Lessons from the Bayh-Dole Act
and other industrial policy recommendations from the Institute for Research on Public Policy
In the year and a half I have been ranting writing about innovation policy, I’ve had many opportunities to learn. A comment on one of my older posts prompted me to reread some of my early content, and it is clear that some of it is overdue for an update to take into account how my thinking on these issues has changed.
In the article in question, I came to the conclusion that inventor-owned IP policy in universities is correlated to better outcomes with respect to entrepreneurship than policies in which the institution takes ownership. In hindsight, this was an overly simple take. It came primarily from my own experience with tech transfer and was based on an overly Canada-centric view. At the time I wrote that article I had not yet explored how tech transfer is done abroad, which suggests a more complex interaction between policy and outcome than can be inferred from Canadian examples alone. For example, the United States has almost uniformly adopted institutional ownership of research IP, and has led the world on tech transfer over the past several decades. Clearly, IP policy at the level of universities is not the only thing at play.
David Durand, TJ Misra, and I recently published a related op-ed for IRPP Policy Options that presents a much more nuanced view of the issues at play. Focusing on the Bayh-Dole Act, an inspired piece of American legislation which shaped American tech transfer, this op-ed serves as a spiritual successor to the post linked above. I suggest reading the op-ed (it is not very long) before going any further.
This is the first, but certainly not the last, old article that will get a refresh to take into account what I have learned through the debates and conversations in which this blog has enabled me to take part.
I am going to leave the old article up, warts and all, with a link to this one and a note that it is outdated. I welcome and encourage public debate on these topics, and I think that having a public, written record of the thought process behind these debates is both useful and important.
Context Matters
The op-ed makes a key point that is the core of where my original post went wrong: that we cannot generalize the outcome of a policy framework without also considering the context in which it occurred. While we point to the Bayh-Dole Act as a key example of successful policy on emerging technology commercialization, we also acknowledge that attempts to recreate that success in other contexts has mostly failed: Finland tried, with almost an opposite result, and other attempts have had mixed results, none of which come closes to the American version. New Zealand, inspired by Waterloo, just went in the opposite direction and changed its universities’ IP policies nationally to favour inventor ownership of IP. It will be interesting to see how that plays out, but my prediction is that it makes little practical difference, given that there appears to be little consideration of context in the language around the change.
In other words, the key correction to my original post is that while policy can set target outcomes and provide guardrails with respect to how they are achieved, that alone is not enough. What determines how intention translates to outcome is the context in which that policy is enacted. Canada has a lot to learn from Bayh-Dole, but it has just as much to learn from previous failed attempts to replicate it, and from thinking carefully about the differences that exist between Canada and the United States and how to compensate for those differences in any attempt to recreate its outcomes.
The United States has risk-tolerant private capital that is happy to invest early in the development process, understanding that most of those bets will fail. Canada does not. The United States has a private sector willing to take big swings on new technology, fuelled by decades of proof that technological innovation is the key to economic prosperity and security. Canada does not. The United States has whole-of-government leadership in the form of federal frameworks that support emerging technology (the SBIR, DARPA, Bayh-Dole, and others) which align all the stakeholders toward common goals. Canada does not. Most places where policies similar to Bayh-Dole have been attempted lacked these key ingredients, as well. The lesson here is not complicated.
Kevin Carmichael at the Logic suggested recently that because the Canadian government is making big bets, the private sector should follow suit. He’s right, but private sector investment in Canadian innovation is probably a few years away even if the Carney government delivers on these promises. The private sector will invest when the innovation and competition created by embracing risk and actively supporting emerging technologies forces them to adapt, and that will take time. If Bayh-Dole-like policies are to be adopted here, and I believe they should, we must actively fund and resource the initiative with risk-tolerant public capital, at least long enough for the effects of a more innovative ecosystem to spur Canadian private firms to act in self-preservation, or to fail and make room for those that will.
Industrial policy recommendations from IRPP
The op-ed linked above is a small part of a set of points I made in a round-table discussion hosted by the Institute for Research on Public Policy (IRPP) about a year ago. The round-table was part of a much larger effort to synthesize evidence relating to industrial policy into a set of recommendations for the Canadian government to address Canada’s productivity challenges.
The findings of the discussion series are now summarized in their report entitled Building for the Future: How Industrial Policy Can Strengthen Canada’s Economy and Sovereignty. It is full of gems and is worth a full read through, and I have to commend IRPP on coming up with a report based on a research process that straddled the second coming of Trump while maintaining any kind of relevance.
The report is a solid starting point for debate around industrial policy initiatives that will be necessary for Canada to remain globally competitive, and gives careful thought not just to implementation, but to ongoing evaluation and governance. As with every single remotely related report ever produced on Canadian innovation, it calls for strategic coherence across all levels of government combined with rigorous evaluation and an ability to course-correct as basic requirements of effective industrial policy.
Probably my favourite quote from the report is from Dani Roderick:
“What determines success in industrial policy is not the ability to pick winners, but the capacity to let the losers go”
Substitute “emerging technology” for “industrial policy” and you have the core message of CanInnovate in a nutshell.
What is implied by the quote above, and what I try to get across in some form in most of my writing, is that successful industrial (and innovation) policy requires a high tolerance for risk and the ability to place many bets, accepting that some will fail. In other words, the report makes clear that none of this works without capital, and suggests numerous means by which productive investment can be encouraged.
What’s next?
The lesson about context generalizes: in seeking to learn from any policy framework that has seen success elsewhere, including industrial policy, we must consider the context in which that policy worked and then either adjust the policy to compensate for any differences, or work eliminate those differences. Successful policy import requires beginning with the end in mind and working backwards to identifying the how. The path to similar outcomes may not be the same.
As Canada follows the rest of the world toward a more active industrial policy, we would do well to keep this in mind. We have no shortage of evidence, studies, and good ideas. What remains is action. From our own op-ed:
“We know exactly why we’re failing and we can’t let ourselves off the hook.”