The University of Hawai'i placed 81st out of 84 universities in terms of technological strength, defined by the number of patents obtained and references to an institution's scientific papers, according to a 2002 scorecard of university research by the Massachusetts Institute of Technology's Technology Review magazine. That same year, UH ranked 99th among 141 universities in terms of technology transfer, according to the magazine.

The University of Hawai'i spent nearly $103 million on research and development in fiscal 2000, but generated just $300,000 in licensing income. To put that in perspective, Tulane University, which was ranked 25th, generated $6.8 million in licensing revenue, but spent just $89.8 million on research.

Many economists, business leaders and politicians are looking to the University of Hawai'i to play a larger role in the growth and diversification of the state's economy. When UH discoveries aren't converted into real-world solutions, the state misses out on a chance to create intellectual property, jobs and income.

UH and state officials agree that the university needs to do a better job of connecting researchers and businesses.

James Gaines, interim vice president for research at UH, pegged the problem to a lack of industry involvement in university research. Between 2.5 percent and 3.5 percent of research at UH is financed by industry, compared with a 6.75 percent average for the top 100 universities nationwide. Most of UH's research is federally financed.

To fix this, lawmakers and the Lingle administration want to create a tax credit for businesses that partner with UH to conduct research. The tax credit, which is advancing in both legislative chambers, would allow a company to write off 20 percent of UH-related research and development costs against its income-tax bill. The goal is to increase the commercialization of UH research.

"Clearly we need now to stimulate more intellectual property emerging from our research institutions," said Ted Liu, director of the Department of Business, Economic Development and Tourism, in testimony supporting the measure. "We need them to play a role as a driver for the technology portions of our economy, just as Stanford is for Silicon Valley ... and University of North Carolina is for the Research Triangle."

Few Hawai'i companies are taking advantage of federal grants available for industry-university commercial projects, Gaines told legislators last month.

"These are clear indications that industry is not leveraging the R and D assets at UH and other research institutes in Hawai'i," he said. "Part of the reason for this is the fact that Hawai'i technology companies have insufficient resources to finance R and D."

Although UH royalty revenue remains relatively low, it has grown about 76 percent since fiscal 2000 and is expected to surpass $620,000 this fiscal year. Those gains coincide with a reorganization of the university's licensing and patent office and a change in the way profits from licensing agreements are divided between UH and faculty. As an incentive, university researchers now get more licensing income up front before the university is repaid for patenting costs. About half of the $530,000 licensing income generated at UH last year went to university researchers.

Last year the university also created what's called the Accelerated Research Commercialization or ARC grant, which provides up to $75,000 to match expenses incurred by a company that brings UH research to market. A total of $146,000 was given to three such faculty-corporate efforts last year.

In addition, UH is building a $150 million medical school complex in Kaka'ako, designed partly to buoy the university's research strengths, which include oceanography and astronomy.

Still, as it stands, UH's level of research grants and licensing income are relatively low, said Jonathan Silberman, an economics professor at Arizona State University West. Silberman, who has studied factors that drive technology transfer at universities, said some schools have been slow to embrace the need to generate money from research efforts both to offset falling state budgets and serve as catalysts for economic development.

Instead of conducting basic research, which is free from any commercial consideration, universities need to focus on innovation, he said.

"That's the problem with universities. Sometimes they try to do everything and so they don't do a good job," Silberman said. "You have to be serious. That means leadership from the top all the way down to the technology transfer office. And then you have to compensate the researchers."

Silberman questions the value of a state tax credit to encourage university-industry cooperation.

"I'm not sure you really need an incentive," Silberman said. "What you definitely need is a strong private-sector and university research infrastructure. (Hawai'i) doesn't have either so I guess you have to start somewhere."

The tax credit for businesses that partner with research facilities such as UH and the Oceanic Institute are part of a package of measures that include extending Act 221 technology industry tax credits and the creation of a state-backed venture capital incentive program. It's based on a similar tax credit created in Ontario, Canada, in 1997. There, lawmakers have considered requirements to ensure that commercialization gains benefit Canada.

However, the legislation being considered in Hawai'i contains no requirements that products or jobs created by the tax credits remain here. Keith Mattson, director for UH Connections, which administers the ARC program, said the idea behind the tax credits is to increase public/private research collaboration.

"Once you have that in place, it almost doesn't matter if a company does something outside Hawai'i — it's still going to benefit us," he said. "UH still gets licensing revenues."

Mattson added that, "The more we do to help companies that would benefit from this kind of tax credit, the more likely they are to stick to Hawai'i."

If the proposed tax credit passes, there's no guarantee businesses will partner with UH unless they believe they will get a marketable product, said Jian Yu, an associate professor at UH's Hawai'i Natural Energy Institute. Yu's research into the use of organic waste to create environmentally-friendly bioplastics was licensed by I-PHA BioPolymers Ltd. of Hong Kong last year.

"It (a tax credit) could be helpful, but it's not the determining factor," he said. "In my mind, if the company outside wanted to work with UH, they must see potential of the technology or the product," so that "even without the tax credit they would go forward."