Innovate or Perish: Managing the Enduring Technology Company in the Global Market

University and Corporate Costs of Product R&D and Commercialization

The university’s investment in an R&D project will be the “lost opportunity” cost of not working on an alternative, potentially more “licensable” technology with another funding sponsor (typically, either industry or government). An additional implied assumption in this “opportunity cost” is that the university’s principal investigators are fully funded through the summer and are turning down projects due to lack of time.

The overall costs to commercialize technology from the idea stage can be staggering. For the pharmaceutical industry, a recent study pegs the average cost to commercialize a new drug at $897 million.^[15] Although less, the costs to commercialize technology in the chemical sector can also be substantial. A recent study was conducted for the chemical industry in which the R&D costs required to produce a patent were estimated for 11 representative companies.^[16] The results indicate an average cost of $3.2 million per patent in 1997. Since any given technology typically has more than one patent associated with it, it’s easy to envision a total R&D cost of at least $10 million per technology. To account for the costs downstream of the R&D expenditure, an estimate was recently made based on data from the United States, Canada, and Israel.^[17] The results of this study indicate these downstream costs (scale-up, commercial development, marketing, plant investment) can account for 40% to 60% of the overall ...