THE CASE OF INTERNET2 points strongly to the dynamic role that networks of presidents play in forward planning that contributes to the academic capitalism knowledge/learning regime. That case led us to ask if trustees have networks and what part they play with regard to academic capitalism. Because trustees are usually not involved in the day-to-day running of universities but have formal legal and fiduciary responsibility for them, we thought their networks might be somewhat different from those of presidents. We analyzed the networks of a small sample of private and public research universities, which formed a pattern of tightly interlocked boards. After analyzing network densities and patterns and contrasting them with presidential networks, we came to the conclusion that the boards of trustees comprise one of several networks crucial to the management of universities. Boards have to approve universities’ adoption of policies and activities that contribute to an academic capitalist knowledge/learning regime, whether they are new policies, legal strategies, or activities such as Internet2. When boards are cognizant of the possibilities of an academic capitalist knowledge/learning regime, they participate more fully and knowledgeably in decision making. However, private and public boards seem to serve somewhat different functions, and presidents of public universities may use their knowledge about private university trustee networks’ practices to leverage their boards of trustees.
Theory and Method
There is not a great deal of theoretical literature on boards of trustees. Generally, scholars assume that university presidents (now CEOs) are the key decision makers and institutional leaders. The bulk of the literature on boards of trustees is descriptive, surveys of trustee characteristics, or proscriptive, aimed at educating trustees so they understand their duties (Chait, Holland, and Taylor 1991; Kerr and Gade 1989; Hill, Green, and Eckel 2001; Madsen 1997). The proscriptive literature makes the case that the function of public-sector trustees is to serve as a buffer between universities and nonacademic groups, primarily government, while the function of private-sector trustees is to protect academic autonomy from donors, alumni, and government. Networks of trustees are neither studied nor theorized.
We turned to scholars of business organizations to see if they could shed light on the role of trustees. Much of the literature on corporate boards from the 1930s to the 1980s made the case that CEOs, not boards of directors, were the decision makers for corporations (Berle and Means 1932; Toffler 1970). However, research beginning in the 1950s began to study interlocks among boards of corporate directors. Interlocks occur when a member of one corporate board sits on the board of directors of another corporation. From the 1950s to the 1970s, these studies were relatively few in number and viewed interlocks as “elements of capitalist class integration” (Mizruchi 1996, p. 279; see also Domhoff 1967; Mills 1956; Useem 1979, 1984; Zeitlin 1974). As the study of organizations moved from examining single organizations to considering organizational fields and interorganizational relations in the 1980s, boards of business corporations began to receive much more attention. Tightly interlocked boards were seen as important business networks rather than simply as vehicles for class domination. The interlocks were retheorized as avenues for interorganization information transmission, ranging from specific practices, such as total quality management (TQM), to business strategies that gave firms competitive advantages. As network methodology and analysis became more sophisticated, the study of interlocking corporate directorates burgeoned.
What compelled researchers was the density and flexibility of the network formed by corporate boards (and its amenability to quantitative analysis). “Directors of the median Fortune 500 firm ...collectively sat on the boards of seven other Fortune firm boards, and some firms… shared directors [‘interlocked’] with 40 or more large firms. The aggregate result is the creation of an interlocking directorate linking virtually all large American firms into a single network based on shared board members” (Davis 1996, p. 154). In 1999, “any two of the 4760 directors of the 546 largest US firms… could be connected by 4.3 links, and any two of the boards are 3.5 degrees distant” (Davis, Yoo, and Baker 2003). From 1982 to 1999, there was substantial turnover in the identities of the firms and directors that created the network among the Fortune 500 firms, but the network nonetheless remained tightly linked. As Davis, Yoo, and Baker put it, “The interlock network created by overlapping board memberships has proven to be a potent medium for the spread of corporate practices and structures… [which]… spread through shared directors like a virus, cumulating into substantial changes in the character of the largest corporations.” As they note, boards meet quite often—several times a year, sometimes as often as ten. The directors, who sit on multiple boards, bring information learned on one to problems faced by others. If the distance between directors is shorter, the information flows faster. The Fortune 500 corporations are so closely linked that Davis, Yoo, and Baker use a metaphor of contagion rather than of communication to capture the rapidity of knowledge flow among boards.
Higher education researchers have not studied college and university boards of trustees as networks (for an important exception, see Thomas, Pusser, and Slaughter, forthcoming). A few historical works studied corporate boards on which trustees sat, and, after noting the numbers of large corporations represented, made the case that these trustees and regents were the means through which business leaders’ exercised conservative control over higher education (Veblen 1918; Sinclair 1923; Beck 1947; Smith 1974). However, these studies did not focus on the interlocks among the various boards.
Our sample was defined by the membership of governance boards of twenty of the nation’s leading research universities in the academic year 2000. Using the National Science Foundation’s report of federal obligations for fiscal year 1999, we chose the ten leading public and ten leading private universities in terms of the federal dollars devoted to science and engineering obligations.
Members of the governing boards of these twenty universities were identified directly from institutional records. Each board’s membership list was then compared to listings of boards of directors from publicly held U.S. corporations that ranked within the top thirty best capitalized firms and those appearing in the top 500 of the NSF’s ranking of firms’ expenditures on research and development (National Science Foundation and the United States Department of Commerce 1999). The source for the corporate board memberships was EDGAR Online, Inc. This comparison of board memberships allowed us to identify individuals who sat both on university governing boards and the publicly held corporations identified for our sample. Because our sample is quite selective, it likely underrepresents the density of interlocks.
Aggregating the total linkages observed for any university allowed us to develop a matrix representing the number of ties between each university and each corporation in the sample. If, for example, university X trustee Jane Smith was a director at Xerox and at IBM; and university X trustee John Stevens was also a director of Xerox, university X would have a total of two ties to Xerox and one to IBM.
The data contained in this matrix can be subjected to descriptive analyses yielding a number of measures useful to social network analysts. The typical focus of such analyses includes measures of network density, width, degree of connectivity, and centrality. While we use GAUSS and SNAP for our preliminary descriptive analysis there are a number of other software packages that have been designed specifically for this purpose. These descriptive measures can provide a wealth of information about the characteristics of the linkages between boards such as those of interest to us.
Corporate and University Interlocks
In 2000, the top ten private research universities, as defined by annual R&D funding, had as trustees one hundred people who sat on the top thirty capitalized corporations in the United States or on the boards of the NSF’s top 500 research performing corporations, representing a total of sixty-one firms. Thirty-nine (39%) of the corporations shared board members with more than one university board of trustees. None of the private research universities were more than two steps away from each other. Most were multiply linked through the corporate board members who sat on their boards of trustees. For example, trustees of MIT served as members of the board of directors of twenty-four corporations in our sample. MIT was interlocked through six corporations to Johns Hopkins University (see Figure 9.1). Johns Hopkins had thirteen trustees who were members of corporate boards in our sample, as did Cornell; they were interlocked to other top ten universities, Cornell to all ten, Johns Hopkins to six. Washington University had twelve members from corporations in our sample, only four of which did not link directly to other universities. Harvard had eight of our sample’s corporations, five of which were connected directly to other universities. Duke, Columbia, and Stanford each had six, most of which linked to the other universities, as was the case with Yale, with five. The density of the network is extraordinary.
After discovering the density of the network of members of corporate boards of directors who sit on boards of private research universities in 2000, we wanted to check to see if the network had changed over time. However, we had difficulty compiling historical data, given the lack of any easily accessible public archive. We were able to locate 1981 data on only four of the twenty universities we studied in 2000. Two were public and two private. We realize that such a small data set does not constitute baseline data and were tempted to discard it as a comparison point. In the end, we decided to retain it but acknowledge that it is at best suggestive.
The 1981 data (see Figure 9.2) show as many chairs of corporate boards holding seats on private universities as in 2000, although they are not as tightly interlocked. The lack of linkage may be due to having information from only two private universities from this period. However, private research universities may have been less tightly interlocked with each other then.
Figure 9.1 NSF Top 10 Private Research Universities, 2000
Figure 9.2 NSF Top 10 Public Research Universities, 2000
Figures 9.1 and 9.2 cont. Standard and Poor’s Major & Detailed Industry Categories*
Figures 9.1 and 9.2 cont. Corporation Index, by Major Sector & Detailed Sector
Although the network created by interlocks among university boards has not been studied, corporate interlocks, as we noted earlier, are receiving more and more attention. Studies indicate that the overall network established by corporate interlocks creates a general communication system through which information important to corporations quickly travels (Davis, Yoo, and Baker 2003). Sitting on external boards allows corporate leaders to run a “business scan” to understand what other corporations are doing (Useem 1984). Interlocking boards created social cohesion within the business class which unifies them as political actors. Interlocked firms have similar Political Action Committee (PAC) contribution patterns and give voice to similar political positions at congressional hearings (Mizruchi 1989, 1990). Patterns of interlocks predict a range of corporate strategies: provision of “golden parachutes” (Wade, O’Reilly, and Chandratat 1990), adoption of the multidivisional form (Palmer, Jennings, and Zhou 1993), engagement in acquisitions (Haunschild 1993), and TQM (Westphal, Gulati, and Shortell 1997).
Corporate board members have long sat on university boards of trustees, where they have been the dominant occupational group since the 1890s (Veblen 1918). There are several interpretations of this behavior, which fall into three broad categories: altruistic service, social cohesion among elites, and self-interested exercise of power over universities. Because many trustees are successful alumni, their board service is often seen as dedication to the institution at which they were educated. Business persons may also see a university board seat as conferring status and prestige. Private, non-profit boards are self-perpetuating and selective, and service is a mark of social cachet (Domhoff 1967). The corporate board members in our sample, especially the 40 percent who sit on more than one board, meet with each other specifically about university concerns several times a year. The interorganizational literature on corporate boards suggests that perhaps interlocked university trustees, like corporate trustees, do something other than support the president/CEO. For example, they may form a communication and learning network in which information about practices and strategies flows rapidly among the boards. If this is the case, then boards of trustees very likely influence institutional management, especially with regard to decisions relevant to their university’s interorganizational field.
Only sixteen (16%) of the corporate board members were from the thirty most highly capitalized corporations that were not also part of the NSF top R&D 500, and they represented only ten (16%) firms, five (50%) of which were financials. Although financial firms do not invest heavily in research, they are among the heaviest users of information and electronics research (NSF 1999). Nine firms were in the top thirty most highly capitalized and in the NSF top R&D 500: four produced medical substances and devices, largely pharmaceuticals, and three were information and electronics companies. The corporate board members who were trustees at the top ten private research universities were more likely to be from research intensive firms than highly capitalized firms.
Our concentration on firms from the NSF top research 500 at first glance suggests that we deliberately selected new economy firms. However, the economy has so reshaped itself over the past twenty years that most firms—other than financials—in the Fortune 500 also appear in the NSF top research 500. In part, this is because Fortune changed its definition in 1995 to include all industries, not just manufacturing, a change which deals with the shifting boundaries among manufacturing firms and service industries (Davis, Yoo, and Baker 2003). Moreover, about one-third of all 1980 Fortune 500 firms had been acquired and merged by 1990, and even more were merged during the 1990s. Many new firms entered the Fortune 500, often from the information and electronics or medical sectors. By 2000, the Fortune 500 exemplified many of the characteristics of the new economy.
The one hundred seats held by corporate board chairs at the top ten private research universities represented the following sectors: information and electronics (26); medical substances and devices (19); basic industry (15); chemical (12); financials (9); aircraft and guided missiles (8); machinery and electronics (6); motor vehicles (5); engineering and accounting (1). When contrasted with the firms represented on private university boards in 1981, the marked change is the decrease in seats held by corporate board members in machinery and electronic equipment and the increase in seats of companies representing information and electronics, and medical substances and devices. In 1981, seventeen, or 73 percent, of the trustees represented basic industrial and materials firms, chemical firms, or machinery and electronics firms. In contrast, only 34 percent of the 2000 trustees represented such firms. In 1981, there were only three firms (15%) in information and electronics or in medical substances and devices. In 2000, these same sectors accounted for forty-five (45%), or almost half, of the one hundred interlocks.
Information and electronics and medical substances and devices are at the cutting edge of research in the new economy. A number of university and corporate leaders have identified universities as the appropriate sites for research six to ten years away from development (Council on Competitiveness 1996; Office of the Vice President for Research University of Michigan 1996; Stokes 1997). Some scholars go even further and argue that research universities already serve the functions that industrial labs formerly did (Worthington and Varma 1995). The top research universities are repositories of knowledge valuable to the members of boards of directors of new economy firms.
Trustee positions very likely provide corporate board members with a “research scan” (Useem 1984) that allows them to get the big picture of the direction of university research in fields with which they are concerned: information and electronics, biotechnology, and medical substances and devices. Although trustee/corporate board directors have other means of accessing information about research—for example, through partnership programs such as MIT offers, or through their Vice-Presidents for Research, who meet as an Association of American Universities subgroup, or through technology licensing officials, who also meet as a group—they may attend more closely to information shared by other corporate directors/trustees because it is immediate, direct, and presented by their fellow directors (Haunschild and Beckman 1998). The “big picture” may also involve discussions about the commercial potential of research from the perspective of corporate leaders who have research investment portfolios that are different in scope and magnitude than those held by any single university or covered by any organization of university actors.
In contrast to the private research universities, and contrary to our expectations, the top ten public research universities, defined by the amount of research funding they received in 2000, had only sixteen corporate board members from our sample (see Figure 9.3). Again in sharp contrast with the top ten private universities, none of the corporate boards linked any one university to another. Indeed, half (5) of the top ten public research universities are not linked to any of the corporations in our sample. Only one corporate board, JP Morgan, links a public university to the private research universities. Because JP Morgan interlocks with four private research universities, the University of Pittsburgh is connected to the dense private research university network, the institutions of which are at most two steps away from each other.
Like the private universities, public universities have the heaviest representation from information and electronics and medical substances and devices (8, or 50%). However, the number of firms is not great when compared to the number connected with the private research universities. The only other strong pattern among the public universities is that all three of the University of California’s corporate board members come from the information and electronics sector.
There are several explanations for the differences between private and public boards of trustees. First, the private research universities had a much larger number of trustees: 467. The number of trustees ranged from seven to seventy-nine, with the average being forty-three trustees per board. In contrast, the public universities had 165 trustees, with each board having from eight to twenty-seven, with an average of sixteen. The private research universities have many more opportunities than publics to appoint trustees from new economy, research-intensive corporations. Second, there may be different rationales for the appointment of private and public board members. Private boards are self-perpetuating and may select corporate CEOs that they see as at the cutting edge of the new economy, reasoning that they have the greatest value as future donors. State governors usually appoint trustees to public boards and often repay campaign activists or contributors by naming them (Pusser 2004). Third, private universities may define themselves as national in scope through their trustee appointments, while governors may have to represent large state voting blocks through their appointments.
Figure 9.3 NSF Top Research Universities, 1981
Figure 9.3, cont. Corporation Index, by Major Sector & Detailed Sector
Do interlocks matter? Recent work on private enterprise suggests that board interlocks encourage adoption of underlying decision processes that can inform many policy issues: examples are R&D spending, advertising, acquisition activity, and executive compensation (Westphal, Seidel, and Stewart 2001). Not all practices and strategies diffuse throughout the network. Characteristics of boards (active versus passive) and alternative sources of information (membership in organizations such as the Business Roundtable or the Business Council) as well as other factors influence patterns and their outcomes. However, interlocks do seem to shape corporate communication, learning, social cohesion, and political activism.
Although the university boards have not been the subject of interorganizational interlock literature, activity similar to that of corporate boards may occur in research university boards of trustees or regents. Like corporate boards, university boards (and their corporate members) meet several times a year, and the information that flows through the network is “personal, vivid, and concrete” (Haunschild and Beckman 1998), very likely making it persuasive to board members. The network created by the interlocks among private research university boards may give them advantages that public universities lack.
If the private research university network conveys advantage, we should be able to distinguish among behaviors and strategies of public and private research universities, especially with regard to activity related to academic capitalism, because corporate CEOs should have information and opinions on what “works.” Yet the two sets of research institutions seem to follow similar practices, strategies, and scripts with regard to policy changes that call for trustee endorsement, as our chapters on patents and copyright have shown, even though the two sets of institutions are quite different with regard to resources, legal constraints, and the size of their student bodies.
Similarities between public and private boards may occur for a number of reasons. Although our sample corresponds to the Fortune 500, it is not congruent with it: the top ten public research universities may have members of Fortune 500 corporations as trustees who are not in our sample. These corporate board members, who are privy to the same information as are those in our sample, may behave in similar ways. Similarities may also occur because presidents of public universities have alternate sources of information that allow them to access information flowing through the private research network. Research on what influences corporate decisions show that decision-shaping information flows not only through interlocks but also through CEOs’ membership groups and the business press (Haunschild and Beckman 1998). Presidents of public research universities regularly meet with corporate board directors who sit on private university boards: in organizations like the Business-Higher Education Forum, the Business Roundtable, the Committee on Economic Development, and the Council on Foreign Relations (Slaughter 1990); on the boards of university foundations; and on advisory boards that serve specific colleges and schools in their universities. University presidents also sit on a number of corporate boards. In a 1983 sample of thirty-eight university presidents who were members of the Business Higher Education Forum, half of whom were heads of public institutions, 55 percent sat on at least one corporate board, and half of the public presidents sat on two (Slaughter 1990). In two separate studies of a larger sample of Research I and II universities, one in 1998, the other in 2000, researchers found that about one-third of the presidents in both studies served on from one to five corporate boards and that more than half of the presidents who so served were public university presidents (Goldschmidt and Finkelstein 2001). Many of these were the same boards from which the corporate members on the top ten private research universities boards were drawn. Overall, public university presidents have alternate sources that are likely to provide them much of the same information available to private university presidents and corporate board members who are university trustees.
Presidents may use this information to educate boards that are passive with regard to market practices and political issues (see Zajac and Westphal 1996, on the differences between active and passive corporate boards). More likely, non-Fortune 500 university trustees may be eager to emulate the practices of their corporate counterparts and actively develop similar scripts (see Westphal, Seidel, and Stewart 2001 for board members’ scripts and organizational learning in the corporate sector). They almost certainly regard the top ten private research universities as their peer group and would be ready to adopt practices and strategies that make them more similar (see DiMaggio and Powell 1983, for neoinstitutional explanations of why organizations are similar).
Innovation Management in Public and Private Universities
If interlocking boards provide private research universities advantages over publics, then we should be able to see differences in adoption of strategies, practices, and behaviors between the two sets of institutions. Market activities should be most likely to differentiate the two. Private research universities, which have heavy representation of corporate board members from firms that overlap with the Fortune 500, should rapidly communicate information about business practices and market activity relevant to higher education. Public research universities, which are only indirectly connected to this knowledgeable network in a single instance, should have more difficulty gaining access to information about the same business practices and market activity, or at least lag substantially behind private research universities.
Three recent practices in terms of which to compare the two sets of research universities are: increased compensation for professors; presidential compensation; and taking equity interests in companies, often based on faculty discoveries, in exchange for giving the companies the right to use university intellectual property. The corporate board directors of the top ten private research universities likely have information about and interest in all of these practices. Approval from the boards of trustees at private and public research universities is necessary for adoption of any of them.
Private university trustee networks may play an important part in setting faculty salary ranges. Beginning in the 1980s, salaries for professors increased much more rapidly at private-sector universities than public (Alexander 2001). By 2000, there was a noticeable gap between private and public salaries. On average, professors at private universities made $15,000 more than professors at publics. University trustees at private research universities, many of whom are also CEOs at competitive new economy firms, may have seen the competitive edge private universities could gain through attracting the “best and the brightest” with higher salaries. The network of private university trustees undoubtedly exchanged professorial salary setting practices as part of their learning process and may have acted to consolidate gains.
Public-sector research university trustees and presidents have also increased professorial salaries but, lacking the same resources, have done so much more unevenly than private universities. As publics compete with privates with regard to salaries, they likely increase salary differentiation within their institutions. In effect, public research universities may have internal segments composed of centers and departments, perhaps even colleges, which are similar to private research universities, while the university as a whole behaves more like other public institutions. The concentration of resources on some units likely heightens internal stratification within public research universities.
Presidential selection is one of boards of trustees’ most important functions. Often the corporate board members who are trustees of universities are themselves CEOs. The salaries of CEOs have risen dramatically in the past decade. If the networks of corporate directors and trustees are dense and overlapping, then as CEO compensation in the corporate sector increases, we likely will expect to see CEO compensation in private universities increase.
Before the mid-1990s, very few private research university presidents had annual compensation packages that topped $500,000 per year. In 1994, two made more than $500,000, but by 2001, twenty-seven did ( Chronicle of Higher Education 2002a). Rather than speaking of salaries, pay for top leaders began to be referred to as “presidential compensation packages.” Pay became more than salary, including bonuses for meeting performance objectives as well as various forms of deferred compensation. Among the targeted performance goals for presidents are admissions and finance performance, upkeep and construction of campus facilities, faculty and staff firing and retention, and overall reputation of the university. By 2000–2001, seven of the top ten private research university presidents had presidential pay and benefits over $500,000, and all had compensation packages above $400,000, while the median pay for the president of a doctoral university in 2001–2002 was $243,360 ( Chronicle of Higher Education 2002a).
Presidential salaries for public research university presidents fell far behind those of privates in the 1990s. By 1999, the gap between private and public university presidents’ salaries had widened to as much as 30 percent. Presidents and search firms began to tell public boards of trustees that they would have to increase salaries to compete. When state legislatures were unwilling to raise presidential salaries, private sources began to make up the difference. A 2002 Chronicle of Higher Education survey found that about a third of the 131 public university presidents received base-salary supplements from private sources that “equaled and sometimes far exceeded their state salaries.” Most of the presidents led state systems or flagship or large land-grant institutions with large foundations. In some cases, “new presidents have signed two contracts. One is with the university, and one covers compensation from its affiliated private foundations” (2002a). Increasingly, public university presidents are also joining what the Chronicle calls the “$500,000 Club.” For example, Mark Yudoff, president of the University of Texas system, has a total compensation package of $787,319, of which only $70,231 and a house comes from the state. John Shumaker, president of the University of Tennessee system, receives total annual compensation of $733,550. The state contribution includes $365,000 base salary, $20,000 expense allowance, a house and car, and $98,000 performance bonuses. His private contract has $250,000 in benefits that include executive stock options purchased by the University of Tennessee Foundation and performance bonuses from the foundation. Mark Emmert of Louisiana State University receives $590,000. The state pays $259,160 and provides a house and a car. The private contribution is $230,840 base salary with a $100,000 a year bonus if he completes his five-year contract.
While only a few of the presidents among the top ten public research institutions are members of the “$500,000 Club,” many may join in the near future. The public sector institutions lag behind the private, but presidents use information about the private sector from various sources, ranging from search firms to the Chronicle of Higher Education, to push their trustees to develop similar practices. The market in presidents spans private and public sectors and, as long as supplemental private resources are available, allows the public to use private-sector practices to leverage their boards for similar compensation packages.
Private research universities’ densely interlocked boards may not provide long-term strategic advantages over elite publics, at least with regard to presidential compensation packages, even though their network seems to give privates a short-term edge. Although the two sets of institutions may end up with similar practices and strategies, we think they do so through a different set of dynamics. We see information about practices and strategies traveling rapidly—like “contagion”—through the dense private research university network and boards of trustees as quickly adopting new practices such as complex, high-reward presidential pay packages (Ehrenberg, Cheslock, and Epifantseva 2001). The top public-sector boards, drawing on alternate sources of information from networks that overlap the private-sector board of trustees network, implement similar packages but rely on nonstate sources. In taking this course, the public boards make public institutions more like private. As Derek Bok, the former president of Harvard notes, some research university presidents now make twice as much as the president of the United States, four times that of the Secretary of State (Bok 2002). In other words, the compensation structure of public institutions approximates that of private institutions, both of which are closer to the general structure of pay for CEOs in the corporate world than to the structure of pay in most public organizations. When public and nonprofit universities adopt compensation packages that are structured like those of the private sector, they become more committed to an academic capitalist knowledge/learning regime.
Equity deals did not occur frequently among research universities until the 1980s, when we see an academic capitalist knowledge/learning regime gaining ascendancy. The number of equity deals spread among research universities, slowly at first, and starting in the 1990s, quite rapidly. Taking equity positions rather than licensing intellectual property and receiving royalties became a market strategy for research universities. According to Feldman et al. (2002a), equity provides three advantages over licensing. First, equity gives universities options or financial claims on companies’ future income; second, equity deals align interests of university and firm with regard to rapid commercialization of technology; third, equity signals interested investors about the worth of the technology. These scholars attribute the rapid growth of universities taking equity positions to organizational learning through technology transfer offices and do not consider the role of boards of trustees. However, this is precisely the sort of organizational learning that interlock researchers see as spreading rapidly through linked boards. The second and third advantages are relevant to corporate board members in their roles as corporate leaders and as university trustees. As university trustees and corporate board directors, they would have an interest in using equity to align the interests of the start-up and the university, the better to foster rapid and efficient development of the technology. So too, they can easily send and read the signal that universities send about their belief in the promise of the technology when they take equity in a faculty company.
In 2002, Feldman, Feller, Bercovitz, and Burton surveyed sixty-seven Carnegie I and II research universities that had active technology transfer operations. Of these institutions, 76 percent had taken equity in a company and altogether had participated in 679 equity deals. Public universities appeared to make greater use of equity when compared to their private research university counterparts. Public universities took more equity in companies than did private universities, even though thirteen of the public universities (19% of the total sample) were prohibited by state laws from holding equity in companies. Ten of these public universities were able to circumvent state statutes by forming independent entities (501(c)3s), usually research foundations or other intermediary institutions, that were able to take equity in corporations based on faculty intellectual property. Although the study does not address whether public or private universities initiated the first equity deals, this market strategy spread rapidly through both, even more rapidly among the public than the private, despite the barriers to public institutions taking equity. This suggests that public institutions unconnected to the interlocked network in which private research universities participate did not suffer. Indeed, both sets of institutions adopted the same strategies geared to increasing external revenue streams.
Ironically, public research universities’ adoption of practices and strategies similar to privates’ may steer public institutions’ trustees toward more aggressive market activity. Public research universities do not have the same resources as privates. Even the highest endowments of the top ten publics do not compare to the endowment of the average top ten private. To pay presidents, public trustees have to support other revenue-generating practices, such as increasing revenue from intellectual property. As noted above, public institutions are more likely than private to take equity positions in faculty intellectual property, even if that means circumventing state law or, as we saw in chapter 3, working to change state law to allow such practices. Public institutions may become more entrepreneurial than privates so that they can keep up. Public trustees may find it easier to build up the foundation than to get funding from the state legislature to compete with privates. However, private subcontracts with presidents and private revenue streams diminish the boundary between public and private, privatizing parts of public universities. Such practices also valorize market activity and undermine the public (nonmarket) mission of public universities.
Our small sample of corporate directors who are trustees at the top public and private research universities suggests that the composition of boards has changed over time. In the past, boards represented basic industry; currently they represent the information economy. As board composition changed, the commercial potential of university research may have become more salient to board members. They may have played a part in developing the federal and state policy changes detailed in chapters 2, 3, 4, and 5 that created the conditions for academic capitalism to flourish. In addition to general concerns with the commercialization of intellectual property, corporate board members who sit on university boards of trustees may have specific interests in university-industry partnerships of various sorts that touch on information and electronics (computers and telecommunications) and medical substances and devices (biotechnology). Practices that shape the climate for the academic capitalist knowledge/learning regime, such as pay packages that make university presidents more like corporate presidents than leaders of nonprofit enterprises, seem to flow through the network created by interlocked private boards. In turn, these seem to influence public universities. Market or academic capitalistic practices also seem to flow through the network and diffuse through the public sector: taking equity positions based on university intellectual property moves universities more directly into the market than licensing did. Trustee networks very likely participate in the interorganizational communication that makes this strategy for generating external revenue possible.
We need to know much more about the part that networks of trustees play in an academic capitalist knowledge/learning regime. The differences in density between private and public networks may have underlying causes that we are not able to explore given the limitations of our data. The extraordinary density of private university trustee networks may stem from their need for a partitioned resource space in which they can consider issues unique to themselves, for example, management issues involving their large endowments. Alternatively, private universities may be engaged in increasingly direct competition with each other and may use the network to reduce uncertainty.1
Networks of trustees overlap with networks of presidents. The presidential networks may constitute the creative force for university involvement in the new economy, but many university trustees are heads of corporations that are committed to a knowledge economy. The trustee network likely has a deep interest in fostering an academic capitalist knowledge/learning regime because such a regime creates a milieu for their products and services. For example, if Internet2 uses universities as test beds for advanced computing and Internet electronic products, they create a milieu of use in which students learn to use sophisticated products with which they might otherwise never come in contact. Universities as milieus of use advertise, induct, and instruct students about products and career possibilities in the knowledge economy. Trustee networks may endorse policies that enable an academic capitalist knowledge/learning regime and support presidents in their ventures in boundary-spanning intermediating organizations.
Like the presidents who organized to develop Internet2, trustees form another type of intermediating network between private and public sectors. Networked trustees may have intermediated between private and public sectors since the last quarter of the nineteenth century (see Veblen 1918; Sinclair 1923). However, in each epoch, the network of trustees integrated colleges and universities with different economies—at the turn of the twentieth century, with the industrial economy, at the turn of the twenty-first, with the knowledge economy.
Trustees are more likely to sit on the boards of the NSF research 500 corporations than the thirty most highly capitalized corporations, illustrating the trustees’ close connection to the new economy. Trustees undoubtedly played a role in shaping many of the practices we have discussed in earlier chapters: championing legislation at national and state levels that created a policy milieu that supported the academic capitalist knowledge regime, and contributing to patent, copyright, and information technology policies, including Internet2. At the least, trustees had to endorse these policies. At most, they actively campaigned for them. All of these policies shape how knowledge is valued in the new economy, converting knowledge into products that provide public and nonprofit support for new economy corporations.
At a more specific level, trustees may in some cases initiate and in other cases endorse specific practices, such as compensation packages for presidents, universities taking equity positions in corporations built on faculty patents or copyright, and professorial salaries (and compensation packages). Information about such packages likely travels instantaneously through trustee networks.
While in this chapter we limit our consideration to a basic description of these ties, our ongoing work considerably extends this presentation. Much of our work in progress employs more sophisticated measures of the frequency and strength of these ties. Perhaps more importantly, however, we can specify models that allow us to estimate the net impact of these linkages on outcomes such as faculty salaries, extramural grant productivity, patent revenues, and a number of other outcomes of capturing institutional behaviors central to academic capitalism (Thomas, Pusser, and Slaughter, forthcoming).
The differences between networks of private and public trustees need further study. As indicated at the beginning of this chapter, the size of our sample makes us less than confident about our data. If our sample were expanded in either direction—to include more corporations and/or more research universities—the results might be very different. As well as expanding our sample, we should explore alternative connections that public universities may have to the new economy. For example, public universities might be tied to regional or niche economies through a variety of intermediating advisory boards at the level of colleges and or/centers.
Public university trustees should be studied to see if they form networks that are grounded in public good purposes. Such a study would involve identifying public university trustees’ shared organizational connections to see if they constitute networks embedded in the public good or other knowledge/learning regimes. Perhaps these networks support, initiate, or preserve public good practices. For example, the role of trustee networks in developing or defending affirmative action practices might repay investigation.
