How American universities can promote innovation: My long-read Q&A with Korok Ray

A key component of America’s
ability to innovate is its world-renowned system of higher education, which is
the envy of the world. However, there’s room for improvement. Universities can
do more to promote the inventive talents of their students and faculty. Recently,
I discussed this potential — and the steps higher education institutions should
take in order to realize it — in an interview with Korok Ray.

Korok is an associate professor at the Mays Business School of Texas A&M University and the director of the Mays Innovation Research Center. He’s also the author of the recent National Affairs article, “The Innovative University.”

What follows is a lightly edited transcript of our conversation, including portions that were cut from the original podcast. You can download the episode here, and don’t forget to subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet. Tell your friends, leave a review.

I think many people assume, and
it’s certainly my assumption, that American universities are the best in the
world. Is that still true? And if so, why is this the case?

The good news is that right now,
they still are the best in the world, so that’s a true statement. I don’t know
if it will always be that way, but it’s where we are today.

I think that’s fundamentally
because, since World War II, the US has made big investments in higher
education, primarily through entities like the National Science Foundation
(NSF). Vannevar Bush was the Dean of the College of Engineering at MIT, and he
really envisioned the modern industrial university — i.e. entities like MIT.

He also created the NSF, which —
though designed for promoting basic research — actually funds a lot of applied
research too, primarily through US universities. So since World War II, there’s
been a huge amount of investment in higher education and research level
education at US universities. And while it was going well, now there are some
serious issues that we need to address, especially given the global competition
for technology investment.

In your article, you say the “industrial
university” has played a big role in American innovation. Can you expand on this
concept of the industrial university?

Sure. So in the US, there are
really two kinds of universities. There are technical, industrial universities
— MIT is probably the best example of that. And on the other side there are
liberal arts universities. You could say Harvard, Yale, or Princeton are the
best examples of that — especially Princeton, given they don’t even have
professional schools. Those are the two dominant paradigms in higher education
today.

Building 10 sits behind Killian Court at the Massachusetts Institute of Technology (MIT) in Cambridge, Massachusetts, U.S., November 21, 2018. Via REUTERS/Brian Snyder

The industrial university largely
arises from the strength of the engineering faculty and students, funded mainly
through government grants rather than tuition. You can think of these
universities as doing some pure research, but also a lot of applied research to
bring ideas from theory to practice. Like I said, the NSF puts huge amounts of
money every year towards these universities to develop technologies that will eventually
make it to market, either through actual spin-outs of the university — students
who go on to start companies of their own — or formal programs designed to
commercialize technology like the NSF has with the iCore program. So there are
all these different avenues for commercialization of research, and that is
primarily happening through these industrial universities.

Liberal arts universities, on the
other hand, don’t actively commercialize research or even do applied research
at that scale. They are successful in innovation, but primarily through their
students. Mark Zuckerberg or Jeff Bezos are great examples — it wasn’t like
Facebook and Amazon were research projects that faculty were working on at Harvard
and Princeton. Rather, they were projects that the students were working on and
then executed on their own afterwards. So those are the two big paradigms in
higher education today.

So they both play a role in American
innovation, but, as you just outlined, they play different roles. Is your
concern that, at least at the industrial kind of university where there’s a
commercialization of the research being done, there’s something wrong with that
process?

I think it could be better. To be
totally frank, what’s happening now is that there’re a lot of mixed messages. These
universities are purportedly pursuing basic science, and to a large extent they
are, but at the same time the NSF funding is becoming more and more based on
applications.

For example, the NSF runs a big
program called Engineering Research Centers, which gives $30 to $60 billion
grants to universities over several years. They’re not really just looking for
purely theoretical research — they’re looking for research with real impacts on
society — but the universities don’t fully embrace that. I think they are a
little schizophrenic and could engage with their commitment to innovation in a
more substantial and coherent way.

So it seems that universities are a
key part of American innovation. Broadly speaking, do you think that these
university programs are working, or do there need to be revisions in that piece
of the American innovation machine?

I think it’s working at some
level, but I also think that we’ve been pretty lucky so far because I’m not
sure that it’s really working at a systematic level. We’ve been lucky in the
sense that we’ve had a vibrant tech sector since World War II, and we’re
currently leading in some areas of innovation. But I think it could be vastly
improved. To me, there’s a lot of inefficiency within higher education and how
to execute innovation.

Even within these industrial
universities like MIT or Texas A&M, there’re a lot of faculty and students who
could be engaged in innovation but aren’t. Typically, the liberal arts faculty
are largely agnostic or totally detached from innovation. However, part of the
value of innovation is not just the technical innovation itself, but rather the
impact of that innovation on society — and that includes things creating an
innovative business model. And if we have learned anything about real
innovation in the last 20 or 30 years, it’s that it’s never just technical
innovation alone. It’s always some business, economic, or social innovation on
top of the technological innovation. We have all those skills within
universities — we just don’t deploy or recruit them in the right ways.

At the very least, I think some
parents will like to hear that. I think a lot of parents think that every kid
needs to be engineering or computer science and that there’s no role for
liberal arts in the economy of today or of the future. That’s not true, right?

Exactly right. Let me give you an example.
When I was at Stanford getting my PhD, Google started simply as an algorithm, a
way to rank websites. However, Google is not successful only for that — it
fundamentally also created an entirely new way of selling advertising. That’s
the reality of why it’s a trillion-dollar company now. Yet no one ever uses
Google as an example to talk about the economics or business of understanding
innovation and digital advertising — we always refer to them as the first
search engine to implement the page rank algorithm.

So I think there’s a huge benefit
to taking the liberal arts skills that we teach and applying them towards
innovation to really amplify our impact.

A sign is pictured outs a Google offcie near the company’s headquarters in Mountain View, California, U.S., May 8, 2019. REUTERS/Paresh Dave

If I’m an engineering or computer
science professor and I have a great idea that can be turned into an amazing
project, product, business, or be really useful in some way, what happens next?
Who gets the credit or revenue for that? How does that process work?

The first thing is to decide
whether the idea comes from the student or the faculty. If it comes from the
student, then the university really has no claim to that IP, and the student is
on their own. They have to go through whatever extracurricular channels and
resources are available to them at the university to help take that product to
market. That resource may be an entrepreneurship center that puts them in touch
with mentors, or it may be that they join a startup incubator. Usually, those avenues
are not well-connected to the university itself.

Where the university has a bigger
role is with an IP that emerges from faculty or staff, usually as a result of funded
research. For example, a professor of engineering receives a big NSF grant to
explore something, and then an offshoot of that grant is that they would like
to commercialize some of that technology. In that case, they’re supposed to
approach their tech commercialization office and discover some sort of contract
between the faculty and the entity that they will create, usually a startup.

Universities vary a lot in terms
of how much support and resources they bring to help that faculty commercialize
the business. Sometimes they offer a lot of support and they’ll help gather the
entrepreneurs together, put the team together, and even provide and locate
funding for the startup. Other times, they’ll do the bare minimum. There’s a
wide range.

Right. So it seems like some
universities, particularly more industrial universities, really understand and
encourage that process, while others don’t. Generally, do you think that, given
global competition for talent, universities are becoming more aware of that
process and feel like they need to do more to help their students, or certainly
their professors, take those next steps?

I think there are mixed results
here. I’m going to go back to my Google story because Stanford was actually critical
in this change. Stanford was obviously wildly successful off of Google — both the
university itself, which made money off of Google, but also some of the faculty
who were advisors to the founders and were later able to have some ownership in
Google. But what also happened when Stanford’s Google-success story got out
about 20 years ago is that all universities started to ramp up their
commercialization efforts. Most university commercialization offices saw Google
as a great case study and thought “Maybe we have our own Google lurking
within our halls.”

But for two reasons, it didn’t
actually work out as we’d like. One is that much of the success of Google was
beyond Stanford itself and more a result of its position in Silicon Valley. Many
universities just don’t have that kind of ecosystem built out. The second
reason is that commercialization offices began to impose fairly rigid and
somewhat onerous grievances with faculty which, rather than promoting
innovation, actually hindered innovation because they essentially promised that
at least some part of the equity would go to the university. So faculty started
to wonder, “Well, what do I get in exchange?”

If the university isn’t giving
anything in exchange, it’s a raw deal. And it hinders innovation because then
faculty don’t disclose what their ideas are. They don’t want to give up equity
for no reason because they’re not getting anything on the other side, whether
it be marketing, connections, networking, or what have you.

Should universities have closer ties with business in order to help students fully maximize any ideas that have innovative potential? Obviously, students are a tremendous resource — you’ve highlighted at least one example of students turning their idea into a trillion-dollar company. Do there need to be closer ties with businesses, and do universities push away from that in many cases?

I think there could be a lot of
benefit from closer ties. The process right now is fairly haphazard. A lot of
the ties could come through alumni, and, in my opinion, most universities don’t
really actively utilize their alumni base. It’s random — they use it for
development, or maybe if they want to fund the next football stadium, but in
terms of actually connecting with what alumni do with their careers, it’s not
used well.

A lot of the most successful
alumni at many universities are entrepreneurs for whom innovation is key to
their life. They would be more than happy to engage with students — the younger
generation of innovators — on substantial, meaningful projects instead of simply
getting a call from the development officer when they need to fund the next
athletic stadium.

Should the government be giving a
lot more money to schools for research? And on that note, one of my concerns is
that, if the government does increase funding, there’ll be too much emphasis on
the applied side of research. I’m very worried that we’re so focused on industrial
policy and competing with China that we’re going to forget about the basic
research side of things.

So should governments be giving
more money to schools? And if so, what should that money be for?

I don’t think this would require an
increase in public funding of higher education. I think we could keep it as it
is, or even possibly decrease it if the money doled out to universities is targeted
a little better. So much of the innovation in this space could happen within
higher education itself, and frankly, higher education has their own incentives
to get this right.

In the long term, I’m fully
convinced that if a university has a policy that executes well on innovation,
it will pay for itself over generations because of the loyalty of alumni to
give back to the university — those donations could eventually offset tuition
increases later. So I think it’s in the university’s interest to do this.

In terms of the government’s role,
maybe when they do give NSF grants, for instance, they should tailor those grants
to make sure that the receiving universities actually engage the broad set of
faculty in using them, rather than just engaging with the narrow silos as they
do right now. That would be one policy change that would be welfare-improving.

There’s always a China aspect to
these policy discussions. Do you think that universities are equipping this
country to compete with China’s innovation output? Chinese leaders seem to be
laser-focused on technological progress — being at that frontier and pushing
that frontier forward. It sounds like our universities could be doing more to
help us compete.

China’s a good example, and
innovation is just one small area, as I think there’s a larger discussion about
China’s operations going on. Truthfully, it comes back to the command-and-control
versus laissez-faire debate. With innovation, China is surely taking a strong,
pointed view for things like AI by funding large amounts of research and
technology in that area. The US has a fundamentally more decentralized approach
where we’re, to quote President Bush, “letting a thousand flowers
bloom” to see where things go.

A smart sport field is installed inside the Nike NO.1 flagship store, which offers a fashion high-tech experience during the Christmas season in Shanghai, China, 12 December 2020. Via REUTERS

I prefer the decentralized
approach because I don’t believe we know upfront what specific area of
innovation will be the best. It could be that a huge investment in AI is not
the right area — maybe China should have invested in blockchain, for example,
rather than AI. But that’s the risk you run with a command-and-control central
authority trying to dictate innovation, which is fundamentally unknowable from
the outset.

I think that, structurally, the US
is in the better position with its decentralized network of universities. The
universities just need to up their game, or a new university needs to be
created that is specifically oriented around innovation, not other things

Finally, one of my frequent
concerns on this podcast is that we will become, and are becoming, less open
and friendly to immigration, which has played a huge role in our economic
success and the success of our universities. Is that a concern of yours?

Absolutely. In fact, I spent almost all of last year writing a paper exactly on high-skilled immigration. Fixing our immigration policies is probably by far the easiest and most straightforward way to increase our productivity.

Moving to a merit- or skill-based
immigration system rather than our current policy of family reunification — which,
like our birthright citizenship program, is essentially arbitrary — would be vastly
more productive for higher education, future entrepreneurs, raising the quality
of the student labor force, and improving the quality of technical work hired
into companies. I think that’s an easy win, and I hope this new administration
looks seriously at that proposed policy.

My guest has been Korok Ray.
Korok, thanks for coming on the podcast.

Thank you, James. I enjoyed it!

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