This paper analyzes innovative activities of universities in the United States. Universities with a high quality of research and a tradition of ties with industry tend to generate more inventions although the relative weight of research money from industry is not related to these inventions. If states are economically undeveloped or do not receive adequate federal funding, or are active for science and technology programs, then their governments are more willing to support university research. However, since the quality of university research depends on cumulative federally funding from the past, it is difficult for state funding to transform universities into innovators. License revenue from inventions is small compared with the total research budget of the university. It is difficult for universities to finance their research by license revenue, so the role of the central government is critical to maintain research quality. State governments should not expect that funding university research will lead to quick fruits as an economic policy. Universities should not limit their efforts only to visible results which are close to commercialization, such as inventions, patents, and license revenue. The role of supplying higher education and communicating informally with industry personnel is critical for long-term regional development. (C) 2000 Elsevier Science Ltd. All rights reserved.
