R&D outcomes, before launching their consortia. The endorsement of the Patent Cooperation Treaty in March 2009 will reduce costs and complexity of filing Nurturing and consolidating the best of these patents in more than 140 states. Similarly, adherence to experiences, especially those that are closely linked to other important cooperation treaties such as the Madrid Chile’s economy, and building new research capabilities Protocol for the International Registration of Marks dedicated to other key clusters is the next step along and the Hague System of International Registration of this road. Public funding for the first such consortia Industrial Designs, which would simplify registration of will come to an end within about one-two years. marks and industrial designs, could be achieved within Thus, a new public program to foster longer-term the next few years. strategic alliances between the business community and knowledge centers could be launched within the 3.2 Developing Strategic Partnerships for next one-two years providing continuity to the best Applications Oriented Research performing ones. Public support for existing consortia needs to be selective and support for those with weak The second key area of intervention concerns the performance, lack of critical mass or poorly connected promotion of strategic partnerships that pursue a to the productive sector would need to be phased out. medium- to long-term research agenda relevant to the international competitiveness of priority economic clusters. Based on the lessons learned from the current consortia So far in Chile, this strategy is at an early development operating in Chile and other international experiences, 34 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration it would be desirable for the next program to consider the consortia would need to commit to such policies. the following guidelines. (See for example the experience of Australia.) • Clear corporate governance with a majority of Board First, the new effort should move from the present “R&D members from private businesses who are members project� culture to a sustained long-term effort with or users of the organization and with transparent dedicated teams employed permanently on the work and regular reporting both to build the history of (i.e., the building of long-term applied research and successful cooperation and to report on the use of technology platforms). This will require the following; public funds. • Strong alignment to priority economic sectors and • Organizational goals and management culture that building of critical mass (including collaboration by emphasizes becoming the best in the world to sustain several knowledge centers) to be competitive on a the competitive advantage of member companies as global basis. The merger of smaller research projects they have to face increasing competition. with duplicative or complementary objectives could • Scholarship programs to attract young talent at early be encouraged. stages in their careers so seeding the future cadre of • Majority funding from the private sector partners in advanced researchers working closely with business the consortia, coming from a membership charge, on high quality research. fees for services or an endowment, or from all three sources. This is also consistent with the broader Second, the participation of leading international policy priority of expanding the level of privately research centers in the consortia alongside Chilean funded R&D in Chile. universities and public technology institutes would • Sustained support from public budgets to encourage be highly desirable linking Chile to cutting-edge some R&D work of a longer term nature but of a knowledge. In critical S&T areas with research capacity sufficiently low proportion of total R&D investment shortages, consortia members could consider attracting (e.g., 10 or 20 percent over the medium to long highly recognized researchers to lead the strategic term) so that it does not compromise the private alliance team. The public funding program to foster ownership and service culture in each consortia. strategic alliances could include resources for such However, given Chile’s limited consortia experience initiatives along with the provision of scholarships to and coordination failures associated with bringing seed the future cadre of Chilean researchers in the field. together business and researchers that have not Countries such as Singapore and Malaysia have similarly worked together before, it may be desirable to invited leading international researchers in those S&T provide a higher share of public funding in the short areas where they lacked the capacity and felt the need term but reduce it towards 20 percent in the medium to built local capacity in an accelerated manner. to long term. • Public financing commitment for at least 10 years. Third, in some clusters, there could be a need for the Financing could be provided in phases, e.g., two strategic alliances to conduct both R&D as well as to phases, and funding availability for the second phase provide more basic, yet important, technology extension would depend on satisfactory performance during services for those small and medium enterprises (SMEs) the first phase. with less technology competences to avoid spreading • Concentration of research talents into permanent limited capacities. The approach to be followed would teams with a sufficient critical mass to offer depend on the cluster structure and technical needs. continuity, and in appropriate instances, a more Public funding programs would need to provide the permanent research institute with advanced financing incentives for the strategic alliances to cover equipment and pilot plants available for multiple such activities and provide services to a larger group of users. (For example, a pilot plant facility in support users, rather than limit service provision to core funding of food and nutrition has already been identified.) members. The public funding agency would need to define policies for the maintenance and open use of large Fourth, it would be desirable to integrate all initiatives scale equipment and pilot plants, and the parties to for promoting large-scale strategic alliances between Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 35 the business community and knowledge centers under Research Act was passed after these two centers were a single program and a single institution to avoid initiated to legitimize and govern the practice for co- duplicative efforts. Given the commercial orientation that operative research37,38. The legal revisions incorporated a needs to underpin these alliances, InnovaChile might be definition of pre-competitive research (generally defined better suited to lead these efforts in collaboration with as that which precedes the stage where technologies other public agencies of the national innovation system, are embodied in products or services) as legitimate areas in particular CONICYT. for co-operation between firms. Inevitably, there were grey areas in the boundary between pre-competitive Fifth, given that the best S&T capacities of Chile would research and product development, especially for those likely be associated with the consortia, it would be firms in SEMATEC that were developing technologies crucial to have a technical review process comprised of for the Department of Defense, which was one of the international experts. The experts would need to review shareholders of the consortium. the technical merits but, most importantly, the relevance and potential impact to the industry. Eight, both communication between the consortia research teams and the member companies and Sixth, monitoring indicators could include some knowledge of IP management need to improve. intermediate progress targets such as number of (i) Communication practices among consortia have member firms, (ii) financial resources committed by varied hugely and much more attention is needed to the firms, (iii) number of participating knowledge ensure efficient dissemination and receptiveness of centers, and (iv) advanced human capital trained, and member companies to the output from pre-competitive longer-term impact indicators could include (i) patents programs. Similarly, awareness and capacity of IP produced, (ii) value of licensing agreements, (iii) spin management differs markedly among consortia. The offs, (iv) new products and processes by member firms, active engagement of technology ambassadors and and (v) impact of these on firms’ performance. brokers becomes important to address both of these issues – whether they are inside the consortia, inside Seventh, it could be necessary to review the anti-trust the member firms or independent service providers. policy framework before such strategic alliances become Again, Chile could benefit from examining advanced embedded in Chile. The anti-trust policy framework consortia practices in other countries and consortia seeks to protect consumers’ interests by ensuring that staff could conduct an internship in well established collusive anti-competitive practices between firms are consortia in OECD countries, e.g., Australia, to learn illegal and fosters a strong competitive supply of goods in a practical setting how consortia manage IP issues and services. Cooperative research, however, is by and disseminate outcomes among members. The gap in definition collusive among firms with common interests, technology management and IP protection skills within and thus the legal framework needs to determine how the consortia is common to other institutions such as far co-operation should be allowed. TTOs deserving a more systemic approach as further discussed in section 3.4. Similar issues were faced in the USA when the pre- competitive research agencies in micro electronics, Finally, funding to large scale strategic alliances like SEMATEC and MCC were established in Austin, between industry and knowledge centers would need Texas, to undertake pre-competitive research to meet to increase substantially to have an impact, but it should the competitive and security challenge from Asian not totally replace other smaller initiatives that seek producers. These agencies focused on developing the to foster applications oriented research, for example, next generation of technology platforms and tools that FONDEF and the Pre-competitive program, sponsored could be used by all the consortium members for their by CONICYT and InnovaChile, respectively. These next generation of products. The National Cooperative programs support universities and other knowledge 37 See Gibson et al. (1994) for further information on MCC. 38 The National Cooperative Research Act of 1984 was amended in 1993 and renamed as the National Cooperative Research and Production Act. See http://www.usdoj.gov/atr/foia/divisionmanual/204293.htm for further information. 36 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration centers in the implementation of smaller scale projects formulation of a new medium-term strategic plan closely with direct applications to the productive sector. That linked to their core mission and to the current challenges said, these two programs could be operated in a more faced by Chile´s most promising agricultural clusters and integrated way to avoid duplicative support and more the mining sector. The institutes’ performance targets closely linked to priority clusters. In funding terms, its could include inter alia sale of services to the productive relative weight should be smaller than that of large scale sector; pricing policies; number of patents and licensing strategic alliances. The reverse was true in recent years. revenues; and participation in high impact collaborative research with the productive sector. Changes in human Enhancing the impact of technology institutes: The resource policies appear necessary so the institutes can performance and impact of Chile’s public technology retain qualified staff, and early separation packages institutes can be enhanced. Prior to devising a strategy could be necessary in some circumstances to accelerate for them, it is important to distinguish between (i) the renewal of human resources. those whose primary public mission is to contribute to technology transfer and (ii) those whose primary public The institutes´ funding incentives can be strengthened mission is to generate information on natural resources as well. International experience points to a decline in and other issues of national strategic interest as well as direct budget funding as percent of the total budget to develop standards for producers and consumers in and increased share of revenues generated through those areas. While the latter set of institutes can fulfill an direct sale of services and competitive means with the important public service, it is the former whose mission is dual purpose of promoting excellence and motivating more closely related to the objectives of this report. These relevancy. Base financing (e.g., 30-40 percent of total two distinctive missions have often been confused. financing) would still be necessary to provide some stability and allow the institutes to engage in longer-term Fundación Chile, INIA and CIMM are three institutes intelligence services and applied research, anticipating whose primary mission is more closely linked to sectoral needs, and possibly finance pilot plants as well. technology transfer. Fundación Chile has shown a better Based financing, for example, could be estimated on performance but faces the challenge and opportunity of a 10-year framework with a 5-year renewal process continuing to advance the technology transfer frontier conditioned on satisfactory performance. and helping to fill crucial technology market gaps. Over the years, it has become engaged in a growing number To enhance the governance of these institutes, the of sectors but, in the future, it could be desirable for the CNIC has proposed the creation of a special technical institute to have a greater focus which would allow it to committee (SNITEC) that would be responsible for attain deeper technical expertise in its priority sectors of providing strategic direction, signing performance intervention. An increase in its endowment fund could agreements and monitoring their implementation, and be necessary to achieve these challenges. appointing the institute’s director and board members, including appointments to Fundación Chile´s board that The other two institutes could benefit from more correspond to the public sector. The committee would fundamental changes. The institutions could further be accountable to the Inter-ministerial Committee on enhance their “intelligence services�, quality and Innovation. The ample participation of representatives relevancy of research, commercialization of research from the private sector in the boards of the technology outcomes, and provision of new technology packages. institutes would be much desirable to foster relevancy. Improvements in these areas will imply (i) greater Overall, the proposed framework could provide a collaboration with the productive sector to help identify long-term vision for the institutes, define performance sectoral priorities and increase the relevancy and standards and put in place an independent mechanism for impact on technology transfer; (ii) important changes monitoring outcomes over time, which could stimulate to the governance and funding framework; and (iii) the change.39 This framework presents some challenges, 39 The CNIC has suggested a similar governance framework for the other public technology institutes which would be mainly geared to the generation of information on natural resources and other issues of national strategic interest and the formulation of standards for producers and consumers in those areas. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 37 however, since the institutes would still report to their The particular set of firms that are most relevant are traditional ministries that would be responsible for their those that are “born global� meaning that they target yearly budgets. This dual responsibility could generate a high value international market from their inception. some tensions or a principal-agent problem. These firms have different needs to the traditional start ups which only address the local or national market, Alternatively, the institutes could report to their traditional and the incubation strategy needs to emphasize the ministries which in turn form part of the Inter-ministerial package of services that address the needs of these Committee on Innovation. The institutes’ directors and firms especially when linked to priority clusters. In Chile board members, strategic plan, and budgets would be the nearest to this conception is the Octantis incubator proposed by the corresponding ministry but would be which also adopts the label accelerator since it supports subject to validation by the Inter-ministerial Committee firms with high growth potential move to a faster on Innovation. The SNITEC could still be appointed as a growth path. Other good practices have emerged, for high-level technical committee accountable to the Inter- example, in 3IE with a focus on faculty and student ministerial Committee on Innovation and responsible entrepreneurs and in Fundación Chile with an emphasis for providing guidance to the Committee on the future on international search for innovative technologies to development of the institutes and overseeing progress. underpin the formation of new local businesses. The full deployment of a new governance framework The key in all of these examples is that incubation is would entail legislative changes, but the process of change a much wider process than an incubator and really could begin now. In the short term, the Government revolves around the entrepreneur and the business idea of Chile could set up a special technical committee by rather than an incubator building. Assistance packages decree, and performance agreements could be signed to these fast growth and born global firms are usually in between the corresponding ministries and the institutes the area of early stage finance and venture capital and subject to approval by the Inter-ministerial Committee stimulating the deal flow and incubation process. While on Innovation and prior review of the aforementioned the primary emphasis of the incubation process should technical committee. To enhance accountability of the be on born global companies with greater potential, institutes, performance agreements and SNITEC´s reviews support can also be adapted to new knowledge-based on progress achieved could be made public. ventures with a more national or regional focus. 3.3 Accelerating the Formation of New Early stage finance and venture capital Technology Firms Articulation of funding through the various development The third pillar of a technology commercialization stages of new technology firms is a challenging process strategy concerns the formation of new firms based worldwide and even more in Chile as discussed in the on the findings of R&D work. These firms are rooted previous chapter. New technology firms in Chile, as locally and provide a clear and visible demonstration of in other countries, are finding the biggest financing the personal and broader economic return that can be constraint in the early stages when the firm is exposed derived from the application of knowledge. to the highest technical and commercial risks and the experience of the entrepreneur is still limited. Some This strategy has received considerable attention and progress has been made in Chile in the development resources in Chile over the last few years. Unfortunately, of angel networks, although this has been slower than the attention has been focused on incubators based ideal not least because of the detailed requirements to predominantly in universities rather than the incubation access the scheme. Even though this activity is riskier process so it has not been successful on a broad enough than that of existing venture funds, the latter benefits scale to achieve the desired significant effect. However, from fiscal incentives while the former does not. Early a few of them, inter alia Octantis and 3IE, are examples stage funds are still scarce in Chile and more efforts are of good practice that can provide the foundations for needed to overcome this as a barrier to new technology the next initiatives. firm growth. 38 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration The 2007 amendments to the capital markets law the academic community, as mentioned in section 3.5. provide an opportunity for CORFO to engage more In addition, there is a need to put in place facilities to actively in the promotion of early stage financing as assist new business ideas move forward to the stage many other OECD countries have been doing over where they are ready for investment which is a lot more the last two decades. Within the next three years, challenging than drafting a convincing business plan. CORFO could sponsor a pilot private-public technology venture fund primarily focused on early stage finance.40 As a first step, InnovaChile is starting to formulate a The pilot would provide a demonstrative effect and program to benchmark incubators in terms of capacity42 encourage similar initiatives by the private sector in the and outcomes (such as successfully graduated future. A direct participation of CORFO in the fund and incubators, their sales and exports) as a means to its governance might be more effective in steering the encourage improvements in their performance and to fund towards technology and early stage finance as link its financing support to performance to overcome opposed to the current CORFO schemes which extend gaps in previous support initiatives. The benchmarking financing to venture funds through credit lines. For the process should distinguish among those incubators with most part, these venture funds have focused on later a focus on born global ventures and those with a more stages and only a small share of their portfolio supports national or regional focus, given differences in services knowledge-based firms. CORFO could place a limit on required, but should seek to promote excellence in both the upside of its contribution to the pilot early stage fund circumstances. to help attract private sector participation to an area that they are unfamiliar with (information asymmetry) This is a welcome initiative that could be taken a step and perceived as very risky—an approach that has been further in the medium term in order to develop a market followed in some OECD countries.41 of “deal flow� promoters that would actively seek ideas from the research base with commercial potential and In addition, the formation of angel networks could be help accelerate their preparation so that they can be further stimulated. First, restrictions on the formation presented to early-stage/venture capital financing. The of angel networks (such as a minimum net worth functions of the deal flow promoters would comprise (i) of US$13.3 million) could be relaxed to make their scouting ideas from the research base; (ii) assessing the formation easier and instead support for the network technological viability of the project; (iii) estimating the could be based on the number of deals successfully commercial potential of the innovation, (iv) generating, conducted. Second, the Government of Chile could presenting and marketing new information about the explore options for providing some fiscal incentives project, and (v) helping identify financing (Figure 3.3). to angel investors similar to what currently applies to International experiences suggest that more than 300 venture funds. In the United Kingdom, for example, promising technical ideas might need to be scouted there is a personal tax incentive for investments in to produce just 15 projects attractive to an investment new companies (including non-technology firms) that company. “Deal flow� facilitators in active technology operates through the personal tax allowance system. markets tend to operate on the basis of flat and success fees. The latter could be an equity stake in the company Stimulating the “deal flow� and incubation or a commission by the investment company since they process brought a successful deal. Stimulating the technical community to engage in InnovaChile could stimulate the development of such commercialization and building the deal flow merits more a market through a small initial subsidy akin to the attention. Some of this work involves building support model proposed for private technology brokers. The so that this type of activity is considered legitimate in “deal flow� promoters could possibly emerge from the 40 The difficult conditions of global financial markets have reduced the current appetite for risky ventures and activity in VC markets has temporarily “dried up� even in traditionally active markets. Thus, it seems opportune to postpone such endeavors for a few years. 41 The return on the public contribution, for example, could be limited to the return on other long-term government instruments. 42 Capacity indicators could concern inter alia business model and governance, international and local network capacity with the technical, commercial and investment community, and services offered. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 39 A question arises as to whether private technology Figure 3.3: Functions of Deal Flow Facilitators brokers (section 3.1) and deal flow facilitators are more likely to be viable if such structures are integrated due to possible synergies and economies of scope. In highly IDEA developed technology markets, private providers often specialize in one of the two functions and in some cases they conduct both. One option would be for InnovaChile Initial assessment to launch a program to promote private providers for 150 technology brokering and deal flow facilitation (along p g Prospecting report the lines described above and in section 3.1) and allow the potential providers to determine whether they have 50 Business p plan the capacity to conduct both functions or prefer to specialize in one of them. Forcing potential providers to 30 Investment readiness carry the two functions could set entry criteria that are report overly restrictive to the potential detriment of market development. 20 Investment in estmen Investment in compan company p 3.4 Developing the Skills Base for Technology Transfer Source: Authors. The expansion of activities in the three aforementioned areas (IP management, strategic partnerships, and foundations of successful incubators and in alliance with formation of new knowledge-based firms) will require other partners given the need to bring together a range a deepening of skills and competences related to of complementary skills (both technical and commercial). technology management and brokering and patent law The program’s subsidy could comprise a basic subsidy in Chile. A two-pronged approach can be followed to for specific services provided and a success-fee for accelerate the development of such critical skills. every project that receives external investment.43 The basic subsidy is lowering the agents’ set-up costs in the First, there is a need to fill the most immediate gaps initial stage of their existence, when the market for new in competences. Some pragmatic options are proposed technology-based ideas is at a nascent stage. Overall, below: the remuneration-scheme would be heavily focused on success providing a strong incentive to create actual • Attracting diaspora and contracting international deal–flow. The program could cover about five years, specialists on technology management and at the end of which it is expected that some of the brokering, with hands on experience of doing the “deal flow� facilitators would have become viable. The day-to-day job; offering competitive international number of viable operators is likely to be small (possibly salaries to recruit the best talent; and including a duty two) given the expected size of Chile’s technology to train other team members in the new agencies/ market in the medium term.44 Active promotion of intermediaries as a key element of their employment the program would be desirable to increase demand contract. for their services. Currently, there seems to be little • Building sustainable alliances with equivalent awareness among potential users of available support agencies/intermediaries that are more advanced to to assist them in developing their ideas and concepts fast track change and learn from their experience, further. while recognizing that the alliance needs to be structured in a way that offers something to both 43 For example, the basic subsidy for services provided could be paid after the delivery of a satisfactory business plan at the third or fourth assessment stages (Figure 3.1). It could possibly cover 50 percent of the estimated average costs of the analysis at the respective stage. The success fee could be 10 to 20 percent of the investment made by a VC fund or another external investor. 44 This already takes into account the government’s commitment to expand substantially expenditures in science, technology and innovation. 40 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration parties in order to be successful. initial subsidy. It could conduct an open competition • Offering internships for Chilean staff in external inviting proposals and offer partial financing of agencies/intermediaries to learn and build critical initial operational costs of the organization, for international networks. example during the first three to four years.45 As the • Active sharing of experiences across agencies within professional base expands, the organization would Chile rather than all learning the same lessons in move towards sustainability through membership isolation. fees and provision of services such as training, but • InnovaChile´s programs to foster TTOs and private the initial support seems justified due to network technology brokers could provide financing support failures and small professional base. Critical impact (e.g., as matching grants) for the aforementioned indicators would be sustainability of the organization activities. The support will be more effective if following program completion and training activities it is included as an integral part of the business conducted. development plan of the TTO or broker rather than financed as isolated activities. Similar activities (strengthening of university programs and development of a professional organization) can be In parallel, there is a need to create a professional cadre sponsored to enhance competences in patent law. of specialists or technology managers, which implies both specialist degrees in universities to train those 3.5 Stimulating Firms’ Interest in Technology entering the profession and professional associations and Innovation to organize accreditation and continuous professional development. Seeding the development of both of Working on the demand side of technology transfer and these elements is important to the long-term future of commercialization is as important to the effectiveness of the knowledge economy in Chile and some proposals the innovation system as is the efficiency of the linkage are presented below. with the supply side even though the former is not the main focus of this report. Here, the main issues are • Strengthening/developing university programs provided and a framework is defined for policy to address on technology management: InnovaChile, could the need to stimulate firms’ interest in technology conduct, within the next two years, an open and innovation. The overall objective is to expand the competition offering support to about 3 or 4 number of firms in Chile that use knowledge as the main universities to strengthen existing or develop new competitive strategy, where knowledge is shorthand for technology management programs with an emphasis both process innovations to improve productivity and on developing programs that can attain international product innovations. Not all firms will develop in this quality. The support, for example, could be extended way even though the technology upgrading agenda for about four to five years providing partial financing requires to be addressed across the board. for the revision or development of new curricula, overseas sabbatical to highly recognized programs, Addressing this need has to be tailored at two levels. The attraction of international teachers, other linkage first and most relevant to the main topic of this report is activities with internationally recognized programs, for leading clusters whose orientation is predominantly and overseas internships in relevant institutions the competitive international market. Here, the tools for the top 15-20 percent of students. Key impact described in the strategic partnership section (section indicators could include: (i) number of students 3.2) are most relevant, working alongside fiscal graduated and (ii) their insertion in the labor market incentives to encourage firms to invest more in R&D in relevant professional positions. both internally and collaboratively. The objective being • Seeding the formation of professional organizations: to develop leading edge applications oriented research Similarly, InnovaChile could seed the formation of that underpins knowledge based innovation strategies a professional organization by extending a small by Chilean firms. This is the most innovative area and 45 The subsidy could be provided against satisfactory completion of goals agreed ex-ante in the organization’s business development plan. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 41 where partnerships between public and private sectors innovation focused development strategy. In the first have been used to great effect. half of the 20th century, a small number of universities in industrial countries collaborated in research and At this stage, however, some firms around leading development with the private sector46, while the clusters are still far from the technology frontier, which majority devoted themselves to teaching (first mission). points to the need for combining the strategic alliances Large scale-scientific research (second mission)47 at for applications oriented research with technology universities took off during the middle of the century extension services in some of the clusters. As discussed and, by the end of the century, an increasing number of earlier (section 3.2), these technology extension universities in OECD countries were involved in outreach, services could be self-standing or the aforementioned research and technology development with the business strategic alliances could cover both some R&D activities community (third mission). By comparison, excluding a and technology extension services depending on the few Chilean universities such as Universidad Católica del specific cluster structure and needs. The latter might Norte, most are timidly engaged with the third mission. be appropriate in some sectors to avoid spreading In some cases, university management allows it but does capacities thinly. As firms’ capacities in leading clusters not encourage it, while in others inertia or a cultural bias advance, the need for technology extension services will against academic involvement with business persists. diminish relative to the need for higher R&D investments to maintain the cluster at the technology frontier. The Recommendations: The Government of Chile can put in services of technology centers in Spain, for example, have place a series of incentives and initiatives to encourage evolved along these lines as the technology capacities of Chilean universities to engage more actively with the the cluster they were serving have matured. business community as a way of contributing to the country’s economic development and thus to the social The second is for other firms who lie outside the priority progress and standard of living of its population. A clusters. Here the most frequent response is for a summary of key recommendations is presented below shared-cost grant scheme to be implemented linked to and a more detailed discussion follows. accredited suppliers who have been vetted for the quality of services they offer. InnovaChile has a grant scheme • Short term: The CNIC can develop an advocacy of this type that could be further disseminated and is campaign on the benefits derived from universities planning to complement it with the further development embracing the third mission and convene a special of suppliers of technology extension services. The Committee to address issues relevant to the third program will cover priority clusters and other sectors on mission with relevant participation from key a needs basis. International experience highlights the stakeholders as well as independent experts. importance of allowing the business community to take • Key issues to be addressed by the Committee would the lead in the governance of such institutions to foster include inter alia (i) the formulation of a code of close linkages to the needs of the productive sector practice on IP management, (ii) the development and considering the sustainability of these centers. of proposals so that financial support to universities Key program indicators can include increased revenue takes account of the third mission; and (iii) the generated by selling of technology services, declining formulation of a plan for integrating education on public support, and improved productivity (sales per entrepreneurship in universities. workers) of firms assisted. • FONDEF and the Pre-competitive program could be operated in a more integrated fashion and linked to 3.6 Nurturing Universities’ Third Mission-- the adoption of best practice IP rules. Contributing to Economic Growth • Medium to long term: The CNIC together with the Changes in the behavior and practices in universities is Ministries of Education and Economy would continue one of the main areas that needs to underpin Chile’s advocacy efforts on the third mission. 46 Collaboration was more prevalent in the US. 47 The second mission involves research in the broadest sense not only scientific research. 42 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration • It would be highly desirable to simplify and increase integrating education on entrepreneurship in universities, the effectiveness of direct budgetary transfers to a topic that will be further discussed in the following universities, including inter alia criteria related to the section. The Committee could sponsor National Annual third mission. Awards for University Entrepreneurship and Technology • Universities could be encouraged to review criteria Transfer with high visibility, to reward top universities for measuring performance and worth of academics, and knowledge centers that have shown the highest including third mission related aspects. impact and progress on the third mission flank. In the short term (one to three years), the CNIC can initiate In parallel, the Government could launch the proposed an awareness campaign of the social and economic program to support the formation of a strong network benefits that can emanate from universities embracing of technology transfer offices (section 3.1) and start the third mission. The communication campaign could applying financial rewards as tools to stimulate the comprise events with wide media exposure as well as an change in attitude and culture. For example, FONDEF active dialogue with universities to convey the benefits and the Pre-competitive program which seek to of such collaboration and motivate greater commitment encourage universities and other knowledge centers to the third mission. Moreover, the CNIC could convene to conduct research with direct applications to the a Committee with participation from the Ministers of productive sector, could require that leading researchers Education and Economy, rectors of Chilean universities, a in these projects be associated with institutions that few private sector representatives and some independent have adopted best practice IP rules. The rationale for experts to discuss a process for universities to embrace this is strong since universities with sound IP policies the third mission more forcefully. The Committee could provide the best incentives for those research resources facilitate this process by disseminating best practices on to have an impact in the productive sector. how internationally recognized universities have moved forward on this mission. It could invite to the country In the medium to long term, the CNIC together with high-level representatives from salient universities that the Government of Chile could continue the awareness have successfully integrated the third mission over the efforts (e.g., the aforementioned national awards past few decades (e.g., universities from the United program), support the consolidation of the technology Kingdom, Australia and Finland), and possibly invite transfer offices as discussed in section 3.1, and support a Vice-Chancellor of an internationally recognized the expansion of financial incentives to promote the university as a senior advisor to the Committee. It could change in culture. The last one will be challenging similarly organize visits of representatives of Chilean but budgetary support needs to better aligned with universities to those countries to learn first hand about impact. The communication and consultation process IP management policies, technology transfer impact discussed above will give legitimacy to new policies and of universities, and public policies to foster the third ease their implementation. Direct budgetary support mission. from the Ministry of Education to research universities could incorporate performance criteria that are As part of this effort, the Committee could form working related to the third mission.48 Presently, direct support groups entrusted with the following key issues: (i) the constitutes close to 40 percent of all budgetary funding formulation of a code of practice on IP management by to universities (OECD and World Bank 2009) and is universities and other knowledge centers as discussed complex, inequitable, and fragmented among four earlier in section 3.1, (ii) the development of proposals different programs that do not follow an overarching so that financial support to universities takes account of goal. Special funding for CRUCH universities amounts the third mission; and (iii) the formulation of a plan for to about 80 percent of direct funding support, with 48 Direct budgetary support includes (i) special support for CRUCH universities, (ii) competitive resources under the Institutional Development Fund, (iii) competitive resources for innovative institutional programs under MECESUP, and (iv) the pilot “performance program� signed by five universities with MECESUP. The first and third programs are available only to CRUCH universities, and the second is available to CRUCH universities and technical institutions. Indirect budgetary funding includes scholarships and subsidized loans to students enrolled in CRUCH universities, guaranteed loans to students in accredited universities, and vouchers to institutions attended by top students according to PSU results. In addition, all research universities can participate in competitive research-related programs administered by CONICYT and InnovaChile. Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 43 95 percent of it determined by historical shares rather (e.g., number of patents, patent quality, licensing than objective criteria.49 The other 5 percent is defined revenue, and participation in high impact collaborative by 5 parameters, of which 3 are related to research research). A critical policy question to address will be activity but do not incorporate any variables related to whether core financing is limited to public universities technology transfer or research impact.50 or also extended to all private universities, ending the current discriminatory treatment between private It would be desirable to simplify and increase the universities on the basis of historical practices. In the effectiveness of direct budgetary transfer to universities. short term, a few steps could be undertaken in this For example, it could be rationalized along two basic direction by ensuring that MECESUP’s performance programs--core financing to provide some basic degree programs and special funding to CRUCH universities of stability and performance-based related funding-- (at least the 5 percent based on objective criteria) take and these could reach about 15 percent and 25 percent account of some of these parameters such as the number of overall public university funding, respectively, over a of patents and participation in collaborative research. period of 10 years. The share of total direct transfers would be close to current levels, but the significant Complementing the above, the Government of Chile change in allocations among the two categories would could encourage universities to review the criteria for better align incentives. Performance based-funding could measuring performance and the worth of academics be linked to institutional goals (distinguishing between so that it is not solely based on teaching skills and teaching and research universities) and, for the latter, it publications, but other criteria such as patenting, could incorporate criteria related to technology transfer earnings from consulting and resources mobilized from Box 3.4 Changing University Policies to Embrace the Third Mission: Recent International Experiences Providing a balance of incentives to encourage the academic community to give equal weight to their work on commercialization as to their traditional activities as teaching and research has proved a challenge. A growing number of leading research universities, however, are making a positive move in this direction. When the Victorian University of Manchester and the University of Manchester Institute for Science and Technology in the U.K. merged three years ago a new contract of employment was offered to academic staff from the two universities. In the contract there was an explicit provision that their career progression would be judged by their performance in three areas – teaching and research in the traditional way and their contribution and successes in working with firms and commercializing technologies. Operationalizing the weight to be given to the three components in any specific promotional decision is still being settled, but there is an explicit recognition of the value placed on the third activity grouping which is central to promotion. Complementing these changes has been the introduction of courses that give academics knowledge and skills in business relations and the creation of new enterprises. The University of Chalmers in Gottenburg, Sweden was a pioneer with elective courses in masters and PhD programs. The BBSRC in the U.K. has followed with training on these subjects for all its supported researchers and many others are now including such skill development in their programs. In China, selected universities that are striving to become world leaders and contribute to the country’s economic and social development have adjusted their performance evaluation framework to recognize commercialization and technology transfer activities in addition to teaching skills and publications (Yusuf and Nabesima, 2007). Source: Yusuf and Nabesima and authors 49 CRUCH universities comprise all public universities but only the private universities established prior to 1981. 50 The first parameter is the number of students per number of undergraduate degrees, and the other four are calculated on the basis of the number of undergraduate students, number of CONICYT research programs, number of ISI publications, and number of academics with graduate degrees to the number of full time equivalent academics. 44 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration external sources are also rewarded (Box 3.4). Sabbaticals opportunities and support available to launch new could also include commercialization of IP. ventures, and encouraging others to follow. The Irish Government, for example, implemented its strategy These changes would involve extensive communication to foster entrepreneurship through its two main efforts with universities and the public to explain the development agencies, the Institute of Industrial objectives of these policies and gain their support. Research and Standards (IIRS)51 and the Industrial (See OECD and IBRD/World Bank (2009) for a further Development Authority (IDA). The IIRS published books discussion of tertiary education in Chile.) with case studies on successful entrepreneurs in Ireland which achieved widespread publicity and a daily column 3.7 Fostering an Entrepreneurial Culture in national newspapers giving details of business opportunities and championing entrepreneurship. Initiatives to stimulate technology transfer and A program on national TV, featuring case studies of commercialization will be more effective if rooted in entrepreneurs, has now been running for ten years and a broader entrepreneurial culture—a matter that has has attracted wide attention. Participating entrepreneurs received little attention to date in Chile. Increasing competed for the title of “Entrepreneur of the Year�. entrepreneurship in Chile requires a comprehensive Previous winners include names such as Esat Telecom approach that encompasses the development of a Group, which are recognized internationally today. cultural and educational environment supportive of it. InnovaChile could sponsor similar activities in Chile and Little has been done to date to celebrate successful cases champion a culture of entrepreneurship. of innovation and entrepreneurship. A few universities in Chile have included some entrepreneurial courses, Education can also play a critical role in shaping but this is not yet a widespread approach. Most of these attitudes, skills and culture towards entrepreneurship. courses are still concentrated on business schools, while While some individuals are born with a higher propensity most departments of engineering and science have not toward entrepreneurship, students are more likely to incorporated them, even though these departments undertake an entrepreneurial career the more exposure need to become a fertile ground for the creation of new and learning they have to entrepreneurship and entry- technology entrepreneurs. level entrepreneurial skills. This is why entrepreneurship education has been growing rapidly in the United States Creating an entrepreneurial culture will be a long process, and has started to gain acceptance in Europe since the but the experiences of other countries, e.g., Ireland, early 1990s as countries have sought to narrow the suggests that attitudes can change over time. Ireland, for entrepreneurial gap with the United States.52 example, has evolved from being an agricultural society with a low entrepreneurship level in the early 1970s International experts on entrepreneurial education point into a knowledge society with a dynamic early stage to the following framework. The primary and secondary entrepreneurial activity. This change has been facilitated levels can start to teach entrepreneurial attitudes, by a comprehensive strategy that has included inter while post-secondary education can further nurture alia retraining of the labor force, incubation structures, these attitudes and substantially improve the skills for seed and venture capital funds, and support for R&D, entrepreneurship. The Irish Government, for example, but changes in the education system and the cultural has sponsored a number of initiatives to promote environment towards entrepreneurship have also played entrepreneurship among young people. Students can a role. now opt for a transition year at age 15-16 where they take a year out from formal study and engage in a The general culture towards entrepreneurship can be broader range of experience such as starting a business. changed over time by continuously displaying cases Many students group to start micro-enterprises. Shell of entrepreneurial success, informing the public of Oil sponsors a Young Entrepreneur of the Year Program. 51 It has now become part of Enterprise Ireland. 52 Despite recent efforts, the US still leads Europe by a substantial amount. In 2004, there were over 400 chairs of entrepreneurship in the US compared to about 100 in Europe (Katz). Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 45 Box 3.5 Entrepreneurship Education as a Lever for Change: The Experience of the United Kingdom The Government of the United Kingdom is promoting a wide range of policies that seek to build a more competitive economy in which entrepreneurship and innovation are the engines of growth. In this context, it is supporting entrepreneurship education to facilitate the development of graduates with innovative and entrepreneurial mindsets. Activities vary across education levels being more dynamic at higher levels and gradually expanding to others. These initiatives started in 1999 with the launch of the Science Enterprise Challenge, which established 13 science enterprise centers around the United Kingdom. Many of these were consortia of universities, and 43 universities (out of approximately 140 universities) were involved with this initiative. The initial focus was on enterprise education for scientists, and a national network –United Kingdom Science Enterprise Challenge-- was established to share best practice. The funding of the Science Enterprise Challenge ended in 2004, and most universities then used part of their Higher Education Innovation Fund (HEIF) to continue financing entrepreneurship education. As HEIF is not specific to science, many institutions introduced some aspect of enterprise education for students across a range of curriculum areas. The Science Enterprise Challenge has now expanded substantially and become Enterprise Educators. It now supports over 600 enterprise educators from more than 90 Higher Education Institutions to develop their practice, network with peers, and collaborate in enterprise and entrepreneurship teaching and research across all curriculum areas. The National Council for Graduate Entrepreneurship, established as an independent organization in 2003, is also playing an important role in promoting graduate entrepreneurship. Its mission is to foster a long-term cultural change in universities; inform national and regional policies on entrepreneurship in universities; share the institutional environment for entrepreneurship; and increase the number of enterprising graduate businesses. The University of Nottingham--named the first ‘Entrepreneurial University of the Year’ at the Times Higher Education Awards in 2008--provides one of the best examples on enterprise education, which is now well established and embedded through the curriculum. While some universities have already made good progress, others are still striving to embed entrepreneurial education. A number of initiatives on enterprise education are underway at the secondary level. The government paper “Enterprise Britain� (2002) paved the way for the introduction of enterprise education for all 14/15 year olds and many others within the 11-16 age bracket. The Enterprise Network has coordinated this effort since 2006, and its remit has now been extended to students from 5 to 19 year olds. But, for the most part, entrepreneurship education at this level is based on discreet sessions and has not been fully embedded within the curriculum. Source: K. Beresford, Enterprise Educators and National Council for Graduate Entrepreneurship and Enterprise. In the United Kingdom, the government is also fostering include entrepreneurial courses as an integral part of entrepreneurship education since the late 1990s. the curricula. Activities were first started at the tertiary level and are gradually being expanded to other levels (Box 3.5). It would be desirable for Chile to develop a plan on The experience of the United Kingdom points to the entrepreneurship education, starting with the tertiary challenges of integrating entrepreneurship education level and expanding it to other levels over time. in the curricula but also indicates that progress can be Universities in Chile, for example, could start teaching made. Within Latin America, the Instituto Tecnológico entrepreneurship throughout various disciplines de Monterrey in Mexico is recognized for its early and across the campus, not only in business schools. focus on developing professionals with entrepreneurial Teaching on entrepreneurship could be available to all skills, culture and attitude. The first initiatives to students at the tertiary level of education, especially in teach entrepreneurship date back to 1978 and these science and technology programs, where potentially gradually evolved into the Programa Emprendedor new technology-oriented entrepreneurs can emerge. (Entrepreneurial Program), jointly designed between Furthermore, incorporating teaching on entrepreneurship academics and the private sector. Today, all its degrees in scientific and engineering universities would increase 46 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration the exposure of the scientific research community to the awareness and education. Some guidelines for opportunities that exist for commercializing research and launching such initiatives follow. development, further strengthening the links between academia and the real economy. Entrepreneurship recognition and awareness: • InnovaChile could start championing a culture of International experiences teach us that entrepreneurship entrepreneurship through national awards, regular education requires a multidisciplinary approach and publications and other media events on successful a different paradigm to the traditional teaching of entrepreneurial cases as highlighted for the case of business education. The latter usually follows more Ireland above. structured formats. By contrast, the literature on • Awards could be broadly based and recognize entrepreneurship has characterized the entrepreneurial the initiatives of existing and new entrepreneurs, experience as chaotic: entrepreneurs practice including researchers, university students, secondary disruptive forms of innovation as opposed to small students and other groups. business owners who practice management skills as • These initiatives could be started now and continued their principal activity of their enterprise53. According over the medium and long term considering that to them, entrepreneurial education must reflect the cultural changes happen gradually. unstructured environment that students will eventually • Engaging recognized entrepreneurs and enterprises face in their entrepreneurial careers. Entrepreneurial in some of these activities would make them more programs vary among universities that teach them, effective. The CNIC could reinforce these efforts but best practices tend to share a number of features. through its public messages. Common features are project-based experimental learning that integrates theory and practice; student Entrepreneurship education: business starts ups; facilitating interactions and • To create a more entrepreneurial culture, it will also be mentoring with practicing entrepreneurs; network critical to develop a plan to integrate entrepreneurship development; and finance. education at the different educational levels which could be done in a progressive fashion. Schools and universities teaching entrepreneurship • The experience of other countries suggests that it is actively engage local community leaders and easier to start incorporating changes at the higher entrepreneurs in advisory boards.54 Entrepreneurial educational levels. The proposed Committee to programs can also have a specialized focus such as promote the third mission of universities, discussed the technology management programs. Given the in the previous section, could undertake the task of challenge of integrating entrepreneurship teaching formulating a plan for integrating entrepreneurship throughout various disciplines and developing relevant education within its responsibilities. pedagological approaches, universities have benefitted • In the short term, a pilot program could be from the guidance of specialized institutions. The implemented to start integrating entrepreneurship Kauffman Institute, Enterprise Educators and the education in higher institutions and, to avoid European Foundation for Entrepreneurial Research have creating a multiplicity of activities and funding lines helped universities in the United States, the United for universities, this program could be embedded Kingdom and the European Union, respectively. Chilean within an existing one, e.g. the pilot performance universities could benefit from the guidance of similar contract program. institutions. • In the medium term, the above initiative could be extended to all universities, and similar activities could Recommendations: Chile can promote a more dynamic be initiated at the secondary level, first on a pilot and entrepreneurial culture through entrepreneurship basis. The CNIC could collaborate with the Ministry 53 See for example Carland, Hay and Bolton (1984). 54 The Intotalo Academy in Finland, which teaches both pre- and post-secondary students, also represents another interesting experience of entrepreneurship teaching. The model follows a community-based learning approach. It emulates an innovative working environment and helps students network with practicing entrepreneurs in the community (http://www.intotalo.com/). Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration 47 of Education and the Ministry of Economy (Chair of support to beneficiaries performing below standards the ICI) to expand entrepreneurship education to the is withdrawn. secondary level. • Evaluating overall impact. While detailed evaluations • Initiatives to enhance entrepreneurship skills will need of each program will be desirable, it will also be to go hand in hand with other efforts to enhance necessary to assess the overall coherence and science education from the primary level on. complementarity of the various policy interventions that seek to promote technology commercialization, 3.8 Evaluating, Learning, and Adjusting especially since it is likely that more than one public agency will be involved in fostering this process. Policies to foster technology commercialization will entail some degree of learning and experimentation 3.9 Conclusions and thus evaluating their impact and feeding results into the policy-making process will be crucial. In some Creating a milieu conducive to technology cases, public programs can accelerate the development commercialization and transfer will be a challenging of missing market agents, but these agents will need and long-term process but necessary for Chile to to become self-sustainable over time and program become a dynamic knowledge economy. The chapter support should be eventually phased out. In others, a proposes seven complementary initiatives to move public agency sponsoring a program may be tempted forward in this direction: (i) improving institutions, to extend support to a group of beneficiaries it helped regulations and practices to foster an efficient and create even though its performance is substandard. more dynamic IP management system; (ii) developing Mechanisms must be in place to allow policy-makers to strategic partnerships between the business community learn from evaluations and adjust policies and programs and knowledge centers to conduct research applied to accordingly. Sound evaluation policies will minimize the key economic areas and improving the performance of potential risks of principal-agent problems. the technology institutes; (iii) accelerating the formation rate of new technology firms and the necessary financing The following are some elements to take into account mechanisms; (iv) developing the requisite skills and when designing programs and evaluation policies. competences to support the above; (v) strengthening • Developing effective measurement mechanisms and technology extension capacities and stimulating its clear baseline indicators. If evaluations are to move demand; (vi) nurturing universities’ third mission of beyond legitimizing government programs, it is contributing to economic growth; and (vii) fostering an important to define clear baseline and performance innovative and entrepreneurial culture. indicators and, to the extent possible, control groups at the outset. Control groups can help measure the The proposed agenda is challenging and requires a long- performance of agents that receive the benefits term commitment. Many of the proposed reforms entail compared to those that do not. an important change of culture among key stakeholders, • Performance-based benefits. In as much as possible, in particular universities and the business community. It financial support should be performance based. will be critical to engage key stakeholders early in the This could have the dual benefit of easing impact process and build a strong national consensus around a measurement and establishing clear incentives to long-term vision for technology commercialization and modify behavior. transfer in Chile. Continuous communication of this • Independence of evaluators: Some degree of vision by high-level policy makers will help maintain the independence of evaluators will be critical for direction and momentum. evaluations to be objective and thus credible. If not, there is a risk that the evaluation will be used to endorse outcomes and justify how well a public program functions. Independence will be particularly important to ensure that programs that are not performing well are adjusted or phased out or that 48 Chapter 3: Fostering Technology Commercialization in Chile: Options for Consideration Chapter 4: Conclusion Chapter 4: Conclusion Chile’s technology transfer and commercialization Moving forward will require a coherent long-term plan system, one of the most critical components of the based on complementary interventions and continuous national innovation system, depicts numerous gaps. monitoring and evaluation of policy interventions. These gaps are driven by two factors: low innovation The report proposes seven areas where strategic inputs (e.g., less than adequate levels of human interventions and support appear to be necessary: resources and other resources allocated to research) (i) improving institutions, regulations and practices to and inefficiencies in the use and processing of these foster an efficient and more dynamic IP management scarce inputs. Addressing both of these will be critical system; (ii) developing strategic partnerships between to enhancing technology commercialization in Chile the business community and knowledge centers to and to realizing the goal of moving forward as a conduct research applied to key economic areas and knowledge economy. The proposed national innovation improving the performance of the technology institutes; strategy recognizes the importance of increasing (iii) accelerating the formation rate of new technology innovation related inputs, proposes long-term targets firms and the necessary financing mechanisms; (iv) and broad directions to achieve those targets. However, developing the requisite skills and competences to this will not suffice. It also recognizes the importance support the above; (v) strengthening technology of creating a milieu that will be more conducive to extension capacities and stimulating its demand; (vi) technology transfer and commercialization. In that nurturing universities’ third mission of contributing to spirit, this report seeks to provide guidance and identify economic growth; and (vii) fostering an innovative and strategic interventions to stimulate the creation of such entrepreneurial culture. a milieu. Finally, while the impact of some of these proposed The earlier diagnostic has identified gaps in most of changes will be observed in the short run, building the elements that need to be in place for an effective a dynamic milieu for technology commercialization technology transfer and commercialization system will be a long-term process. Thus, it is vital to build a to operate: stakeholders exposed to weak incentives, national consensus behind a long-term strategic view institutional gaps and missing market links, financing and engage key stakeholders--in particular universities gaps, weaknesses in the design of public support and the business community—early in the process. A programs, and a need for a more entrepreneurial and change of culture is both necessary and feasible. The innovative culture. business community can learn to work on a more 50 Chapter 4: Conclusion open innovative system together with universities and other actors, while universities can learn to appreciate that collaborating with the business community in technology transfer and commercialization can be compatible with a long-term research agenda. The development of critical market links (e.g., new financing agents and technology brokers) will also be a gradual process that will require a steady effort. The CNIC can play a leading role in helping define a long-term strategy and the Inter-ministerial Committee of Innovation in securing its implementation. CORFO and other agencies such as CONICYT will also have critical roles to play as executing agencies. Chapter 4: Conclusion 51 Annex 1 Annex 1: Fostering Technology Transfer and Commercialization in Chile: Summary of Proposed Recommendations* Short term (1 to 3 years) Medium to Long term (4 to 12 years) Policy area of intervention Intervention Performance Intervention Performance indicators** indicators** Overall • Interventions detailed • Interventions detailed • Increased patenting levels in performance below below the US to 8055 on Technology transfer and • Increased annual rate of new commercialization knowledge-based businesses (measured by national enterprise surveys) • Increased ranking of Chile on WEF technology indicators (from 44 to about 35) • Increasing ranking of Chile on WEF innovation indicators from 56 to about 45 Improving IP • Develop a strong • About 2-3 TTO • Continue development • Licensing revenues produced management: network of TTOs at networks initiated of TTOs network by TTOs institutions, research centers implementation of (InnovaChile) regulations and (InnovaChile) sound strategic plan; • Number of patents filed and practices revenue generated • Continue issued in Chile and the US • Pilot program to from signing of implementation of linked to TTO support seed development of research collaboration pilot program to seed private technology agreements; number development of private • About 2-3 self-financing TTO brokers (InnovaChile) of patents registered technology brokers networks operating in Chile and the (InnovaChile) • Foster IP awareness US; and number of • Number of self-financing and stimulate the licensing agreements • Continue initiatives to private technology brokers demand executed. generate IP awareness o Awareness efforts and stimulate demand • NIIP: Time to examine and (CNIC, Ministries • About 2-3 institutions (CNIC, Ministries process patents reduced to of Economy and participating in the of Economy and less than a year on average Education, NIIP, pilot program for Education, NIIP, InnovaChile and promoting private InnovaChile and CONICYT) technology brokers CONICYT) *Responsible government entity or public funding agency in brackets **End of period ***Current global conditions suggest the program launch could be postponed for a few years 55 The estimations assume that (i) Chile ‘s R&D growth increases to 2.3% of GDP by 2021 and yearly GDP growth is 5.5%, in line with the targets of the National Innovation Strategy for Competitiveness, and (ii) Chile becomes more efficient in the transformation of R&D investments into patents by closing the current efficiency gap with Taiwan of 11%. See Bosch, Lederman and Maloney (2005) for methodology. 54 Annex 1: Summary of proposed Recommendations Short term (1 to 3 years) Medium to Long term (4 to 12 years) Policy area of intervention Intervention Performance Intervention Performance indicators** indicators** o Implement specific • NIIP: increased staff • Implement Strategic programs to stimulate competencies; new Development Plan demand (InnovaChile) IT systems fully for the NIIP (NIIP in operational; and collaboration with • Develop and implement adequate financing Ministry of Economy) Strategic Development support and enhance Plan for the National enforcement of IP Institute of Industrial • Madrid Protocol for rights Property (NIIP in the International collaboration with Ministry Registration of Marks of Economy) and the Hague System of International • Enhance enforcement of IP Registration of rights Industrial Designs signed • Signing of Madrid Protocol for the International Registration of the Hague System of International Registration of Industrial Designs (Government of Chile) Developing • Consolidate leadership • Consortia programs • Consolidate and • Number of patents strategic of strategic partnership merged expand strategic generated out of the partnerships programs under a single partnership initiatives consortia support for applications public funding agency • About 5 large public- (InnovaChile) oriented research (InnovaChile) private consortia • Value of licensing between knowledge programs linked to agreements produced centers and • Launch new program priority economic the business to expand strategic clusters granted • New products and community partnerships within the (new or expansion of processes by member next one to two years existing ones) firms accounting for lessons learned from current • About 25-30% of co- • Impact on firms’ experiences inter alia financing by firms productivity (sales per o Leadership by the worker) productive sector • At least 2-3 knowledge o Close linkages to needs centers (including • Co-financing by firms in of productive sector international centers) new consortia programs o Building critical mass to participating in each of 50% or more achieve impact consortia o Moving to a longer-term effort o Build alliances with international research centers o Inviting international peer reviewers • Review need to adjust anti- trust legislation to allow pre-competitive research cooperation as legitimate objective. (Ministry of Economy) *Responsible government entity or public funding agency in brackets **End of period ***Current global conditions suggest the program launch could be postponed for a few years Annex 1: Summary of proposed Recommendations 55 Short term (1 to 3 years) Medium to Long term (4 to 12 years) Policy area of intervention Intervention Performance Intervention Performance indicators indicators Enhancing the • Review governance, • Strengthened • Implement revised • Increased revenues capacity of funding structure and labor governance structure governance structure from sale of technology public technology incentives in place services institutes • Implement a medium- • Develop medium-term • Increased revenue term strategic plan • At least 35% of revenues strategic plan for each from sale of for each institute with derived from non-direct institute with clear technology services clear performance budgetary sources performance targets targets (including program to • Increased patenting strengthen human capital) levels • Increased participation in R&D projects with the productive sector Accelerating the • Increase early-stage • Incubator support • Consolidate • Increased annual rate of formation of new financing opportunities programs closely initiatives for early- new knowledge-based technology-based (CORFO) linked to performance stage financing businesses (measured firms o Sponsor a public-private (CORFO) by national enterprise early stage fund** • About 2-3 institutions surveys) o Stimulate the formation participating in • Pilot program to of further angel-networks pilot program for seed the formation • At least one/two self- through seed funding and promoting deal flow of deal flow facilities financing deal flow redefinition of relevant facilities that will become self- facilities operating in formation criteria. financing over time Chile Explore options to (InnovaChile) provide fiscal incentives • About 4-5 strongly akin to venture capital performing incubators funds. focused on technology firms • Improve performance of incubators through • Increased value of the VC benchmarking program, industry linking public support to capacity and performance. • Increased shared of the Adapt assistance VC industry in early stage packages to the needs financing of firms—born global vs. those with national or regional focus (InnovaChile) *Responsible government entity or public funding agency in brackets **End of period ***Current global conditions suggest the program launch could be postponed for a few years 56 Annex 1: Summary of proposed Recommendations Short term (1 to 3 years) Medium to Long term (4 to 12 years) Policy area of intervention Intervention Performance Intervention Performance indicators indicators Developing the • Fill most immediate • Development and • Consolidate • Internationally accredited skills base skill gaps in technology strengthening initiatives or “recognized� management and of technology (InnovaChile) technology management brokering through management programs (2-3) pragmatic approach programs (InnovaChile) • Graduates of technology o Attract diaspora and • At least 50 technology management programs contract international managers completed employed in relevant specialists internships overseas areas o Build sustainable alliances with • Professional • Professional association intermediaries/agencies association of of technology managers overseas technology managers fully operational o Offer internships established for Chilean staff in intermediaries/agencies overseas o Active sharing of experiences across agencies within Chile • Seed the development of university degrees in technology management and professional associations in the field (InnovaChile) Strengthen capacity • Develop program to • At least 5 centers • Continue • Improved productivity for technology strengthen technology assisted or under strengthening of (sales per workers) of extension and extension capacities development technology extension firms assisted stimulate demand capacities but with • Stimulate demand through reduced public • Revenue generated by matching grant program financing selling of technology services • Continue to stimulate demand through matching grant program *Responsible government entity or public funding agency in brackets **End of period ***Current global conditions suggest the program launch could be postponed for a few years Annex 1: Summary of proposed Recommendations 57 Short term (1 to 3 years) Medium to Long term (4 to 12 years) Policy area of intervention Intervention Performance Intervention Performance indicators indicators Nurturing • Develop awareness • Code of practice • Continue awareness • Direct budgetary universities’ third campaign on third mission on IP management efforts on third transfers to research mission and convene special adopted by main mission (CNIC, universities linked inter Committee to foster and research universities Ministry of Economy, alia to performance on address issues relevant to Ministry of technology transfer the third mission (CNIC, • Financing from Education, rectors of Ministry of Economy, FONDEF and Pre- universities) Ministry of Education, competitive Program rectors of universities, and explicitly linked • Simplify and increase private sector) inter alia to sound effectiveness of IP management direct budgetary • Formulate and disseminate practices transfers to code of practice on IP universities, including management (CNIC, • FONDEF and third mission related Ministry of Economy, Precompetitive incentives (Ministry of Ministry of Education, Program operated Education) rectors of universities, and in a more integrated private sector) fashion • Encourage universities to review • Link participation criteria for measuring in FONDEF and the performance and Precompetitive program worth of academics, to IP management rules including third mission (CONICYT) related aspects (CNIC, ICI, and Ministry of Education) Stimulating an • Awareness generation • Entrepreneurship • Consolidate initiative • Increased annual rate of entrepreneurial through media events, education included at the higher new knowledge-based culture publications, and national in the curricula of education level businesses (measured awards (CNIC, ICI, and a wide range of and progressive by national enterprise InnovaChile) fields in at least 3 expansion of surveys) universities entrepreneurial • Implement pilot to education to • Entrepreneurship integrate entrepreneurial secondary level education included in the education in the curricula (CNIC, Ministry curricula of a wide range of higher education of Education and of fields in about 65-75 institutions (CNIC, Ministry Ministry of Economy percent of universities of Education, and Ministry as Chair of ICI) of Economy as Chair of ICI) • Entrepreneurship education piloted in the curricula of about 10-15 percent of secondary schools Evaluation • Monitoring and evaluation • 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