A rebellion of the faculty at Harvard has scuttled the university's plan to found a genetic engineering company and earn profits from it.

Over the past two weeks, critics of the plan marshaled several of the university's Nobel prize winners and other professors to protest to Harvard president Derek Bok.

"The preservation of academic values is a matter of paramount importance to the university, and owning shares in such a company would create a number of potential conflicts with these values," Bok said yesterday. "After consulting with the faculty, I have decided that Harvard should not take such a step, even on a limited, experimental basis . . . ."

Bok's statement said the university should continue to consider "various means of participating in ventures of this kind . . . ." But Daniel Steiner, university counsel, said that Harvard should "lie low for a while" in considering such proposals, and that it will not reconsider this proposal.

Though the university does own stock in many companies, and many of its faculty are officers or consultants for companies, the novel difficulty with this proposal is that Harvard would own a substantial piece of the company (10 to 15 percent) and have the chairman of one of its departments, Mark Ptashne, on the company's board.

Faculty members said they were worried that the existence of a company linked to Harvard would create a pressure to make many decisions with the company's commericial interests, rather than purely academic interests, in mind. Decisions that critics claimed might be affected include the hiring and promotion of faculty members with ties to the company, and what biochemical research to purse.

Since Harvard first came up with the idea, three companies and one individual investor have joined to put up the millions of dollars necessary to get the company started. Even without Harvard's direct participation, the company likely will be formed, with Ptashne as an officer, and with its labs adjacent to the Harvard campus.