The Triple Helix of Innovation
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The Triple Helix of Innovation
Fostering a synergistic innovation culture
Human progress is driven by innovation. Innovation underpins economic growth, prosperity, and is our best hope for reducing global poverty and solving environmental challenges. In the late 20th Century, a new model of innovation came to the fore, one that recognized the synergy between the government, education, and industry: the Triple Helix Model of Innovation. What is the triple helix and how can we leverage this synergy in the 21st century?
The Triple Helix Model
The Triple Helix Model of Innovation was first proposed by Henry Etzkowitz and Loet Leydesdorff in the 1990s. The model suggests that interactions between industry, government, and universities can spawn new intermediary institutions, like science parks and technology transfer offices (TTOs). In this model, all three players retain their core roles but also take on some functions of the others. The net effect is innovation output greater than the sum of each part.
The triple helix model is perhaps best epitomized in Silicon Valley. Silicon Valley emerged when the “double helixes” of industry-government and government-university converged together, creating something wholly new. Initially supported by government contracts with industry for radio and microwave technology in its early years, the combined interaction with Stanford University produced the semiconductor mecca we know today.
While most depictions of the triple helix use a static image of three adjacent or overlapping circles, in reality, the interaction between the three players is fluid. Some circles grow larger and others shrink. Sometimes they converge closer to one another and at other times they remain quite distinct. The fluid and evolving roles of the respective players can be partly attributed to the changing requirements of the parties during the lifecycle of the innovations they are nurturing.
The Lifecycle of a Startup
New ideas are often first commercialized by startup firms that seek to try them in the marketplace. Freeman and Engel’s model for an entrepreneurial venture divides this lifecycle into four stages: inception, launch, growth, and maturity.
In the inception stage, the focus is on developing a business plan and securing initial funding. In the launch phase, the business begins operating and generating revenue, though typically at a substantial loss. This stage is often referred to as the “Valley of Death” for most startups and they require significant investment for survival.
In the next phase, the growing company is finally able to successfully compete against established incumbents and is likely cash flow positive. Finally, when the company reaches the maturity stage, institutional investors seek to take their profits for reinvestment into other ventures. Profit-taking can take place through an IPO, a merger, or an acquisition.
At each stage in the lifecycle of the venture, its needs are different, thus the interactions between members of the triple helix are in constant flux. At the inception stage, for example, university involvement is likely more important than it is for a mature company that has substantial internal R&D capability.
Enhancing the Triple Helix
In recent decades, many universities have rushed to establish technology transfer offices (TTOs) that license IP developed at the university for profit. The Association of University Technology Managers (AUTM) notes that while some 30 universities had a TTO in 1979, some 174 did in 1999. Despite this trend, licensing remains largely an unprofitable revenue stream for most schools.
Instead, many universities, per the triple helix model, have been chartering separate entities to handle their IP, including forming start-ups that nurture and commercialize new ideas. TTOs now often facilitate many of the functions once limited to business incubators, including legal/managerial advice, office space, and access to university facilities.
There are potential pathways toward improving the synergies of the triple helix while retaining its flexibility and adaptability. If, as I suggested here, we use equity instead of debt to finance student education, universities will have a greater incentive to train their students for the workforce. They will also have a strong incentive to help place their graduates into jobs, fostering closer university+industry relationships.
Tax reform, such as the adoption of a distributed profit tax as I outlined here, would allow the full and immediate expensing of R&D and only tax supernormal profits. This would be especially helpful for new ventures, where cash flow often runs in the negative long before profits can be realized. Money-losing enterprises could have those losses deferred to future years, making financing easier to secure.
By the same token, the revenue raised by a distributed profits tax could be directed toward subsidizing R&D performed at business incubators and university/industry research labs. Likely, this would best be done by targeting research at “Pasteurs Quadrant” as outlined here. We could do this without distorting the investment incentives of established companies.
In the enhanced triple helix, the government’s role would be limited primarily to funding university research and aiding startups through the Valley of Death. Industry would benefit through a closer relationship with universities, gaining early access to emerging talent and IP. The schools themselves would receive new revenue streams and access industry knowledge. An enhanced triple helix synergy could bring faster innovation, growth, and prosperity for everyone.
The Triple Helix of Innovation
I thought that the military gets first dibs on innovations and we get the scraps.