Commercialization of academic research in Shenzhen

• Nowadays, many places around the world have increasingly emphasized knowledge transfer from the academia to the outside world as the third mission of universities, in addition to two existing core missions of teaching and research. A crucial component of this process is the commercialization of academic research, which involves transforming research knowledge into economically viable products and services that benefit society at large and industrial development in particular. Patenting, licensing of intellectual property ("IP") to industry, and creation of spin-offs are common channels of university-industry knowledge transfer, while facility sharing and provision of consultancy services to industry clients are also prevalent.^{1Legend symbol denoting See Organisation for Economic Co-operation and Development ("OECD") (2019).}
• Being the home to several world-renowned universities, Hong Kong is strong in basic research but appears lagging behind its global counterparts in commercializing research and development ("R&D") outcomes, as observed in the apparently subpar performance in patenting, licensing and spin-off activities. There have been views that relatively conservative university policies, slow development of a thriving innovation ecosystem, and insufficient university-industry collaboration might have thwarted the commercialization efforts of universities^{2Legend symbol denoting See 明報(2022), Our Hong Kong Foundation (2020) and 香港01(2021).}, notwithstanding enhanced funding support from the Government in recent years to drive R&D commercialization at universities.
• Hong Kong's neighbour Shenzhen is well regarded for its innovation and technology ("I&T") capabilities, noticeably in applied research, technology transfer and commercialization of R&D outcomes. In 2020, Shenzhen spent 5.5% of its Gross Domestic Product ("GDP") on R&D, outpacing not only Hong Kong (1.0%) but also other developed economies like South Korea (4.6%) and Germany (3.1%).^{3Legend symbol denoting See Legislative Council Secretariat (2022b).} Shenzhen's universities and firms also ranked at the top of global and national league tables for patent applications in 2021.^{4Legend symbol denoting In 2021, Shenzhen filed 17 443 international patent applications with the World Intellectual Property Organization ("WIPO"), ranking first among Mainland cities for 18 consecutive years. Shenzhen University and some Shenzhen-based businesses were also included in the top 50 lists for international patent applications. See 深圳市人民政府辦公廳(2022) and World Intellectual Property Organization (2022).} This issue of Essentials reviews the measures implemented by the Government to promote commercialization of academic research in Hong Kong and the challenges encountered by the key stakeholders concerned. It is followed by a discussion of pertinent measures in Shenzhen, with special reference to (a) supply-side and demand-side policies; and (b) creation of intermediary organizations/enablers for facilitating matching between supply of and demand for innovations originated from the academia in a move to help bolster commercialization activities.

• The Government has taken a more proactive role in chartering the path of I&T development in Hong Kong over the last two decades or so. This features, among other things, the introduction of a raft of measures to encourage university-industry-government collaboration and commercialization of R&D outcomes.^{5Legend symbol denoting For details of these measures, please refer to Measures to Promote Government-Industry-Academia/Research Institute Collaboration and Their Outcomes in Selected Places published by the Research Office in July 2022. See Legislative Council Secretariat (2022a).} Of particular importance was the creation of the Innovation Technology Fund ("ITF") worth HK$5 billion in 1999 and a number of injections totalling HK$41 billion in subsequent years. ITF, currently administered by the Innovation and Technology Commission, provides funding support to projects that assist the Hong Kong enterprises in upgrading their technological level and introducing more innovative ideas to their businesses. There are 17 funding schemes under ITF, of which some aim specifically to support applied research and/or research commercialization (Table 1).
  Table 1 – Examples of ITF schemes supporting R&D commercialization⁽¹⁾

  Scheme (Year of launch)	Objectives	Approval since launch
  		Number of projects	Amount of funding (HK$ million)
  Innovation and Technology Support Programme (1999)	•Supporting universities and designated public research institutes to conduct R&D projects (e.g. exploratory seed projects, industry-oriented platform projects with potential for commercialization, and theme-based translational R&D collaboration)	2 908	10,713
  Public Sector Trial Scheme (2011)	•Supporting production of prototypes or samples of R&D outcomes, and conducting of trials in the public sector to facilitate commercialization of R&D results of ITF-funded projects	329	680
  Technology Start-up Support Scheme for Universities (2014)	•Supporting teams of professors and students from six designated universities to start technology businesses and commercialize R&D results	241(2)	191(2)
  Partnership Research Programme (2019)	•Providing matching funding support for applied R&D projects undertaken by universities and designated public research institutes in collaboration with private companies	198	382

  Notes: (1)As at end-April 2022.
  (2)Figures were from April 2017 to February 2022.
  Source: Innovation and Technology Commission (2022b).
• ITF also fully or partially funds technology transfer offices ("TTOs") and research institutes to translate R&D outcomes into business innovations. Since 2013-2014, the Government has provided recurrent funding to TTOs at designated universities to enhance their capacities in providing the necessary professional support in research commercialization (e.g. patenting and contract negotiation).^{6Legend symbol denoting From 2019-2020, the maximum annual funding for each TTO has been doubled to HK$8 million, providing incentives for universities to offer entrepreneurship education and engage with industry players to commercialize their research. See Innovation and Technology Commission (2022a) and Legislative Council Secretariat (2020b).} Through ITF, the Government also sponsors the operation of four R&D centres to drive applied R&D in selected areas^{7Legend symbol denoting Since the 2000s, the Government has established five R&D Centres: (a) Automotive Platforms and Application Systems R&D Centre; (b) Hong Kong Research Institute of Textiles and Apparel; (c) Logistics and Supply Chain MultiTech R&D Centre; (d) Nano and Advanced Materials Institute; and (e) Hong Kong Applied Science and Technology Research Institute ("ASTRI"). All centres are funded by ITF, except for ASTRI, which is funded by the Government's annual recurrent subvention.}, as well as state key laboratories and R&D centres from the Mainland.^{8Legend symbol denoting Each laboratory/R&D centre receives a maximum annual funding of HK$10 million to cover manpower, equipment, and R&D-related service costs. See Innovation and Technology Commission (2022a).}
• Notwithstanding the above, the performance of local universities in research commercialization does not match with their strength in basic research. Hong Kong has a tertiary education sector with top institutions and researchers. During 2021-2022, four universities ranked among the top 100 universities in the world, and over 1 000 researchers were among the list of top 2% most-cited scientists globally.^{9Legend symbol denoting See Times Higher Education (2022) and Elsevier BV (2021).} However, local universities have generally trailed their global peers in filing international patents through the Patent Cooperation Treaty ("PCT") system^{10Legend symbol denoting PCT patent applications are considered a gauge for innovation and commercialization activity. They are managed by WIPO, and allow applicants to seek protection for their inventions in a large number of countries.} and generated less income from IP rights (Table 2). Notably, Shenzhen University, having fewer "top 2%" scientists, filed over two times more PCT patents than three Hong Kong universities combined in 2021. As to spin-off activities, all but the Hong Kong University of Science and Technology paled in comparison with top overseas universities. Added to this, several well-known spin-offs from local universities had reportedly located elsewhere, such as Shenzhen, in pursuit of better prospects.^{11Legend symbol denoting One example is "unicorn" (i.e. privately held company valued above US$1 billion ("HK$7.8 billion")) drone manufacturer DJI, whose founder moved to Shenzhen to start the company in 2006 after graduating from the Hong Kong University of Science and Technology. See 香港01(2019).}
  Table 2 – Research commercialization performance of selected universities, 2021-2022

  Global ranking(1)	University	Number of "Top 2%" scientists(2)	PCT applications	IP income (HK$ million)	Active spin-offs
  1	University of Oxford	904	81	635.8	168
  4	Stanford University	1 233	194	926.2(3)	-
  5	University of Cambridge	599	37	125.7	182
  30	University of Hong Kong	272	36	29.0(4)	34(4)
  35	The University of Tokyo	458	150	368.7(3)	-
  46	Nanyang Technological University, Singapore	105	54	29.0(3)	12
  49	Chinese University of Hong Kong	204	17	62.8	10
  66	The Hong Kong University of Science and Technology	156	11	11.9	128
  351-400	Shenzhen University	42	142	-	-

  Notes: (1)Based on the rankings by Times Higher Education (2022).
  (2)Calculation includes universities and faculties/institutes that contain the full name of their affiliated universities (e.g. University of Oxford Medical Sciences Division).
  (3)Licensing revenue only.
  (4)2020 figures.
  Sources: Elsevier BV (2021), Nanyang Technological University (2021), Stanford University Office of Technology Licensing (2021), UK Higher Education Statistics Agency (2022), University Grants Committee (2022), University of Tokyo (2021) and World Intellectual Property Organization (2022).
• There are several challenges hindering the progress of commercialization of academic research in Hong Kong, including:
  • (a)
    Conservative university policies: There are concerns that current university policies on patent ownership and revenue-sharing have disincentivized researchers from commercializing their research outcomes. In Hong Kong, patents are usually owned by universities unless the inventor pays a high price to buy out the patent. As to revenue-sharing, some local universities reportedly share with the researchers concerned 25% to 50% of revenue generated from university-led commercialization activities. In contrast, overseas universities tend to be more generous by rewarding researchers with a higher percentage of revenue-sharing.^{12Legend symbol denoting Some universities in Canada and the United Kingdom, for example, allow inventors to keep more than 60% of relevant revenue. See Our Hong Kong Foundation (2020).} There is also an added concern over the limited flexibility for academic staff to engage in outside practices and commercialization activities.^{13Legend symbol denoting See ibid and University Grants Committee (2013).} Local universities normally allow staff to engage in outside practices and activities for no more than one day per week in a year of 52 weeks, inclusive of vacation and annual leave;
  • (b)
    Slow development in the innovation ecosystem: Some consider that it would take more than funding support to generate sufficient demand for university research and talents. A vibrant innovation ecosystem is also needed. As such, there are suggestions that the Government should foster an innovation-friendly environment that nourishes entrepreneurship and attracts the inflow of top technology talents. Facilitation measures proposed include the implementation of preferential policies and incentive schemes to lower the cost of doing business and improve Hong Kong's attractiveness for talents^{14Legend symbol denoting See 香港01(2019).}; and
  • (c)
    Insufficient university-industry collaboration: While publicly-funded local R&D centres have forged collaborative relationships with universities and industries, tripartite cooperation is still uncommon and its effectiveness in promoting R&D commercialization remains limited.^{15Legend symbol denoting Between 2018-2019 and 2020-2021, the combined R&D expenditures of five publicly funded R&D centres exceeded HK$2 billion, but the resulting commercialization income was only HK$207 million. A government-commissioned study also found that economic contribution of these centres rose by a mere 7% between 2017-2018 and 2019-2020 to HK$4.4 billion. See Innovation and Technology Bureau (2021) and Our Hong Kong Foundation (2019).} Some have called for enhanced efforts to strengthen the role of R&D centres as intermediary organizations to bridge the gap between academic research and commercial viability.^{16Legend symbol denoting See 明報(2022).}

• Over the past few decades, Shenzhen's I&T development has largely been driven by the strategies set out by the central and municipal governments. The onset of the economic reforms on the Mainland since the late 1970s saw the establishment of Shenzhen as one of the nation's first special economic zones, which set the stage for the evolution of the city from a fishing village to a manufacturing hub and I&T powerhouse. Today, Shenzhen is dubbed the "Silicon Valley of China", with headquarters for several technology giants and bases for numerous I&T start-ups.
• In an effort to boost its competitiveness in I&T capacities, Shenzhen has in recent years pledged greater support for applied research and R&D commercialization. As to supply-side measure, it has taken advantage of the amendment of a national law – the Law on Promoting the Transformation of Scientific and Technological Achievements ("PTSTA") (《促進科技成果轉化法》) – in 2015 to encourage knowledge transfer activities at universities. On the demand-side, Shenzhen has ramped up efforts to further nurture an innovation ecosystem studded with technology enterprises and start-ups serving as active adopters of university innovations. The municipal government has also put in place various preferential policies and incentive schemes to attract technology talents, a potential source of technology entrepreneurial leaders who can build, lead and scale future start-up companies.

• PTSTA was first promulgated in 1996 and refined in 2015 to address the issue of inadequate incentives for research commercialization. The current version of PTSTA requires universities to allocate at least 50% of commercialized income to reward relevant researchers. It further makes technological and knowledge transfer an obligation for universities, and mandates the submission of annual reports on their achievements.^{17Legend symbol denoting Failure to submit progress reports on technological transfer may result in researchers from being barred from undertaking government-funded projects for a certain period of time. See 中華人民共和國國務院新聞辦公室(2015).}
• To build further on PTSTA, the Shenzhen municipal government has introduced a number of regulations and directives for universities to translate research outcomes into business innovations:
  • (a)
    IP ownership: According to the Regulation of Shenzhen Special Economic Zone on Scientific and Technological Innovation (《深圳經濟特區科技創新條例》) introduced in 2020, universities should grant lead researchers or their teams the IP ownership or long-term licensing right of results generated from government-funded projects for at least 10 years^{18Legend symbol denoting See 深圳市科技創新委員會(2021b).};
  • (b)
    Flexibility for outside practices: In 2021, the Shenzhen municipal government stipulated in the Measures to Further Promote the Industrialization of Scientific and Technological Achievements (《關於進一步促進科技成果產業化的若干措施》) that universities should support faculty members to join the industry to take part in commercialization projects. Those who take sabbaticals to launch new businesses are even allowed to keep their positions. Engagement in relevant outside practices will be considered when evaluating the performance of researchers^{19Legend symbol denoting See 深圳市人民政府辦公廳(2021).}; and
  • (c)
    Facility and knowledge sharing: Recognizing that university-industry collaboration is a vital channel for commercializing academic research, the Shenzhen municipal government encourages universities to offer consultancy services to outside parties and share facilities like laboratories, R&D centres and equipment with the industry. Such facility sharing practices are included as part of the evaluation performance of universities.^{20Legend symbol denoting See 深圳市人民政府(2016).}

• Apart from providing entrepreneurship education at universities, Shenzhen has further put in place proactive measures to support recent graduates in creating their own start-ups. These measures include financial support, training of human resource, and other policy programmes for innovation such as incubators^{21Legend symbol denoting Incubator is an organization that helps start-up companies and individual entrepreneurs to develop by giving them office space/equipment and services, and providing them with businesses and technical advice.} and institutional support. The municipal government also waives taxes for graduates' start-ups in selected industries and gives them small loans and subsidies to cover loan interests.^{22Legend symbol denoting Enterprises in sectors such as construction, real estate, advertising and entertainment are not entitled to the relevant tax waivers. See 深圳市人民政府辦公廳(2014).} Furthermore, their start-ups are provided with subsidies to cover basic social insurances, rental and wage payments, in a move to lower the costs of doing business.^{23Legend symbol denoting Start-up tenants at government-sponsored incubators receive rent reductions of at least 80%, 50% and 20% for the first, second, and third years, respectively. Those who rent private premises may receive an annual rental subsidy of RMB6,000 (HK$7,000) for up to three years. A start-up can also claim RMB2,000 (HK$2,300) for hiring a local employee, with total wage subsidies available to each firm capped at RMB30,000 (HK$35,000) at any time period. See 廣東省人民政府(2019a), and Mok, K.H. and Jiang, J. (2017).}
• Shenzhen has also launched a high-level talent programme to lure top-notch talents to bring their expertise and businesses to the city. Unlike Hong Kong's talent admission schemes focusing largely on expediting the visa application process^{24Legend symbol denoting For details of talent admission schemes, see Legislative Council Secretariat (2020a). That said, through the Research Talent Hub programme, the Government has provided separate funding support for eligible technology firms to hire up to four research talents, including non-local talents admitted under the above schemes. Each approved research talent, who must have a degree in STEM (i.e. Science, Technology, Engineering and Mathematics), receives a monthly allowance of HK$18,000-HK$32,000. See also Innovation and Technology Fund (2022).}, Shenzhen's differs in terms of handing out generous allowances to attract eligible overseas talents (particularly award-winning scientists and professors). In 2022, each individual would receive at least RMB1.6 million (HK$1.9 million) under the programme alongside housing and other benefits.^{25Legend symbol denoting To illustrate, category A talents (e.g. Nobel Prize laureates or international award winners) can receive up to RMB3 million (HK$3.5 million). The allowance for B level talents (e.g. full professors at world-renowned universities) is RMB2 million (HK$2.3 million), while that for C level talents (e.g. assistant professors at world-renowned universities) RMB1.6 million (HK$1.9 million). Those who choose to work in certain districts (e.g. Nanshan) are also eligible for a monthly housing subsidy of up to RMB5,000 (HK$5,900) for three years. See 深圳市人力資源和社會保障局(2022) and 深圳市司法局(2022).} In less than six years after its launch in 2010, Shenzhen's programme had reportedly attracted over 1 200 talents and 60 R&D teams. Some of these teams have grown into high-tech companies and become active filers of international patents.^{26Legend symbol denoting For instance, team members of DJI and founders of flexible-display maker Royole moved to Shenzhen through the talent programme. In 2021, DJI ranked 20th globally in patent applications, with over 1 000 PCT applications. See China Daily (2015) and World Intellectual Property Organization (2022).}

• According to the Organisation for Economic Co-operation and Development ("OECD"), intermediary organizations like R&D centres and incubators play a crucial role in research commercialization through matching universities (supply side of new technologies) with the industry (demand side of new technologies).^{27Legend symbol denoting See OECD (2019).} In addition to encouraging key universities and research institutes to set up R&D centres in the city^{28Legend symbol denoting Shenzhen built its first university, Shenzhen University, in 1983, and has since then sought to attract other universities and top-notched research institutes to establish branches in the city to grow its higher education sector. As early as in 2000, the municipal government offered free office space and infrastructure, as well as long-term passes for staff to travel to Hong Kong, to incentivize the move. Some 50 universities and research institutes from Hong Kong and the Mainland had reportedly established branches by 2007. See 中新網(2000) and 中國共產黨新聞網(2007).}, like what Hong Kong is doing, Shenzhen has sponsored the creation of Makerspaces (創客空間) and Proof of Concept Centres ("PoCCs") as new intermediaries for research commercialization.

• In response to the national policy on "Mass Entrepreneurship and Innovation" (大眾創業、萬眾創新), Shenzhen pioneered a three-year plan in 2015 to support the expansion of "makerspaces" as a form of incubators for supporting technology entrepreneurship in the city.^{29Legend symbol denoting See China Daily (2017).} An annual budget of RMB500 million (HK$590 million) was allocated for this plan to offer funding support for building/attracting makerspaces to Shenzhen, and to encourage incubatees to adopt technology innovation from universities/research institutes, among others.^{30Legend symbol denoting Each operator received up to RMB5 million (HK$5.9 million) for building new makerspaces, renovating existing ones or bringing overseas makerspaces to Shenzhen, in addition to a subsidy for upgrading software and hardware infrastructure. Each makerspace also received up to RMB1 million (HK$1.2 million) for sponsoring makers to purchase technology-related services (e.g. cloud computing, testing and certification) from accredited research institutes, labs and technology firms, so as to encourage them to fully leverage the latest technological developments. See 廣東省人民政府(2019b) and 深圳市龍崗區科技創新局(2016).}
• Shenzhen had 316 makerspaces as at end-2020, more than doubled the number of incubators in Hong Kong.^{31Legend symbol denoting In Hong Kong, there were 116 incubators, accelerators and co-working spaces in 2020, up from 62 in 2017. See 中國知網(2021) and InvestHK (2021).} These makerspaces supported some 7 600 start-ups, which held 2 500 patents and garnered RMB3 billion (HK$3.5 billion) in funding.^{32Legend symbol denoting Ibid.} While a proliferation of makerspaces in Shenzhen has raised concerns about project quality^{33Legend symbol denoting See Sixth Tone (2018) and 深圳市創新投資集團(2019).}, some makerspaces run by universities and technology firms have provided not only just co-working spaces for incubatees, but also access to industry funding and expertise (e.g. via coaching, commercialization and marketing assistance).^{34Legend symbol denoting Some prominent examples are the Tencent Makerspace and the Chinese University of Hong Kong Shenzhen Research Institute's Entrepreneurship and Innovation Hub, both of which were recognized as national makerspaces in 2020. See 深圳市科技創新委員會(2020).} To ensure the quality of makerspaces, the Ministry of Science and Technology has since 2017 published a list to recognize makerspaces that fulfil national standards upon inspection annually.^{35Legend symbol denoting To be recognized as a national makerspace, one must fulfil certain requirements on floor size, availability of facilities, number of entrepreneurial teams hosted/start-ups created, etc. Makerspaces that fail to make progress on incubating start-ups may be removed from the list of national makerspaces. See 科學技術部火炬高技術產業開發中心(2017).}

• Shenzhen has been supporting universities to establish TTOs and, more recently, PoCCs. Unlike TTOs which are generally tasked with managing the IP of completed inventions, PoCCs support early-stage projects. As angel investors tend to invest in later-stage start-ups, researchers often struggle to secure initial funding to develop prototypes, conduct pilot trials, and perform market research. To close this funding gap, Shenzhen University set up its PoCC in 2019 with the assistance of 2 million yuan (HK$2.3 million) funding support from the municipal government. The centre provides access to venture capital funds and advisory services, and project applications are assessed by an expert panel comprising academics, entrepreneurs and investors who can help evaluate the commercial potential of research results.^{36Legend symbol denoting See 深圳市科技創新委員會(2021a).}

• Commercialization of academic research helps transform knowledge generated in academia into market-ready products and services that benefit society. Yet in Hong Kong, the performance of local universities in research commercialization does not commensurate entirely with their proven records in basic research. Meanwhile, Shenzhen is strong in applied research, thanks to its proactive measures in incentivizing the supply of innovations from universities while boosting the demand for new technologies from the industry. It has implemented measures to reform university policies on IP ownership and outside practices to facilitate knowledge transfer, as well as reducing the costs of living and doing business while encouraging entrepreneurship for technology talents. The creation of new intermediaries like makerspaces and PoCCs further helps foster university-industry collaboration on commercialization activities. This multi-pronged approach has helped Shenzhen to leapfrog and become a major player in applied research on the Mainland, which should provide reference which Hong Kong might draw from when seeking to catch up with the global trend of commercialization of academic research.