A Better Way to Bring Science to Market

New “markets for judgment” like the Creative Destruction Lab are bridging critical gaps between scientific breakthroughs and commercial applications.

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An MIT SMR initiative exploring how technology is reshaping the practice of management.
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In 2012, when the Creative Destruction Lab (CDL) at the University of Toronto’s Rotman School of Management was launched, the audacious target of this seed-stage program for massively scalable, science-based companies was $50 million in equity creation in five years. In 2017, CDL companies surpassed $790 million in equity creation. Such is the power of a market for judgment.

A market for judgment is a nexus between science and technology. By science, I mean the kind of knowledge that is produced in academic institutions and research labs. By technology, I mean the commercial application of that knowledge. A market for judgment is a place, like CDL, where the producers of knowledge meet and mingle with businesspeople and investors.

Markets for judgment are necessary and valuable because science and technology are mismatched in several ways. They are mismatched in geographic terms: Science is concentrated in universities, which are located all over the world; technology aggregates in a few places, such as California’s Silicon Valley and Cambridge, Massachusetts, in the U.S.1 The landscape of science is the gently undulating Great Plains whereas the landscape of technology spikes like Mount Olympus.

The distribution of scientific and technological talent is also mismatched. I think that may be because of the antithetical nature of the two jobs. Scientists are supposed to go down fruitless paths; it’s part of their process. Technologists are supposed to go down fruitful paths; in their process, fruitless paths are decidedly unwelcome and potentially destructive.

In short, although science and technology are supposed to go hand in hand, they usually can’t get that close. CDL was designed to determine if we could bring science and technology closer together by building a market for judgment.

The Case for Markets for Judgment

Typically, entrepreneurs who are seeking to commercialize their hard-won scientific knowledge have little or no business experience. To get started, they need advice. What customers or market verticals should they target? Should they license their knowledge and, if so, to whom? Or should they go it alone? What sort of people should they hire? When and where should they seek funding? There are a host of such questions, and finding even one person capable of answering them, let alone a group whose diverse views would allow scientists to figure out the right answers for their ventures, is unlikely.

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Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
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References

1.A. Agrawal, A. Galasso, and A. Oettl, “Roads and Innovation” Review of Economics and Statistics 99, no. 3 (July 2017), 417-434; J. Guzman and S. Stern, “Where is Silicon Valley?” Science 347, no. 6222 (Feb. 6, 2015), 606-609.

2.For more questions, see J. Gans, S. Stern, and J. Wu, “Foundations of Entrepreneurial Strategy,” (abstract), Sept. 28, 2016, https://ssrn.com/abstract=2844843.

3.J. Guzman, “Go West Young Firm: The Value of Entrepreneurial Migration for Start-ups and Their Founders,” (MIT & NBER, September 2017), http://mitsloan.mit.edu/uploadedFilesV9/Global/Events/TIES/GO%20WEST%20YOUNG%20FIRM.pdf.

4.H. Hvide and P. Oyer, “Dinner Table Human Capital and Entrepreneurship,” Stanford Institute for Economic Policy Research (SIEPR) Working Paper No. 17-046 (Dec. 14, 2017), https://siepr.stanford.edu/sites/default/files/publications/17-046.pdf.

5.A. Agrawal and I. Cockburn, “The Anchor Tenant Hypothesis: Exploring the Role of Large, Local, R&D Intensive Firms in Regional Innovation Systems,” International Journal of Industrial Organization 21, no. 9 (November 2003), 1227-1253.

6.CDL research backs up this finding; see K. Bryan, A. Tilcsik, and B. Zhu, “Which Entrepreneurs Are Coachable, and Why?” American Economic Review Papers and Proceedings 107, no. 5 (May 2017), 312-316.

7.K. Rivette and D. Kline, “Rembrandts in the Attic: Unlocking the Hidden Value of Patents” (Boston: Harvard Business Review Press, 1999).

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