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There are a lot of very smart people in academia. They are at the front of human knowledge and push it further. Obviously, the research that comes out of academia is very new. My question is who applies this research? In other words, why don't these smart professors start a company and sell their new findings by applying it to a problem and sell a service or product?

I mean if I was a very smart researcher, and discovered something that no-one has known before, then first thing for me would be to create a company and sell it. Yet what I see is that all these researchers remain relatively poor compared to business people, and they publish some papers and then someone else applies their findings and makes a lot of money, while they do not get anything.

I might be wrong though. I don't really know how it goes.

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You're asking three separate questions here: (title) How do academics make money from applying their research? (1) Who applies this research? (2) Why don't professors start a company? The answers are different to all of these. I suggest you slim down your post to a single question and ask the remaining (interesting!) questions in a different post. –  eykanal May 29 '12 at 13:32
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I mean if I was a very smart researcher, and discovered something that no-one has known before, then first thing for me would be to create a company and sell it. — Hi, would you like to buy my Ω(n^2) lower bound for 3SUM? No? Then what makes you think your first original idea will be marketable? –  JeffE May 29 '12 at 20:29
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Write books. So far I've made $333 off mine (I'm joking, but the figure is real). –  David Ketcheson May 30 '12 at 10:40
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4 Answers 4

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I mean if I was a very smart researcher, and discovered something that no-one has known before, then first thing for me would be to create a company and sell it.

Come on, do you even think it is so easy for someone to start a company and start making money? The skills needed to make a product (corporate world) are different from those necessary to create an idea (academia). A simple well-thought out, well-exposited algorithm may bring plaudits in academia, but in the industry you need to implement the algorithm as a small part of a large system, subject it to rigorous testing, find people to market the product and suitable customers to buy, etc. And then there is the whole HR team which has to do its thing...

Patents are the way to go if you have to make money from a smart idea in the academia. (EDIT: Generally, both the University and the inventor share equitably the royalties and other income arising out of inventions developed under University auspices.)

Professors do engage themselves in collaborative work with the industry; at times, they are funded by the university for setting up small companies (see this question.). The lifestyles of people in the academia and the industry are vastly different; for one, professors have much more freedom with respect to timings than in the industry and afford greater time for their family - not a bad thing in exchange for money, after all.

Successful researchers in academia are unlikely to quibble about low income compared to people in the industry. Happiness versus money is a concave function - beyond a point, more money is unlikely to make one happier.

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Business people make money because they take the risk to bring a product to fruition: it's their entrepreneurial skills that get rewarded, not their ideas. Not everyone has entrepreneurial skill (or want) to start a company and hope to make bigger money. –  Andres Riofrio May 28 '12 at 22:10
    
This answer is partly incorrect, because in many cases, while it is true that the researcher's name is on the patent, the actual intellectual property (IP) rights belong to the university. –  eykanal May 29 '12 at 13:06
    
@eykanal: Yes, in many cases (eg., nyu.edu/about/policies-guidelines-compliance/…). Editing the answer accordingly. –  Bravo May 29 '12 at 13:23
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Nice, good link. I still do think that this answer is voted up too high, as the vast majority of researchers—particularly those outside of the engineering disciplines—never file for a patent in their entire career. –  eykanal May 29 '12 at 13:30
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@bizso09 - The answer to that is complex enough to deserve it's own question; post it! –  eykanal May 29 '12 at 20:32
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From my experience, most researchers who choose to make money do so in one of two ways:

  1. Entrepreneurship. Take whatever you've found with your research and start a business somehow marketing it. This is a common path, as you are the expert in your field, and you can bring it to market in ways that no one else can.

    Many researchers do not follow this path, though, because the skills and interests required to run a successful business are oftentimes very different from the skills required to become a successful researcher. Anecdotally, the majority of researchers I've met were not interested in bringing their findings to market in any way; they just wanted to perform research and not have the headaches of running a business. Note also that you will have to inform the university about your business, and you will have to deal with the conflict of interest problems that arise because your research affects your business.

  2. Consulting. This is a much easier path, and is performed by many researchers in a variety of fields. It is unlikely you will strike it rich doing consulting, but it can bring in a significant amount of extra cash.

    A subcategory of this is legal consulting. I put this separately simply because it's consulting of a completely different nature that most business consulting. Depending on your field, you may be able to be called in as an expert witness in a legal case, which can also bring in extra cash. This is less common, simply because of fewer opportunities.

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Does the university partake a share of what is earned through entrepreneurship and consulting? From hearsay, I think this happens in India. –  Bravo May 29 '12 at 13:45
    
@Bravo - Regarding entrepreneurship, it can get complicated, but from my experience, in most cases it's completely separate from the university. Consulting is slightly different, depending on whether you consult as a Professor from University X or as a freelance domain-area expert. –  eykanal May 29 '12 at 13:54
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There is a lot of reasons leading to the fact that academics don't necessarily start a business each time they have an idea that seems to work:

  1. There is a very long and difficult (technical) path from an idea that works to a product. Finding the good persons for following that path is generally painful, and an error-prone process.
  2. There is a very long and difficult (marketing) path from product to money. Marketing and sales are two difficult jobs, where academics are not (most of the time) very gifted. Moreover, it may be hard to convince good marketers or salespeople to go with you in your adventure.
  3. Not all academics want more money. If my purpose was to earn more money, I would have originally chosen an other job. As a friend of mine say, if you want to be rich with high probability, start a pizzeria, then another one, then another one, ...
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Consulting is a common way to make more money. Universities in the Us have some kind of policy saying that you can consult for x days a month (x being less than 5, or 2-3). If you find a consulting gig, you can then charge them whatever hourly rate the market can bear, and augment your income that way.

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