Tertiary Business in the 21st Century - Ebonyi State Univ

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TERTIARY EDUCATION FUNDING IN THE 21ST CENTURY –
 OPPORTUNITIES FOR CREATION AND MANAGEMENT OF
        THE ENTREPRENEURIAL UNIVERSITY




  A PRESENTATION AT THE FEDERAL MINISTRY OF
  EDUCATION FORUM FOR VICE CHANCELLORS ON
        TERTIARY EDUCATION FINANCING



                                   BY


   PROFESSOR PETER U. NWANGWU, M.Sc., Pharm.D., Ph.D
           EXECUTIVE ASSISTANT TO THE VICE CHANCELLOR, AND
           CHIEF DEVELOPMENT OFFICER, UNIVERSITY OF NIGERIA
 PRESIDENT AND CHIEF EXECUTIVE OFFICER, UNIVERSITY OF NIGERIA RESEARCH AND
                ECONOMIC DEVELOPMENT (UNRED) FOUNDATION




                  AT UNIVERSITY OF LAGOS
                   APRIL 23RD & 24TH, 2007
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A.      STATEMENT OF THE PROBLEM
        Any major university in the 21st century must have the creative ability and initiative to acquire
sizable and sufficient working capital to apply to the many and diverse needs of a typical academic
campus.       With increasing population, the aging of the population, and intense pressure on
governments to spend more money on various social programs, universities worldwide will face
severe financial crises in the 21st century, if they do not embark on proactive and creative measures to
overcome the steady decline in the percentage of the university annual budget paid for by the
government. The shortfall cannot be paid for by tuition increases alone, because there is a limit to the
amount of tuition increase the public can bear.
        In the ranking of the top universities in the world, no Nigerian university came within the top
6,000. For too long, Nigerian universities have depended too much on the Nigerian government for
the financial resources needed to develop and sustain Nigerian universities. Government can hardly
provide 20% of the resources required to run any of the Nigerian universities adequately. The annual
operating fund given by the government to a typical Nigerian university is less than the annual budget
of a single department in some universities in the United States. The disparity is too glaring in a
globalized economy where the universities of the world are compared and ranked. While no Nigerian
university came within the top 6,000, it is interesting that 17 out of the top 20 universities in the world
are United States (US) universities. What are U.S universities doing differently from Nigerian
universities?
        Majority of the universities in the U.S receive less than 50% of their annual support from the
government. The bulk of their annual budget is derived from a well organized systematic outreach by
their foundation, or by the office of university development, to several stakeholders, such as alumni
and friends of the university, industry and corporate bodies, and massive campaign to the community;
some universities have fund raising campaign that exceed one billion dollars. However, the most
current trend in funds acquisition by the eminent universities in the U.S is intellectual property
development and marketing through research commercialization, economic development, new
venture creation, and spinning out commercial companies based on research inventions at the
university.
        The number one university in the world, Harvard University, does not receive one penny from
any government to pay for its operating costs. If it is not funded by the government, and yet it is
ranked number one in the world, then it is possible to become a robust university without government
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support. Harvard University is a classic example of a center of research and academic excellence
engineered through proper economic planning and development. Until recently, I lived in the United
States for 34 years, and was a productive senior professional there; as a scientist, inventor, and
entrepreneur at both the university and industry. I can therefore comment from practical experience
on entrepreneurial trends and methods at U.S universities that have set them apart from other
universities in the world.

B.      CURRENT APPROACHES TO ENTREPRENEURIAL DEVELOPMENT AND NEW
        VENTURE CREATION AT U.S. UNIVERSITIES
        In 1980, the U.S. Congress passed the Bayh-Dole Act, which gave universities title to
inventions developed by government-sponsored research. The office of technology transfer is
responsible for managing the intellectual property assets of the university. All new inventions from
faculty, staff and students must be disclosed in writing to the office of technology transfer who will
evaluate the inventions for their commercial potential, and work to license them to industry partners.
Royalties received from licenses are shared with inventors, and the university uses its own portion to
support its educational mission, and further develop research on campus.
        An increasingly important mission of the Office of Technology Transfer and Economic
Development is to promote and develop business opportunities in the immediate community and
surrounding regions. One means of accomplishing this goal is to identify new technologies from
inventions at the university and assist the inventors in facilitating their development into companies
that contribute to the local economy. By establishing strong relationships with industry, the Office of
Technology Transfer and Economic Development functions as an additional outlet where the
university can provide tangible benefits to the community.
        In the absence of adequate venture capital funds at the university, a plan to connect the
university to outside entrepreneurial venture sources in the creation of economic growth opportunities
is becoming a preferred national model, and is gaining momentum across the country. In this model,
universities “actively facilitate” business development through outside affiliations and will, to the
greatest extent possible, rely on outside resources. The university provides proactive guidance, but
will leverage non-university assets whenever possible.
        A key goal is to actively build networks and partnership with industry, and capitalize on
available resources in the community. Where those resources do not currently exist, a concerted effort
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is made to create them. To provide necessary physical infrastructure for new venture creation, it is
becoming popular for universities to develop a “business park” or a facility to incubate new companies.
Increasingly across the country, universities, through the Office of Technology Transfer and Economic
Development, or its equivalent, are offering options to those academic staff who prefer a more hands-
on involvement in further developing their innovations. By helping academic staff, should they desire,
create local business and companies to exploit their scientific endeavors, universities are able to
benefit, and contribute to, the economic development of the local region; instead of merely licensing
the technology to companies outside the state.
         The “multiplier” effect of creating synergistic companies in a business district in the community
is well documented. Money stays in the area, other service-oriented businesses and vendors profit,
construction and infrastructure investment follows, and desirable jobs are created.

C.       MODELS FOR ENTREPRENEURIAL DEVELOPMENT AND NEW VENTURE CREATION
         AT U.S. UNIVERSITIES
         Models for entrepreneurial development and new venture creation vary from university to
university across the United States. To some degree, the variance depends on the local resources
available in a particular region to build businesses and assist entrepreneurs. I shall illustrate the
variance by comparing two universities known for their success in spinning out companies based on
new technology from research at the university -- Stanford University, and University of Michigan, Ann
Arbor.
         Stanford University is in a region that is increasingly rich in entrepreneur resources. At
Stanford, the networks for entrepreneurs are well established; investment capital needed to seed new
companies is available, and the region is home to numerous technology-based companies. There is
already a culture of innovation and consequently, Stanford is in the unique and fortunate position not
to have to create the climate itself. Nor do they have to provide “hands-on” involvement in spinning out
companies since the market forces operate to do just that.
         When contrasted with the University of Michigan at Ann Arbor, it is clear that Ann Arbor is not
the Silicon Valley. Therefore, at Michigan, they actively manage business development as the best
way to advance commercialization within the State of Michigan. As a public institution, University of
Michigan depends on significant funding from the state legislature and, of course, makes every effort
to demonstrate it is an economic asset to its constituents. Therefore, Michigan has devoted extensive
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university resources in furtherance of a strategy by which it will create companies from its
technologies. Michigan’s approach, in contrast to Stanford’s, is much more “hands-on”. However, this
requires an enormous outlay of university resources, which is not possible today in an overwhelming
majority of U.S. institutions.

D.        BENEFITS AND CHALLENGES OF ENTREPRENEURIAL DEVELOPMENT AT U.S.
          UNIVERSITIES
          The phenomenon of creating companies around innovations from research at the university is
too sweeping and too important to ignore. In addition to its enormous responsibilities to students,
faculty and staff, the university also has responsibility to the community, region, and state in which it
exists, through the impact of technology transfer, economic development, and new venture creation.
          There is a documented link between economic growth and higher education. The presence of
a strong research university has a robust effect on attracting business to a community, on the quality
of life, and on the overall desirability of a region. Institutions of higher education must become
catalysts to engage and promote entrepreneurial developments in the communities in which they
reside.
          Other advantages include ability to attract eminent faculty and scientists to the university.
Increasingly, prime candidates for faculty positions at the nations’ most prestigious universities will
factor in the type of technology development program an institution has, in the process of making
career decisions. Some candidates often request interviews with the technology transfer office during
the recruiting process to assess the level of assistance available at the university for inventors. Some
want to understand how the technology transfer program operates, and what successes the university
has had in commercialization of intellectual property, new venture creation, and economic
development programs.
          One of the challenges in entrepreneurial development programs at the university is the
potential problem of conflict of interest. As stewards of public funds, the university has to guard
against conflicts of interest or even the perception thereof. Our challenge at the university will be to
conduct our business openly, with full disclosure, in a manner that is beyond reproach. We must also
have policies in place to address such concerns. The greatest challenge facing universities in
entrepreneurial development and new venture creation is lack of venture capital funds.
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E.     OPPORTUNITIES FOR CREATION AND MANAGEMENT OF THE ENTREPRENEURIAL
       UNIVERSITY IN NIGERIA
       Universities in Nigeria are blessed with several talented and intelligent students and academic
staff; but without the proper environment and infrastructure for focused and sustained research and
academic development, productivity has been replaced by decadence and apathy. Without vibrant
and productive creative research that is relevant for the needs of contemporary society, the
development of prime intellectual property which can be commercialized and marketed becomes a
major problem in Nigeria. Unfortunately, most Ph.D thesis projects, and most research projects by
Nigerian scientists are not patentable because they are mostly busy works that have no commercial or
entrepreneurial value, since the primary motivation is to publish for promotion. How can you motivate
Nigerian scientists to invest their energy and intellect in creative relevant research problems that are
likely to yield patentable intellectual property with commercial potential? In the U.S. scientists are
given a significant stake in their inventions. You own about 30% of all financial proceeds of your
invention, for life. In some cases it may run into hundreds of million dollars. There is no reason why
we could not adopt such an invention-friendly policy in Nigerian universities.
       Now, in the absence of intellectual property development and commercialization, there are
other opportunities for creation and management of vibrant entrepreneurial activities at the university.
In a country that imports nearly everything it consumes, I cannot understand why any university in this
country will complain about not having enough money for the needs of the university, when we are
sitting on entrepreneurial goldmines. The university has the highest per capita of Ph.D’s in the
country. Ph.D is associated with knowledge and skills, except if they are defective. About 80 to 90%
of pharmaceuticals consumed in this country are imported, yet there are probably 20 schools of
pharmacy with an average of 20 Ph.D’s in each school. Each of these universities can generate
hundreds of million nairas each year in profits, if they can develop a pharmaceutical manufacturing
plant to serve the needs of society as part of their educational, research and service mission.
Similarly, our engineering schools can develop and market several products for the need of
contemporary society that will generate hundreds of million nairas in profits for the university. And we
have schools of agriculture that can create many products for contemporary society, including fish
farming and artificial insemination of several animals which will bring hundreds of million nairas in
profits each year for the university. I have been horrified at Nsukka to see students and staff who
spend their own money to buy laboratory consumables for their research projects. And our academic
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departments cannot pay for the production of handouts for students by lecturers, because the
departments don’t have the money. Yet we can run an entire department from selling toothpicks, or
water, if we have the will. And while our Ph.D’s sit and literally rot at our universities, our governments
and parastatals import high school and college drop outs from overseas to serve as consultants on
some issues and problems that are uniquely Nigerian, at costs to our governments that are
staggering, while are universities suffer for lack of money. Part of the problem with consultation is that
we at the university have not properly packaged and presented our skills to the government.
        How can we begin to organize the tremendous talents and skills at the university to enable us
better manage and actualize our opportunities for creation of the Entrepreneurial university? In most
American universities, there is a vice president for university development, with a large professional
staff. Their job is to turn every stone and beg for money, big money, for the university. There is a vice
president for research. Under the vice president for research, there would be an assistant vice
president for Technology Transfer, or intellectual property development, and there would be an
assistant vice president for university-industry relations, each with adequate professional staff. In
Nigeria, we have a DVC academic, and DVC administration, but we do not have a DVC for university
development, or a DVC for Research and Economic Development. We do not take wealth creation at
the university seriously in Nigeria, so our universities are in a serious state of decay. The Vice
Chancellor cannot organize or supervise these university development, and economic development /
entrepreneurial activities; a senior level competent professional who reports to the Vice Chancellor
must be appointed to pursue wealth creation with great passion for the university, in every shade and
detail. Forget what the government gives you … that is no money. A potent wealth creation
programme that is properly articulated and orchestrated will yield between 3 to 5 times what the
government gives you. A newer trend at American universities is to orchestrate all their
entrepreneurial and new venture creation programs under the umbrella of a foundation, or
corporation, headed by a president and CEO. An obvious advantage of this is that it insulates the
university from potential law suits.
        Where can you find the investment capital for development of the entrepreneurial university?
An American friend and entrepreneur who is a multimillionaire always said, “People don’t have money
problem, people have idea problem.” He is very correct. If you have a good idea, and know how to
package and present it, money will flow readily to the idea. A good idea that is properly developed,
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packaged and presented will attract significant private placement funds, or can even be sold in the
stock market to raise sizable operating capital.
       In addition to raising funds from the traditional financial markets for a good project that is
properly packaged and presented, I cannot over-emphasize the importance of cultivating strong
positive relationships with Alumni and friends of the university. We must treat our students well while
at the university, and help develop their talents and potential. When we give the best to our students
in their professional development, they will not forget us when they become billionaires and
governors.

				
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