The number of startup companies spun out of Michigan’s top three research universities trended higher as of mid-decade, a possible product of heightened support for entrepreneurship in recent years.
Schools that make up the University Research Corridor spun out 22 startup companies in 2015, easily surpassing a five-year average, according to an annual report published by the research consortium.
Despite the gain, URC members — Michigan State University, the University of Michigan and Wayne State University — still largely lag peer research clusters in the U.S. for startup activity and in other key measures for innovation and commercialization.
The URC’s 2017 annual economic impact report illustrates that even as Michigan made gains over the years, other states progressed as well.
“Nobody’s standing still,” said URC Executive Director Jeff Mason. “These other regions around the country are also creating entrepreneurial support systems and they’re successful at it, too. And I don’t think that’s bad. Competition makes us stronger.
“If we’re in the same ballpark with many of these (research clusters), we think that’s pretty good company to have.”
The URC research dates back to 2007. The group contracts annually with East Lansing-based Anderson Economic Group LLC to gauge the economic impact the member universities have on the state and to compare their performance against seven other research clusters across the country. Those areas include Southern California, Northern California’s Silicon Valley, North Carolina’s Research Triangle, Illinois, Massachusetts, Pennsylvania and Texas.
The 22 startup companies spun out of URC universities in 2015 exceeded the five-year average of 16 companies. The URC ranked seventh among the eight research clusters for startups generated from 2011-2015, according to the Anderson Economic Group analysis.
Southern California ranked first with an average of 42 startups annually and Massachusetts was second at 36.
From 2011 to 2015, the URC ranked sixth in invention disclosures, fourth in patents granted, fifth in intellectual property licenses and options, and sixth in licensing revenue, according to the report.
Additionally, URC universities in 2015 collectively surpassed five-year averages for patents and licensing activity. Licensing revenue in 2015 of $33.7 million was more than twice the five-year average.
Overall, the gains over the five-year period indicate that URC members as “economic engines are hitting on all cylinders” and “are effective research machines that are contributing to the economy” in Michigan, Mason said.
He cites how R&D spending by URC members alone grew by 53 percent from 2011-2015, the third-highest growth rate among the eight research clusters.
“There seems to be some pretty good momentum out there in terms of innovation and entrepreneurship,” Mason said. “We’re stacking right up there with some of the best innovation clusters around the country.
“We’re pretty bullish about the future and how things are going, and I don’t see that changing.”
R&D at URC member universities resulted in the formation of 210 startup companies from 2002 to 2015, according to the Anderson Economic Group report. Seventy-nine startups formed within the last five years.
The annual report did not track how many of the startups remain in business. Nor does the research differentiate between whether a startup from any of the research clusters is “a little side business” by a professor “who’s just tinkering around with something,” or a business whose founder aims to “change the world,” said co-author Alex Rosaen, director of public policy and economic analysis at Anderson Economic Group.
Although the average number of startups generated by URC universities trended upward from 2011-2015, Rosaen cautions that activity is cyclical. As evidence, he points to a decline in startup activity in the years immediately following the state’s severe economic decline. Startups numbered 18 in 2011, 14 the following year, and just 10 in 2013, but trended upward again in 2014.
“When you’re doing basic research, you don’t know if next year you’re going to have a breakthrough,” Rosaen said.
It’s difficult to predict when a breakthrough in the lab will lead to the formation of a startup. Thus, the research cannot directly correlate annual R&D spending to startup formation from one year to the next, Rosaen said.
However, the higher R&D spending by URC members over a broader period coincides with universities’ greater emphasis on technology transfer and support of entrepreneurship, which in turn can drive startup activity, patents and I.P. licensing, Rosaen said.
“Universities — not only are they doing more research as expenditures go up and the number of scientists go up, but they’re getting better at figuring out how to help their scientists translate their work into whatever commercial potential it has,” he said.
The URC ranked second among its peers in an “Innovation Power Ranking” that consists of research spending, technology transfer and talent generation. Southern California ranked first in the composite ranking and Northern California was third.
In individual categories of the Innovation Power Ranking, the URC was first in talent with 35,547 undergraduate and graduate degrees issued in 2015, fifth in research spending at $2.15 billion, and seventh in technology transfer.