Entrepreneurial university icon: Stanford and Silicon Valley as innovation and natural ecosystem

Academic development and land protection

In response to a shortfall in funds to meet the university’s academic ambitions in the early 1950s, its business manager and provost developed a plan to make the Stanford “land grant” into an engine of academic growth and development. Precluded by the terms of the grant from selling off parcels for development as is done by campuses in financial straits (e.g. the sale by Manhattanville College in Purchase, NY of an undeveloped portion of its campus to the Mastercharge firm as a corporate headquarters), Stanford developed a leasing strategy, keeping significant segments of the leased land undeveloped.

Provost Fred Terman, a Stanford electrical engineering graduate with an MIT PhD, channeled that school’s expansion, instigated by the Second World War, into a simultaneous Cold War funded and peacetime economic development strategy for Stanford. Terman soon became aware that the original plan to attract firms to move from San Francisco to an exuburban industrial park was not working. Nevertheless, the land-lease strategy was a success as start-ups that had emanated from the university took building plots. The unexpected outcome resulted in a reconceptualization of the project, even as the basic funding model persisted. Thus, the international model of the science park, with verdant greensward surrounding low-lying corporate buildings to house science-based firms, emanated from the circumstances of Stanford’s industrial park scheme, which was modified to reflect the interests of firms like Hewlett Packard and Varian Associates that had spun off from the university in remaining located close to their parent. Subsequent university science parks made the Stanford model into the format for their development and the International Association of Science Parks utilized the Stanford principles in its membership requirements, even though there was not a direct link from the originating source to this Europe-based association.

STS 186: An undergraduate research model

The most salient and productive research instrument was Science, Technology and Society (STS 186), team-taught by the author with Dr Tatiana Pospelova, now with the Higher School of Economics, Moscow, but then affiliated with Lomonsonov State University. ⁴ The seminar’s signature feature was a series of student-run studies of Stanford innovation and entrepreneurship initiatives, projected for journal publication. After an opening day overview, the class formed itself into three-person teams, with research tasks, including literature review, interviews and data analysis, allotted internally. A common interview guide was followed, brainstormed and tested on class members with direct experience of the topic under investigation (for example, a computer science student who had been recruited by the PhD student teaching assistants in his biology module to do the coding for their biotech start-up, a Brazilian software entrepreneur and a San Francisco venture capitalist – the latter two auditors seconded from the Medical School’s Wellness Program).

The Stanford students, by virtue of that status, enjoyed privileged access to over-studied Stanford innovation venues, while the senior VC, accustomed to high-level access, booked an interview with Stanford’s President. Findings were shared periodically, highlighting students’ presentational skills. Teams presented pitch-session style to invited “ecosystem” guests at the last class. Along the way, required reading authors, such as Professor Calestous Juma (Kennedy School, Harvard) and Professor Mats Lundquist (Director of the Chalmers University Entrepreneurship School) were Skyped in for Q&A, focusing the attention of reading-challenged students. We had intended to produce an edited volume, following the model of the Hebrew University Triple Helix Seminar (Drori, 2013). However, by collating the data sections of different papers, integrating them into the conceptual framework, literature review and further discussion, it proved possible to go for high-level journal publication (Etzkowitz et al., 2020; Etzkowitz et al., 2019).

The entrepreneurial university as academic cynosure

The provenance of the entrepreneurial university is ill understood, even at its Stanford epitome. The special contribution of this paper is to set forth the basic principles of the entrepreneurial university model and to periodize the stages and phases of its development at Stanford. Such a longitudinal take is relatively unusual in a research field dominated by current and recent practice (Perkmann et al., 2013). This article frames a series of empirical studies of Stanford’s acquisition of resources to build research capacity, the development of a formal technology transfer program, the rise of serial entrepreneurs and the appearance of a hidden ‘excluded middle’ of neophyte entrepreneurs, culminating in the challenge of and response to the “paradox of success”, a hidden innovation gap. Stanford’s 125-year experience is probed for replicable principles and practices.

The entrepreneurial university is an expression of an emerging knowledge-based era in which the university plays an increasingly central role as the source of new industries and firms. The theory of the firm has shown that business activity is a more complex social phenomenon than simple supply and demand (Penrose, 1995; Granovetter, 2017). Similarly, the theory of the university is evolving to show that academia is also less discrete and bounded than traditionally conceived. Academia’s basic organizational formats of lecture, seminar and research group have proved amenable to the dissemination and advancement of organized knowledge, and most recently to their extension into putting knowledge to use. Land use and building environmental issues have also come into play in shaping both the physical and intellectual aspects of campus development.

The question of how the university should take into account the environmental and economic circumstances of its surrounding region, and what should be its future ambition for that region, in defining its mission is as relevant today as it was during the era of Stanford’s founding in the late 19th century. Beyond conventional university–industry interactions, an innovative vision of the role of the university as a promoter of start-ups has emerged as a key ingredient in the creation of new techno-economic conurbations exemplified by Silicon Valley. In parallel, much of Stanford’s 8,000 acres represent wilderness as socially defined Nature (Wulf, 2015), a “virtual National Park” where development is strictly limited (Gebhardt et al., 2022).

Stanford’s developmental trajectory is characterized by the incorporation and hybridization of successive overlays of academic innovation with the successful methodologies of one era, like “steeples of excellence”, applied to bring forth the next. The university as a medieval institutional format had its origins as a conservator of existing knowledge, with the responsibility to pass it on to coming generations. The university model has been transmogrified into a radical force in knowledge creation and innovation, from the early 19th century to the present, expressed as the First and Second Academic Revolutions (Jencks and Riesman, 1968; Etzkowitz, 2006).

The stages and phases identified in the Stanford case are non-linear and may be found in alternative order in other instances. For example, North Carolina jump-started its effort with the acquisition of research resources, using its political clout to attract second-level federal laboratories which then provided a base to attract their counterparts in industry. Start-up creation was a later follow-on phase to resource acquisition. University technology transfer presumes a well-developed research base from which transfer can proceed. But what about situations in which that base is undeveloped or modest? Two strategies may be identified to address such circumstances. The first is to utilize existing knowledge to develop new firms to meet regional needs and fill infrastructure gaps; the second is to develop an academic research base in order to jump-start the “standard model”.

The existence of alternative pathways, in the transition from a Humboldtian dual-logic research and teaching academic model to a tri-logical entrepreneurial university, have led some to question the isomorphic nature of the entrepreneurial academic transition (Tuunainen, 2005). However, further research has identified a strong entrepreneurial substrate below seemingly superficial and transient developments that appeared to vitiate the strength of the model. In a typical European pattern, entrepreneurship is introduced as a teaching discipline (Nabi et al., 2017) whereas in the USA it has classically emerged concomitantly with the rise of research as an academic mission. From the mid-19th century prospective investigators were impelled to seek support, rarely associated with an academic position as in the traditional European academic model. Entrepreneurial behavior was induced, later inspiring firm formation, given precipitating conditions.

Some observers view Stanford as a relatively unique “tail” rather than a harbinger of an accelerating entrepreneurial academic phenomenon. Moreover, they admonish aspirants not to view Stanford as a relevant role model, but to seek a more modest pathway to catch up, especially in the face of bleak regional circumstances. Nevertheless, innovative administrative restructurings, like the introduction of a Vice President for Innovation, expanding the remit of technology transfer offices to promote start-ups from academia, have occurred at the University of California, Berkeley, Johns Hopkins, Princeton University and the University of Virginia – schools not usually considered to be in the entrepreneurial academic forefront.

The entrepreneurial efforts of both its peers and aspirants indicate that Stanford’s principles and practices are both replicable and advantageous. Universities, like Oxford and the “Golden Triangle” region centered on Oxford, Cambridge and London, with significant unrealized entrepreneurial potential, may be expected to take significant second-mover steps to catch up with and even possibly surpass the current global leader (Lawton Smith and Bagchi-Sen, 2016). Nevertheless, there is a persisting dialogue between those who pessimistically argue that change is a negative sum game inevitably leading to loss of classic academic values (Mowery et al., 2004; Eisenberg, 1987) and their optimistic colleagues who hold for a “more the more” increasing returns approach (Arthur, 1994).

Ecosystem embeddedness

The entrepreneurial university is surrounded by a penumbra of firms that originated from academic research, perhaps even sharing infrastructure. A significant proportion of the faculty is seconded from external sources to positions of varying levels of academic involvement and commitment, beyond the adjunct level of a discrete course offer. Boundary-crossing educational opportunities may include student internships, start-up accelerators, simultaneously or alternatively with academic work, and faculty serving in external positions with a similar degree of involvement and commitment as their inbound external peers. Classic cases include Harvard Business School Professor George Doriot as CEO of ARD, the original venture capital firm, and Stanford chemistry processor Carl Djerassi as Syntex Research Director, continuing his industry involvement after he took up an academic position. Firms may use academic resources such as libraries and computing facilities even as academics have access to research equipment and testing facilities in industry and government. This type of cross-utilization has proceeded farthest in the newer industries, such as biotechnology, which already offer postdoctoral positions that approximate conditions in universities.

The legitimation of the model is taken furthest in Brazil, where the national innovation law allows an integrated format, with research groups and spin-off firms sharing quarters and personnel, resolving inurement, conflict of interest and commitment issues that often mandate a separation and duplication of resources format in the USA. The process of organizational restructuring to an entrepreneurial academic model, and the broader framework of engagement and interaction with industry, under varying national and regional conditions, is a large and growing field of practice and study (Perkmann et al., 2013).

Early on, Stanford attained an identity as an entrepreneurial university – even before the term was invented. Ever since the original conceptualization of the university taking a role in translating knowledge into economic uses (Etzkowitz, 1983), a precise definition has been sought. We suggest a formulation amenable to a variety of regional circumstances and university development strategies:

• An entrepreneurial university is a university whose faculty, students and administration are oriented to translating knowledge into economic activity, whether from the pool of existing knowledge that it accesses or from new knowledge that it creates. It is an academic institution that develops policies, programs and practices to achieve sustainable regional innovation and works collaboratively with external actors for this purpose.

The key dynamics of entrepreneurial university development include boundary permeability, critical mass and intermediate ties. A prerequisite is openness to interaction across institutional spheres, a necessary condition is the creation of a talent pool with commercialization potential and, finally, the sufficient condition is the ability to create an organizational infrastructure across institutional borders.

The entrepreneurial university and the extension of academic autonomy

Clark’s (1998) contribution to the entrepreneurial university concept was his analysis of a set of relatively new European academic institutions and his discovery that the granting of autonomous authority to shape academic development was a precondition for entrepreneurial university development. Although novel to Europe, academic autonomy was already a taken-for-granted feature of academic science in the USA, where it had been achieved as a resolution of the contest between groups, typically religious, for control of particular academic institutions. Legal appeals were resolved by removing the state from exercising authority.

The premise of the university as a relatively independent entity was established by the outcome of the Dartmouth College case in 1819, with the Supreme Court ruling that, once a charter had been granted, university autonomy under the direction of a self-perpetuating board was guaranteed. This decision applies even in state universities where legislators share in the appointment of board members. Nevertheless, their capacity to intervene in particular matters is restricted. This is in contrast to Europe, where universities were an element of state bureaucracy until relatively recently (Musselin, 2013). Thus, the groundwork for an entrepreneurial university, long-standing in the USA, was only recently established in Europe, and the attainment of an autonomous steering capacity has sometimes been conflated or has even substituted for an overlay of entrepreneurial initiatives, established on that base in European analyses of entrepreneurial academic development

The Dartmouth College decision reinforced the distinction between public and private. Once the state had established a private entity, it was restricted from intervening further unless it had reserved such powers in its founding grant. Otherwise, the private entity was free to pursue its own course without fear of state intervention. This decision also had implications for public universities that were often founded as entities apart from the regular administrative apparatus of state government (Douglass, 2021). The implication of the Dartmouth decision was that universities were increasingly perceived as an independent sphere, separate from the state. Thus, the preconditions for the development of a Triple Helix were introduced in the USA at an earlier period than in Europe.

Boundary permeability

Boundaries are “selective mechanisms”, discouraging some crossings while encouraging others (Champenois and Etzkowitz, 2017). Introducing ease of movement across boundaries is a basic step towards an entrepreneurial university. Concepts such as “boundary objects” in which actors share a joint project, emphasizing common interests, help align diverse institutional spheres (Star and Griesemer, 1989). Beyond “boundary objects” are free flow across boundaries and the enactment of dual roles simultaneously or successively. While some universities require faculty members who wish to start a firm to resign their post, increasing the personal risk of starting-up, others, in contrast, allow a leave of absence during the time-consuming early phases of firm formation, encouraging some to cross a boundary they might not otherwise have risked.

University boundaries have classically been defined in terms of a struggle for autonomy against more powerful institutions, with various rules such as tenure designed to protect faculty independence. As the university has become a more powerful entity in the transition from an industrial to a knowledge-based society, the need for highly fortified boundaries has declined. Indeed, too strong academic boundaries may be a problem in facilitating regional innovation. As boundaries become more permeable, a mission for economic and social development is legitimated while universities retain identity as teaching and research centers. Conversely, a lack of permeability helps explain a regional inability to leverage knowledge resources into endogenous growth.

The emergence of entrepreneurial universities exemplifies the semiconductor model of permeable academic boundaries, with entrepreneurial roles as “dopant” agents. An electronic semiconductor works by infusing or “doping” one of the elements with an “impurity” or energizing substance to start electrons moving. Analogously, a “social semiconductor model” of incentivizing movement across boundaries may help get a dynamic process of regional innovation underway. Start-ups from MIT and Harvard during the late 19th and early 20th centuries, in the scientific instruments and then the radio industry, inspired a broader knowledge-based regional development strategy (Shimshoni, 1970).

Intermediate ties

A series of “intermediate ties” that provide sustenance and support to novel social undertakings and enterprises, often beginning as a “gift” relationship in which a direct return is typically not required or expected, may be identified. These often invisible ties constitute a distinct ordinal category, located in between the weak ties of information exchange (Granovetter, 1973) and an overlay of strong ties of charismatic mentorship and interpersonal collaboration with their affective implications. Such a substrate of sociation, instantiated in colleagueship and friendship, facilitates the emergence of entrepreneurial initiatives. A young Brooklyn College sociologist’s recruitment by an older peer, an advertising executive seeking redemption in sociology, combined the two worlds in a social entrepreneurship project and celebrated their collaboration symbolically with an overlaying of hands after a shared meal at the campus deli (Etzkowitz and Schaflander, 1969). A Swedish university student friendship group repurposed such ties in actualizing latent individual entrepreneurial mindsets, morphing into a local analogue of the original book-sales-focused Amazon firm. At Stanford, the salience of intermediate ties elucidates the apparent paradox of strong discipline-rooted departments crosscut by stellar interdisciplinary research units (Liu et al., 2021).

Dual roles

A significant proportion of Stanford’s faculty is comprised of Consulting, Research, Teaching and Professors of Practice, with variable time commitments to different academic and extra-academic tasks. “Impact”, broadly defined, is an accepted criterion for hiring and promotion, with David Kelley, the contemporary role model, being made full professor and director of the university’s Design degree program and Hasso Plattner Institute while continuing as CEO of his firm. Kelley left the Mechanical Engineering PhD program before completing his degree to found IDEO but regularly taught at the university, along with other members of his firm, and informally founded its iconic D. School. Stanford’s variable faculty model represents a creative reinterpretation of the one-fifth rule compromise instituted at MIT early in the 20th century (Etzkowitz, 2002). It has since spread isomorphically across US academia but seldom beyond, legitimating consultation and by extension other practice commitments within reasonable time bounds, rarely precisely defined, but nevertheless limited by conflict of commitment charges and controversy.

The university is a flexible organizational format with the capacity to align multiple missions that often seem to be in conflict. The recent recognition of innovation and entrepreneurship as a legitimate academic mission expands the late 19th century Humboldtian dual mission framework that was itself driven by changes in the relationship between the university and the state (Brandser, 2006). These expansions of the academic remit are by no means uncontroversial. Indeed, by legitimating multiple competencies as part of the university’s evolution, they run counter to the received wisdom in the industrial sphere concerning the need to focus on a core competency. Some observers have called for such academic specialization, but experiments, like Clark University’s eschewing of undergraduate training in favor of a graduate focus, have culminated in a gradual expansion of the remit, a quick return to a broader model or subsistence as a relatively minor academic institution.

Phase 1: Priming the pump

The original source of Silicon Valley is a university with porous boundaries. The founding leadership, including Stanford University’s President, David Starr Jordan, encouraged graduates to form technology firms in the late 19th century to electrify the region, utilizing existing technology. The university’s entrepreneurial culture was strengthened with engineering school faculty members sponsoring graduates establishing firms to develop the region’s technological infrastructure. These ties served as the basis for a symbiotic relationship, simultaneously strengthening the research base of the university and the technological base of local industry.

Although the immediate local context was agricultural, a regional technological paradigm, derived from mining industries, provided a base to build upon. In contrast to Boston’s technological focus derived from manufacturing, northern California’s originated in technological problems faced by the mining industry in moving water long distances and concentrating its force to separate ore. The technological paradigm for “overcoming distance”, derived from this experience, was next applied to developing hydro-electricity, long-distance electricity transmission and long-distance radio communication (Williams, 1997). A technical substrate was thus available for an innovative engineering school to enhance with higher academic knowledge.

A next generation of Stanford faculty members, exemplified by Frederick Terman, together with their students, interacted closely with a next generation of firms, pursuing incremental innovation. In this era, the firms were often more technologically advanced than the university and aided its development. Effectively, Terman established what Saxenian refers to as a “network-based industrial system”, supporting dense social networks, open labor markets, intense competition and ongoing collaboration (Saxenian, 1994). This network-based system cohesively provided a high regional absorptive capacity, and thus a region primed for further development.

The university’s deep regional embeddedness emanated from engineering professor Frederick Terman’s initiative to form direct ties between university and industry, placing students in firms as part of their training and with the university serving as a repository for the emerging microwave industry’s intellectual property (Lecuyer, 2007). Terman’s academic development strategy in the 1930s had three key elements: (1) making close connections between science and engineering departments; (2) linking academic departments and local science-based firms; and (3) concentrating resources on a few key research areas with both theoretical and practical potential. Terman included visits to area firms, such as Eitel-McCullough and Litton Engineering, as part of student training. He encouraged electrical engineering students to appreciate the commercial potential of electronic devices and to work on multidisciplinary research projects.

The flow of students went in both directions – towards industry and basic research disciplines, notably physics (Williams, 1998; Lecuyer, 2007). Stanford professors and their former students, in nearby firms and in the university, made a series of inventions in the late 1930s that took the local electronics industry to a new level (Norberg, 1976). Encouraging spin-offs was also a key part of Stanford’s academic development strategy. At the turn of the century Northern California was dependent on the East for electrical equipment. Stanford trained engineers, configured and operated these technologies but the region lacked its own technological industries. The base on which it could be built was the Engineering School itself.

Phase 2: Creating a culture of university–industry interactions

In a second phase of the entrepreneurial academic model, local technology companies provided an opportunity for students to gain practical experience in their field as interns or part-time employees in the firms. The university also served as a platform for the firms to collaborate, by holding their patents and sharing them among the collaborating firms. A platform was thus established for the university to develop its own research base, thus setting transfer in motion. The intersection between the two models occurred with the foundation of Hewlett Packard, based on an invention made in the Engineering School by Terman with the assistance of two of his students, just prior to the Second World War.

The university served as a neutral ground, creating links among firms in cooperative arrangements, foreshadowing contemporary academic centers that include precompetitive research conducted cooperatively with seconded firm researchers, with results circulating freely among members. The start-up dynamic was expanded, with Hewlett Packard and Varian Associates originating from academic research projects and training programs. An innovation dynamic was set in motion, drawing technological demand into the university and sending research results out through cooperative relations with firms. Faculty were allowed and even encouraged to take on serious roles in firms. Technical industry existed in symbiosis with the university, indicated by a significant percentage of faculty recruited for impact and encouraged to continue extra-academic pursuits, and this continues today. Contrary to the expectations of some that external intervention in academia would inhibit academic development, these instances suggest the reverse hypothesis (Bok, 2003). A similar dynamic was set in motion at MIT even earlier. This interactive dynamic is the source of new high-tech conurbations and can be found in contemporary Pittsburgh, with Carnegie Mellon University attracting significant federal R&D funds and serving as the progenitor of that city’s emerging robotics and AI industries.

Phase 3: Resource acquisition – expanding the knowledge space

Based on observations made from his wartime position as Head of the Radar Countermeasures Lab, hosted by Harvard, Terman was also influential in transferring the MIT model of federally supported R&D, managed by the university, to Stanford in the early post-war years. The venture capital firm, which also originated in Boston, was soon transferred to northern California. Transfer of the model took place with the assistance of the Small Business Investment Company (SBIC) program within the Small Business Administration (Draper, 2011). SBIC matched public with private capital to widely disseminate the venture firm model that had been invented by the New England Council, a prototypical Triple Helix regional innovation organization (Etzkowitz, 2002).

The next opportunity for such development arrived with the Cold War, as the government was seeking to subsidize university research for defense efforts (Lowen, 1997). Terman founded the Stanford Research Institute in collaboration with an emerging high-tech business leadership in the region in order to attract military-related R&D, including projects beyond the interest and capacity of individual professors. Spun off from the university in the wake of the Vietnam War protests, the Institute played a key role in transforming Stanford into a federally funded research university.

Phase 4: Steeples of excellence

Despite its significant founding endowment and generous private land grant, Stanford was a resource-constrained university in the early 20th century. After an initial ascendance, it soon fell behind Berkeley with its state-provided munificence, not only for academic development but to meet the needs of various state agencies for research to advance their missions (Kruytbosch and Messinger, 1968). To address this gap, Stanford adopted a selective strategy of academic development, focusing resources on strategically identified fields rather than spreading available funds equally across departments.

As an academic administrator, Terman generalized his experience in electrical engineering to receptive fields elsewhere in the university. He developed a “steeple of excellence” university development strategy as the key to Stanford’s advance, creating research groups in emerging fields where the objective was to achieve academic and economic development simultaneously. Terman held that:

“…great institutions are created by a great faculty, not by paneled walls, acres of floor space, a co-op program, or even fancy gadgets in lecture rooms. What counts is first outstanding leaders on the faculty, second, intelligently planned support to enable these outstanding individuals to achieve their full possibilities in the environment in which they are placed, and third an outstanding group of students to be educated at both undergraduate and graduate levels.”

This process could be jump-started by “raiding other institutions for about six outstanding mature men whose reputations were already well established, and whose fields were representative of the major fields of engineering.” ⁵

The taken for granted male-gendered assumption in this discourse was an overlay on a subsidiary theme of significant female participation, including the university's co-founder, Jane Stanford. She served as de facto CEO, guiding the school through a fraught period when it might have been forced into bankruptcy due to legal dispute following her husband's passing that temporarily tied up university funds. Admission of women took place from the opening class (including their participation in field disciplines like geology), albeit with informal numerical limits in place, into the 1960s. Especially in humanities, women like English Professor Margery Bailey, who entrepreneured a summer Shakespeare festival, were noted campus figures who stood out in part due to their small numbers. After a Dean shut down the festival as incompatible with academic values, although she was channeling the same stream of academic involvement in society as Terman in Engineering, Bailey contributed her Elizabethan theatre expertise to the Oregon Shakespeare festival. She adapted off-campus geology field training practice to bring Stanford students into the festival even as she mentored the Ashland Normal School drama teacher festival founder as a Stanford PhD student (Etzkowitz, 2015).

The Stanford strategy of academically-based industrial development and industrially-based academic development required the setting of strategic goals to develop research areas with conjoint theoretical and practical potential. The normal academic mode is incremental development based on unique hires conducted through individual searches within particular disciplines and departments, lacking an overall framework. Terman proposed a 20-year development program, linking the physical sciences with electrical engineering. A small strategically chosen number of engineering fields would be developed in coordination with relevant related fields in the physical sciences, as at MIT during the 1930s.

Terman argued that,

“By determining the proper fields on which to concentrate, and then really laying it on those selected spots we can go places without needing large amounts of extra money. With twenty years, a suitable administrative basis, and reasonable backing from the President, it would be a pushover to do something really big.” ⁶

In his view, universities typically lacked the ability to plan:

“Their detailed administrative operations such as new appointments, allocation of funds for new equipment, etc., are decided largely on the basis of this year's and next year's needs.” ⁷

If Stanford could allocate resources strategically, as part of a long-term program, it could move ahead of its competitors.

As funding allowed, key professors were relieved of non-research tasks, such as committee responsibilities. They were assigned full-time research associates, recruited from the pool of PhDs or near PhDs to assist them in managing their research teams. The number of support staff and technicians, such as mechanics, tube makers and radio technicians, was also increased in order to translate ideas “…more quickly into physical devices”. ⁸ Following the industrial research model, researchers were required to keep laboratory notebooks on a daily basis, countersigned by colleagues. This system was productive and cost-effective due not only to the low rates of pay and the high level of results obtained, but also to the flow of people through the system.

Initially pursued in a few technical areas and then across the university, this strategy transformed Stanford into a leading university in an academic generation of two decades. Fields were selected that had both scientific and economic potential and made best use of scarce resources. Sometimes, the way forward was not clear. For example, according to the Dean of Medicine,

“At the same time the situation in physiology is such that we cannot expect at this time to recruit a really top-drawer man […] In time, a major strengthening of the Physiology Department is needed to make it comparable with Biochemistry and other medical sciences. However, this is not in the cards at the moment.” ⁹

In other cases, as in steroid chemistry, the way was clear and several promising candidates could be recruited simultaneously, making Stanford an almost instantaneous leader in a highly promising field (Djerassi, 1992). As part of his hiring arrangement, Carl Djerassi, recruited to the chemistry department from the Syntex pharmaceutical firm in Mexico, maintained his position as the firm’s research director when it moved much of its activities to the Stanford Research Park.

Phase 5: Organizational innovation: From research groups to centers

Informal arrangements at pre-war Stanford, bringing together scientists and engineers, academics and business firms to accomplish a research goal, became formally organized after the war through the establishment of research centers. The Microwave Lab began as a division of the physics department in 1945. The new center built on Stanford’s pre-war work in electronics but, instead of sparsely funded projects, federal research funds supported permanent research positions. Depression-era professors who could formerly have been found painting their own laboratory floors were now released from extraneous administrative duties to concentrate on research.

The establishment of research centers after the war, bringing together scientists and engineers, academics and business firms to accomplish a research goal, formalized the ad hoc arrangements at pre-war Stanford. Terman initiated a three-pronged financial strategy that included accessing federal funds for defense-related research, making contracts with industry in exchange for preferred access to research results and the development of university land. A shopping center and an industrial park, as well as research relationships with federal agencies and companies provided the financial base for Stanford’s post-war ascendance. As rental and lease receipts came in from the university’s real estate ventures, Terman calculated the additional number of professors he could afford to hire.

Federally funded research centers were also expanded with industrial support. Thus, Stanford entered into an agreement with the General Electric Corporation (GE) to build an extension of the Microwave Laboratory. GE received first rights to the Stanford patents from the linear accelerator, the right to call on Stanford researchers for assistance in accelerator design and office space at the university so that its representatives could closely monitor developments. Terman was well on his way, in the early post-war era, to achieving his goal of integrating an industrial infrastructure for the university with an academic infrastructure for industry. Nevertheless, while assuming an entrepreneurial role, Stanford also continued its development as a leading research and teaching institution in the liberal arts (Geiger, 1986). Indeed, members of its faculty in the arts, sciences and medicine were among the critics of academic entrepreneurship.

Once a stream of firms has been created from academic research, the university tends to return to a traditional relationship to industry – the provision of knowledge and graduates – unless a strategy is institutionalized through the creation of internal mechanisms to continue to produce new firms. Stanford University in relationship to Silicon Valley exemplifies the changing relationship of an originating university to knowledge-based industry. Once the Valley began to produce new firms from succeeding generations of firms that had originated from the university, the relationship to the original source became more distant. Indeed, the university began to seem ancillary to the understanding of knowledge-based economic development in Silicon Valley.

Phase 6: Invention of the marketing model of technology transfer

Stanford’s OTL represented a significant advance in academic entrepreneurship, a shift from a legal patenting and protection model to a proactive marketing and transfer model that accommodated but did not actively support start-up activity. Stanford’s lack of basic transfer mechanisms that had become commonplace, like incubator facilities, while surprising to visitors, was explained away by OTL, which retained virtually sole official responsibility for entrepreneurship: such mechanisms were viewed as unnecessary due to the widespread availability of entrepreneurial support, such as venture capital, in Silicon Valley, which had evolved into an innovation ecosystem with venture capital, angels, law firms and private incubators.

Phase 7: The paradox of success

A highly successful entrepreneurial university may fail to realize its full potential as senior administrators focus on past achievements and recognition received for its leading role. As Stanford University became more successful at technology transfer, a “hidden gap” opened up as the technology transfer office presumed that regional resources were doing enough to pull inventions out of the university without a push in the form of incubator and mentoring support. A 2005 study of OTL identified an “excluded middle” of neophyte inventors (in between the serial entrepreneur and opponents of entrepreneurship) with potentially commercializable research that was not systematically being translated into use (Etzkowitz, 2013). OTL, with 25 staff members, was primarily focused on serial entrepreneurs, with whom they had worked on successive commercialization projects, and did not have sufficient resources to seek out inventors who did not come to them directly.

The underachieving yet highly successful technology transfer office was a victim of the “paradox of success”, with the tendency to blind itself to flaws in the business model that reduced its potential contribution. But who would take such an analysis seriously in the face of success? The deleterious consequences of the paradox of success were not addressed until some of the university’s entrepreneurially-oriented students who were especially affected by it conducted their own study of barriers to entrepreneurship at Stanford and laid out a course of action to create an entrepreneurship mentoring and support structure to meet the needs of neophyte entrepreneurs.

Phase 8: Internal entrepreneurial diffusion

Learning from success is at least as important as the recently popular advice to learn from failure. In recent years, intellectual property generated in the world’s leading entrepreneurial university located in Silicon Valley, the world’s leading entrepreneurial region, has been subject to strikingly different fates. Stanford faculty distribute on a scale of technology transfer and entrepreneurship interest ranging from skepticism to advocacy. Entrepreneurial experience ranges from serial to neophyte entrepreneur. Most faculty, however, are non-involved, research-oriented academics who have to be convinced to support a former student’s entrepreneurial venture.

Innovation and entrepreneurship are enacted by a distinct, ever-increasing academic minority, with interest and intrigue expressed by the not-yet-involved in interviews. These “latent entrepreneurs” represent considerable innovation and commercialization potential, but will only be activated by a serendipitous highly-publicized finding with a significant upside that will make them eagerly sought out by entrepreneurs and venture capitalists (think Cohen, Boyer, Swanson and Genentech). Most entrepreneurial latency bubbles below the surface in lunchtime lab conversations and is surfaced only if there is a business development support structure that goes considerably beyond traditional technology transfer services.

Moreover, the criteria for success are always subject to reinterpretation. The paradox of success stemming from Stanford’s leading role internationally in the early 21st century as a producer of start-ups precluded administrative examination of whether its performance could be improved. Nevertheless, aspirant entrepreneurs attempting to follow the serial entrepreneur role model encountered difficulties and, even when successful, often concluded that their success was due to “luck”. However, the perception of an entrepreneurial support gap, emanating from a variety of faculty and student sources, has inspired a new series of bottom-up initiatives during the past decade. They are being spread internationally, renewing Stanford’s earlier status as entrepreneurial university role model through the invention of the science park in the 1950s and the market model technology transfer office in the 1970s.

Phase 9: Entrepreneurial organizational innovation

The formation of the D School as a bottom-up voluntary faculty initiative, eventually accepted, institutionalized and endowed with a permanent faculty, exemplifies Stanford’s mode of academic innovation. The CEO of IDEO, the internationally renowned design firm, who was a dropout from the mechanical engineering PhD program and a long-term adjunct teacher of design at Stanford, was made head of the School. He was tenured as a full professor on the basis of his “impact” on the field, rather than publications or traditional academic status. When asked what the research direction of the school would be, he replied “that will be up to them [the new hires]”: Stanford’s unique institutional feature has been its openness to bottom-up entrepreneurial initiatives from its faculty, students and staff. For example, the “market model TTO” came as a proposal from a staff member in the university’s Office of Sponsored Research, the administrative unit responsible for accessing external research funds, especially from the federal government.

Niels Reimers felt that the university, earning several thousand dollars per year in the later 1960s from patent licenses, was woefully underperforming given its potential and that this sluggish performance could be accelerated through a proactive approach. ¹⁰ A group of Management of Technology students came to a similar conclusion with respect to start-up incidence 40 years later, despite the university being the global leader at the time with 7–9 each year. Various faculty members saw the potential to systematize invention, organize interdisciplinary student groups to address firm innovation problems and address the internal translational research gap. Typically begun as informal pilot projects, these efforts were gradually legitimated, expanded, institutionalized and transferred.

The elements of a fully-fledged university innovation system have been put in place in Stanford in recent years. Programs have been established that range from seeking out and solving problems, utilizing design thinking techniques to providing a pathway for incipient start-up conversations to be translated into organizational structures, with assistance in financing, including from the university itself. Most recently, links have appeared between some of these programs so that they fill gaps and extend each other’s reach. However, most of the programs are exemplary instances that exist in one part of the university and have still to be replicated and spread across the academic spectrum.

Stanford retains a decentralized structure for its innovation and entrepreneurship activities. The technology transfer office operates under the aegis of the Dean of Research, and in recent decades its office has migrated to various off-campus sites. Spark resides in the Medical School, STVP in Engineering, Lean Startup in the Business School, while the StartX Accelerator is technically off-campus, located in its own building in the Stanford Research Park, after an incubation phase as a student government project in surplus space made available by AoL in its building, etc. A coordinating mechanism to encourage links among the various initiatives is largely lacking, with the exception of a partially filled-in website. While design thinking has been integrated into the university’s educational programs through the D. School, other aspects of innovation, such as intellectual property rights, are located in administrative units that perform their functions without being integrated into the educational mission. Nor is there a think-tank to undertake collaborative research on these issues that are studied by individual academics located in various parts of the university. Although Stanford draws in researchers and practitioners globally, during their time at Stanford they are typically located in isolated settings and often do not meet and interact, except by chance.

An innovation hub could provide a framework for intra- and inter-university innovation activities and so more widely transfer Stanford’s innovations in entrepreneurship support. These innovative initiatives could usefully be expanded from their original sites into cross-university initiatives through a renewal of the top-down entrepreneurial leadership that characterized Stanford in an earlier era. It has been several decades since a leading academic administrator took entrepreneurial infrastructure as their main mission, even though a serial faculty entrepreneur recently served as President. In the interim, faculty and students have led bottom-up, with significant but limited lateral cross-fertilization and few collaborative projects with universities in other areas.

The internal and external relations of the various innovation entities constitute a priority for future investigation, allowing us to address the question of the provenance of an “innovation ecosystem”. As an indication of networking potential, Stanford’s OTL was providing Spark, a medical school entrepreneurship support structure, with unlicensed disclosures as candidates for translational research support.

Top-down measures are best built on an underlying substrate of bottom-up initiative and interest; otherwise there is increased risk of inducing stasis (Philpott et al., 2011). Stanford recently closed some of its innovation initiatives, like the Media X industrial liaison program, a modest version of MIT’s Media Lab, and ended its subsidy to StartX, the student government initiated accelerator program. Nevertheless, the university’s entrepreneurial culture, deeply embedded in curriculum and mindset, attracting like-minded faculty and students, persists on their momentum. It may thus be expected that an overlay of climate science and sustainability research will be hybridized into a renewed commitment to “cleantech” entrepreneurship in Silicon Valley.

Phase 10: Stanford’s environmental turn

The accession of biologist Mark Tessier Lavigne to the Stanford Presidency began with an evaluation exercise in which faculty were asked to contribute new ideas and position papers to set the future direction of the university. After review by a committee representing the various academic constituencies, including students, a new initiative to develop a Sustainability School was announced. Founded in 2022 with funds from a noted venture capitalist, the Doerr School, named for the husband and wife donors, a not uncommon US practice albeit a first for Stanford, was launched with the largest focused donation ($1.1 billion) to a US university to date. The school follows the classic Stanford developmental strategy of “critical mass”, interdisciplinary collaboration and concerted resources. Interdisciplinary departments are a departure (Food and Water Security, Human Health and the Environment and Climate Science). A social science oriented institute will focus on economic and political aspects and will include an accelerator for policy and technology solutions.

The School Dean’s willingness to accept fossil fuel company donations was skeptically questioned by some as unethical and viewed as irrelevant by others, given alternative sources of support. Nevertheless, an observer noted that, “Intensifying calls for Stanford to establish a bright-line stance, divest from these companies and refuse their donations have dampened a historic moment at the University” (Lozano, 2022). Although the Sustainability School wishes to be politically neutral, its mission, addressing one of the most fraught topics of a generation, ensures that controversy will inevitably be generated as the school fulfills its goals, on campus and off.

Second movers in core regions

Perhaps the most remarkable recent transition to the entrepreneurial university model has been made by the University of California, Berkeley in recent years. Authorized by a vote of Californian citizens under the state’s constitutional provisions for ballot measures initiated by petition, Berkeley was founded 150 years ago and received the “land grant” designation for the state. These practical responsibilities were largely carried out in a separate school that eventually was relocated to the university’s experimental farm in Davis and made an independent member of what was by then the UC system of research universities. For most of its history Stanford aspired to the academic eminence held by Berkeley, only relatively recently achieving parity.

Under financial pressures in recent years due to decreased state funding, Berkeley has followed the Stanford model, activating its alumni base to donate and its research base to produce start-ups. Skydeck, an incubator and accelerator program ramped up rapidly with university, alumni and faculty support, is rapidly closing the gap with Stanford as a generator of start-ups and venture capital investment in university-originated firms (Said, 2018). Most startling is the speed of the catch-up and the implication of enormous economic potential, hitherto unrealized. The Berkeley experience, perhaps even more than Stanford’s, has significant implications for research universities’ potential as engines of economic development.

Applicability of the entrepreneurial university model to peripheral regions

The entrepreneurial university as an engine of economic and social development has become a widespread objective of academic institutions and their regions. For example, the controversy over whether the University of Wisconsin, Milwaukee (UWM) and its region were capable of becoming the Silicon Valley of water technology raised issues of whether it was a viable or even a worthwhile goal. A proponent accepted that, “it will be a major challenge for Milwaukee to become the global leader, if there even can be one”. But, “There would be nothing wrong with being two steps short of being the Silicon Valley of water” (Fishman, 2011; Rocha, 2015). A sceptic held that, “The scenario of a UWM-driven ‘Silicon Valley of water’ in Milwaukee verges on fantasy […] but it is not an innocuous fantasy; it is one that threatens to misdirect considerable public and private economic development and educational resources in Milwaukee” away from the need to create low-tech jobs (Levine, 2009).

On the one hand, there is danger of creating a gap between intentions and results (the inflationary dilemma of hype), and on the other of inducing stasis by falling into the trap of discouraging ambition and effort (the deflationary dilemma of cynicism). Entrepreneurial projects must navigate the shoals of hype and cynicism in seeking a practicable pathway to realization, especially at local universities seeking to develop a credible research base. It could also be useful to define criteria for success beyond the intermediate metric of matching ambition to resources in a realistic timeframe. It is presumed in the above “smart specialization scenario” that the university will play a role in regional development that goes well beyond traditional academic research and teaching remits. Typically, the later phases of success cases are scrutinized to discern clues for replication, but this analytical strategy may create a generative mystery obfuscated by the notion of a “secret sauce” too unique to recipe.

We suggest that the Stanford entrepreneurial academic model is amenable to adaptation, especially given links to the source, increasingly commonplace through national and corporate programs like Open Austria and Flanders Investment to promote interaction with Silicon Valley, on the one hand and Volkswagen’s involvement with Stanford’s automotive research program and the numerous international firm sponsors of student projects in Prof Larry Leifer's Mechanical Engineering 310 (Engineering Design Entrepreneurship and Innovation), on the other. Indeed, ME 310 partners with sister courses at universities abroad, whose students interact over the Internet in combined project development efforts. Brazilian students, for example, arrived at Stanford with a reengineered airplane seat, towards the end of the module, to complete the collaboration, in person.

Attention to creating a local substrate of intermediate ties and a receptive innovation environment is encouraged by the efforts of returning sabbatical visitors from, for example, Helsinki, with faculty members attempting cultural transfer by offering a discrete biotechnology innovation module. The ambition of Sweden’s Chalmers University to be recognized as the leading entrepreneurial university by its 2029 Jubilee, with Entrepreneurship Center head Prof. Mats Lunqvist appointed Vice President to lead the effort, may be traced to an older faculty member's Stanford sabbatical visit as well as the school’s own tradition of industrial engagement.