An Analysis of Cognitive Difference of Nurturing Service Among Incubators and Tenants- Empirical Analysis of Incubators in Taiwan

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1 An Analysis of Cognitive Difference of Nurturing Service Among Incubators and Tenants- Empirical Analysis of Incubators in Taiwan Dr. Chang, Wen-Long, Assistant Professor of Shih Chien University, Taiwan Kevin Wen-Ching Chang, Manager, Abacus Distribution System Ltd., Taiwan Jasmine Yi-Hsuan Hsin, Director of Taiwan Federation of Industry, Taiwan ABSTRACT Past studies have shown that survival rate of start-up enterprises increases as nurturing service demands from tenants are more comprehensive to incubators. This paper focuses on the analysis of cognitive difference of nurturing service among incubators and the tenants. Depending on their characteristics, the tenants are categorized into three types:tenants with No Origin, Tenants from High-Tech Industry, and Tenants from Traditional Industry. The three groups of tenants and the incubators demonstrate the existence of cognitive difference of certain nurturing service provided by incubators. The Tenants from High-Tech Industry show the most cognitive difference. The study further discovers that the low survival rate of tenants is caused by the lack of understanding from the managers about the true nurturing service demanded by different tenants. Thus, the true nurturing service demanded from different tenants should be their top priority. Keywords: Incubator, Tenant, Nurturing Service INTRODUCTION Businesses at start-up period are most frangible and most frequently battled with failures; it is the time that the business needs much help and great support in all respect. The concept of incubation first comes with the idea of brooders or premature infant incubators which provide outside force to the growth of the new lives. In light of the idea of incubation, incubators (or sometimes called the incubation centers) are founded as service providers or organizations which offer laboratory and operation space at early statement, technology, administration and follow-up business service supports. (Allen, 1985;Allen, and McCludkey, 1990;Campbell et al.,1988;lalkaka, 2002;Mian,1996;Monlar et al.,1997;nbia, 1995;OECD, 1997; Smilor, and Gill, 1986). Incubators have earned several affirmative supports for their contribution for nurturing tenants in technology industry (Bearse, 1993;Culp, 1990;Goldberg and Lavi-Steiner, 1996;Mian, 1994;Myers and Koen, 1988;Smilor, 1987;Autio and Klofsten, 1998). According to KcKee (1992), survival rate for tenants of incubators is much higher than survival rate for those non-stationed-in enterprises. Thus, incubation is believed to be an effective approach. To raise the high survival rate, providing a complete nurturing service to the tenants becomes the major factor (Chang, 2000;Smilor and Gill, 1986;Hung and Chang, 2002). Based on previous studies regarding tenants perspective, different tenants demands for nurturing services vary in Technology and Human Resource Support, and other seven nurturing services (Hung and Chang, 2002). Another study suggests that there is no significant cognitive difference among tenants; only two out of twenty-eight services reached significant levels (Hung and Chang, 2001). That is to say from tenants point of view, there indeed are significant different nurturing service demands among different tenants. However, incubators have not yet become aware of the fact. The paper

2 further studies the cognitive difference of nurturing services among incubators and tenants managers. It is expected to understand the cognitive difference through scientific research procedures, and provide the incubators managers with more proper cognition. Thus the incubators can customize the nurturing services for each tenant and boost the nurturing performance. LITERATURE REVIEW Types of Tenants Stationed-in Incubators Traditionally, tenants are categorized by their industries. For example, Small and Medium Enterprise Administration, Ministry of Economic Affair, tenants in technology, electronic and electricity, semiconductor, telecommunication and others. The classification is based on the fact that different industries own different characteristic and thus lead to different nurturing service demand. After the classification of industrial characteristics, the research finds that most start-up businesses show frangible periods which are caused by their weakness in resource capacities. Therefore, bibliographies and technical literatures of start-up business management and business origins are reviewed in order to study the influence of source variances to performance of start-up business. For example, Hines (1957) claims that start-up businesses with the support from their parent companies are more likely to overcome the barriers than those Tenants with no origin and extra support. This is the result of the determination of supports from parent company including information support, finance support, training support, and superior market opportunity. Tenants with parent companies in Taiwan can be divided into Tenants from either High-Tech Industry or Traditional Industry; furthermore, tenants can be categorized into the following three types depending on the variances of their non-parent-company characteristics. Independent start-up business with no origin or no parent company Majority of the tenants in this category is start-up business, and theoretically, every incubator tenants should fall within this category. These tenants start from the ground based on simple idea, strong belief, and starters ambition. Hines (1957) believes that these tenants have the highest risk and should be given the more supports and assistance. Derivative high-tech business with support of high-tech parent company This type of tenants is formed after the rapid high-tech industry growth in Taiwan. Local high-tech companies not only devote to their own R&D ability but also coordinate with other research agencies or companies with new product designs. Sometimes, a new department or even a company would be formed to achieve the objectives and scope that the new companies are undertaken to address. 1. Transcend from traditional business with support from parent companies Attention on labor wage, land development, and other environmental issues have altered the industrial structures in Taiwan. Transcendence has become an unavoidable process for small and medium business in order to carry the same strategic advantages. Moreover, government in Taiwan has been offering traditional business with their transcendence with various assistances. Number of business in the category has been increasing in the last few year and they have become one of the major tenant group for incubators. Nurturing Services Provided by Incubators Nurturing services provided by incubators are not only major factors to successfully bread tenants, they are also relative to the business performance of the incubators(chang, 2000;Smilor and Gill, 1986;Hung and Chang, 2001). Consequently, well-found nurturing services with maturity are considerably important to the development of both the incubators and the tenants. Table 1 summarizes the nurturing services provided by incubators in Taiwan and from around the world. Categorized services in the Table are referred from

3 SMEA, MOEA. Table 1. Nurturing Services Provided by Incubators Presenter Presented Year Services 1. Financial Support and Assistant 2. Management Support Pennsylvania State General Business Service University 4. Professional Business Service 5. Physical Facility Service 1. Professional Business Knowledge Smilor Finance Channel 3. Internal Supportive Service 1. Shared Service Allen & McCluskey Management Service 3. Enterprises Internet Service within Community 1. Space of Service 2. General Management consultant 3. Enterprises Planning and Execution 4. Financial Acquirability NBIA Marketing Assistant 6. Financial and Accounting Service 7. Technology Consultant 8. Law and Property Rights 9. Others 1. Function of Physical Facilities 2. Function of Management Support OECD Function of Technology Support 4. Function of Finance Acquirability 5. Function of Legal Assistance 6. Function of Internet Support 1. Space and Facilities 2. Technology and Human Resource Support SMEA, MOEA Business Service 4. Information Support 5. Administration Support

4 Research Structure and Hypothesis RESEARCH METHODOLOGY This research is based on the nurturing services from SMEA, MOEA and the three tenant types focus on the cognitive difference on nurturing services between incubators managers and tenants managers with expectation to become future reference for incubators. Figure 1 shows the research structure and hypotheses. Figure 1. Research Structure Research Hypotheses: Hypothesis 1 :There is no significant cognitive difference on nurturing services between tenants and incubators. Hypothesis 1-1: There is no significant cognitive difference on nurturing services on space and facilities between tenants and incubators. Hypothesis 1-2: There is no significant cognitive difference on nurturing services on technology and human resource supports between tenants and incubators. Hypothesis 1-3: There is no significant cognitive difference on nurturing services on business services between tenants and incubators. Hypothesis 1-4: There is no significant cognitive difference on nurturing services on administration supports between tenants and incubators. Hypothesis 1-5: There is no significant cognitive difference on nurturing services on information supports between tenants and incubators. Date Source and Information Process

5 The investigating objects include 82 incubators founded before the end of Surveys are sent to incubators managers via s and also forwarded to their tenants. 42 valid surveys are sent back from the incubators managers with a 51.2% response rate. Among which, 36 (86%) come from college-affiliated incubators; 3 (7%) come from research-facilitated incubators; 3 (7%) come from government-funded incubators. 218 valid surveys are sent back from the tenants; among which, 96 (44%) come from Tenants with No Origin; 72 (32%) come from Tenants from High-Tech Industry; 52 (24%) come from Tenants from Traditional Industry. As most incubators refuse to tell their number of tenants, it is impossible to estimate the sample population and thus presents the restriction for the research. For information processing, the study first calculates the average and standard deviation of demand level of each services with cognitive difference among incubators and tenants, and then applies the T-test to compare their variance. RESULT AND DISCUSSION Analysis of Cognitive Difference of Nurturing Service among Tenants with No Origin and Incubators The study applies T-Test to check for cognitive difference on the 5 service categories and twenty-eight services among Tenants with No Origin and incubators. Those cognitive differences are shown in Table 2. As shown in Table 2, there appears to be no significant cognitive difference of nurturing service among Tenants with No Origin and incubators. Among the five service categories, none has reached significant level; yet, four out of twenty-eight services show significant variance. The four services items are: office space, Provide Secretarial Administration, Assist with Internal and External Contracts, and Collect Government Consulting System or Subsidy. When p is set with =0.05, only Collect Government Consulting System or Subsidy reaches significant level. Table 2. Cognition Comparison of Service Demands Between Tenants with No Origin and Incubators Service Category Service Average t-test Tenant Incubator t-value Sig. P Space and Facilities Office Space * Provide Secretarial Administration * Administration Support Assist with Internal and External Contracts * Information Support Collect Government Consulting System or Subsidy ** *p<0.1,**p<0.05,***p<0.01 Analysis of Cognitive Difference of Nurturing Service among Tenants from High-Tech Industry and Incubators According to information in Table 3, there exist significant cognitive difference of nurturing service among Tenants from High-Tech Industry and incubators. Among the five service categories, four reach significant level excluding Information Support. Thirteen out of twenty-eight services (46.4%) have reached significant level, including: Office Space, Public Facilities, and Shared Laboratory Facilities in the Category of Space and Facilities; Technology Transfer Service, and Cooperation and Alliance of Technology R&D

6 Groups in the Group of Technology and Human Resource Support; Professional Training Plan, Financial Support, and Case Study in the Category of Business Service; Provide Secretarial Administration, Assist with Licenses Register, and Assist with Internal and External Contracts in the Category of Administration Support; Assist with Collection of Industrial, Technical and Market Information, and Encourage Business in the Category of Information Support. When p is set with =0.05, three out of five service categories reach significant level, and eight out of twenty-eight (6%) services reach significant level. Table 3. Cognition Comparison of Service Demands Between Tenants from Hi-Tech Industry and Incubators Service Category Service Average t-test Tenant Incubator t-value Sig. P Space and Facilities ** Office Space ** Public Facilities * Shared Laboratory Facilities ** Technology and Human Resource Support *** Technology Transfer Service ** Cooperation and Alliance of Technology R&D Groups *** Business Service *** Professional Training Plan * Financial Support *** Case Study * Administration Support * Provide Secretarial Administration * Assist with Licenses Register * Assist with Internal and External contracts ** Assist with Collection of Information Support Industrial, technical and Market *** Information Encourage Business Alliance *** *p<0.1,**p<0.05,***p<0.01 To sum up, there is great cognitive difference of nurturing service between Tenants from High-Tech

7 Industry and incubators. The cognitive difference can be a serious issue as incubators cognition of nurturing services for Tenants from High-Tech Industry is inaccurate. From the averages in Table 3, incubators have underestimated the nurturing services the tenants expectation. It is believed that the cognitive difference have influenced the performance of both the incubators and the tenants. Analysis of Cognitive Difference of Nurturing Service Among Tenants from Traditional Industry and Incubators Table 4 shows that there is no significant cognitive difference of nurturing service among Tenants from Traditional Industry and incubators. Among the five service categories, none has reached significant level. Three out of twenty-eight services show significant variance, and they are: Devotion of Senior Personnel, Instruction of Program Management Plan Writing, and Assist with Collection of Industrial, Technical and Market Information. When p is set with =0.05, only two services reach significant level. Table 4. Cognition Comparison of Service Demands Between Tenants from Traditional Industry and Incubators Average t-test Service Category Service Tenant Incubator t-value Sig. P Technology and Human Resource Support Devotion of Senior Personnel ** Instruction of Program Management Administration Support Plan Writing Information Support *p<0.1,**p<0.05,***p<0.01 Assist with Collection of Industrial, technical and Market Information ** * Conclusion CONCLUSSION AND SUGGESTION The research tends to analyze the cognitive difference of nurturing service among incubators and different tenants, and further discuss the nurturing items with cognitive difference. Results of the hypotheses analysis are as followed. 1. Results of the Hypotheses Analysis As the summary for the results of hypotheses analysis shown in Table 5, cognitive differences of nurturing service among incubators mangers and Tenants with No Origin and from traditional industry are not significant. On the other hand, there seems to be quite the cognitive difference among incubators mangers and Tenants from High-Tech Industry. Table 5. Summary for the results of hypotheses analysis

8 Hypothesis Description There is no significant cognitive difference on nurturing services on space H1-1 and facilities between tenants and incubators. There is no significant cognitive difference on nurturing services on H1-2 technology and human resource supports between tenants and incubators. There is no significant cognitive difference on nurturing services on H1-3 business services between tenants and incubators. There is no significant cognitive difference on nurturing services on H1-4 administration supports between tenants and incubators. There is no significant cognitive difference on nurturing services on H1-5 information supports between tenants and incubators. Tenant from Tenant from Tenant with No High-Tech Traditional Origin Industry Industry Support Non-Support Support Support Non-Support Support Support Non-Support Support Support Non-Support Support Support Support Support 2. Nurturing Services with Significant Cognitive Difference 2.1. Nurturing Services with Significant Cognitive Difference Among Incubators and Tenants with No Origin There is no significant cognitive difference in the five service categories. Among the twenty-eight services, four services reached significant cognitive difference, including Office Space, Provide Secretarial Administration, Assist with Internal and External Contracts, and Collect Government Consulting System or Subsidy Nurturing Services with Significant Cognitive Difference Among Incubators and Tenants from High-Tech Industry In the five service categories, four has showed significant cognitive difference except for information support service. Among the twenty-eight services, thirteen services had reached significant cognitive difference, including Office Space, Public Facilities, and Shared Laboratory Facilities in the Category of Space and Facilities; Technology Transfer Service, and Cooperation and Alliance of Technology R&D Groups in the Group of Technology and Human Resource Support; Professional

9 Training Plan, Financial Support, and Case Study in the Category of Business Service; Provide Secretarial Administration, Assist with Licenses Register, and Assist with Internal and External Contracts in the Category of Administration Support; Assist with Collection of Industrial, Technical and Market Information, and Encourage Business in the Category of Information Support Nurturing Services with Significant Cognitive Difference Among Incubators and Tenants from Traditional Industry There is no significant cognitive difference in the five service categories. Among the twenty-eight services, three services had reached significant cognitive difference, including Devotion of Senior Personnel, Instruction of Program Management Plan Writing, and Assist with Collection of Industrial, Technical and Market Information. Suggestion 1. Incubators should provide different nurturing services regarding different tenant types From the perspective of the tenants, there are significant demand variances for nurturing service on Technology and Human Resource Support and the seven nurturing services (Hung and Chang, 2002). Another research shows that incubators mangers are not aware of the cognitive difference between themselves and the tenants and do not understand that not all nurturing services can be applied on every tenants. Different nurturing services should be provided to different types of tenants (Hung and Chang, 2002). On the other side, balanced team management ability is crucial for start-up business (Berry, 1996); however, it has been almost unlikely for start-up business to form an idea manage team. Therefore, depending on the types of tenants, incubators should provide the services that balance the tenants needs and abilities. Currently, incubators in Taiwan provide equal nurturing services to all their tenants. The study suggests that incubators mangers should customized incubators dominance resources and provide the services according to the tenants needs, especially to those tenants from the technology industry. Once the cognitive difference is eased, nurturing performance from the incubators should increase as number of tenant failures drops. 2. Discuss nurturing demands and difference between different tenant types from various dimensions The accumulation of management knowledge from incubation industry initiates from learning the nurturing service demand of tenants. Starting from different dimensions to categorize the tenants is the first step. Most bibliography and technical literature categorize tenants by their industries. This study categorizes the tenants by their parent companies or origins. Future studies on nurturing service demands and their cognitive difference are suggested to concentrate on the characteristics of the start-up business from various dimensions. For example, business are most likely to fail at start-up period; thus, business innovation and management literature can be referred to separate start-up period into sub-periods (Gordon and McNarama, 1991)and used to study the nurturing service demand and difference for tenants during sub-start-up periods.

10 REFERENCES Allen, D. N. (1985). Small business Incubators and Enterprise Development, Report prepared for the U.S. Department of Commerce, Washington, DC. Allen, D. N. and McCluskey, R. (1990). Structure, Policy, Services, and Performance in the Business Incubator Industry. In: Entrepreneurship: Theory & Practice, 15, (2): Autio E. and Klofsten, M. (1998). A comparative Study of Two European Business Incubators. Journal of Small Business Management, 36(1): Bearse, Peter (1993). The Evaluation of Business Incubation Project. National Business Incubation Association, December. Berry, M. M. J. (1996). Technical Entrepreneurship, Strategic Awareness and Corporate Transformation in Small High-tech Firm. Technovation, 16(9): Campbell, C, D., Berge, J. and Olsen, K. (1988). Change Agents in the New Economy: Business Incubators and Economic Development. Report prepares for the Institute of Public affairs, University of Minnesota, Minneapolis, MN. Chang, Wen Long (2001). Chang, Wen Long (2000). The exploratory research on the cognition difference between incubator s project managers and research & development of science & technology tenant client s managers. Master Dissertation of Department of Business Administration. National Chiao Tung University. Culp, R. P. (1990). Guidelines for Incubator Development. Economic Development Review, 8(4): Goldberg, Albert und Lavi-Steiner, Orna (1996). Developing an effective technological incubator-the experience of Israel, Industry and Higher Education, Dezember S: Gordon and McNarama (1991). High-Tech Tenants-The Guide for Entrepreneurial Success. Addison-Wesley. Hines (1957). Effectiveness of Entry by Already Established Firms. Quarterly Journal of Economics, LXXI: Hung, Chien-Tsai and Chang, Wen-Long (2002). A Study on the Nurturing Services Demand among the Type of Incubator Tenants. The International Journal of Management, 3(2): Hung, Chien-Tsai, Chang, Wen-Long (2001). Study of the Relationship between Nurturing Services Demand and Type of Entities at Taiwan s Incubator Industry, (2000) Annual Meeting of Northeast Decision Sciences Institute, Resorts Atlantic City, Atlantic City, NJ, USA, March 24. Lalkaka R. (2002). Technology Business Incubators to Help Build and Innovation-Based Economy. Journal of Change Management, 3(2): Mckee, Bradford (1992). A Boost for Start-Ups, Nation s Business, August: Mian, S. A. (1994). U.S. University-sponsored Technology Incubators: An Overview of Management, Policies and Performance. Technovation, 14(8): 515-5twenty-eight. Mian, S. A. (1996). Assessing Value-added Contributions of University Technology Business Incubators to Tenant Firms, Research Policy, 25(3): Monlar, L. A., Grimes, D. R., Edelstein, J., Pietro, R., Sherman, D. H. Adkins, D. and Tornatzky, L. (1997). Business Incubation Works: The Result of the Impact of Incubator Investments Study, Athens, Ohio: National Business Incubator Association. Myers, D. D. and Koen, M. S. (1988). Incubators and Higher Education. Industry & Higher Education: , September. NBIA (1995). 10 th Anniversary Survey of Business Incubations : A Decade of Success, NBIA: Athens, Ohio. OECD (1997). Technology Incubators: Background Report. Working Group on Innovation and Technology Policy; Pennsylvania State University Small Business Incubator Guidelines, ( ), University Park PA: The Pennsylvania State University, Advanced Technology Center of Central and Northern Pennsylvania, Fall:1-6. Smilor, R. (1987). Managing the Incubator System: Critical Success Factors to Accelerate New Company Development. IEEE Transactions on Engineering Management, Vol. EM-34, No.3: Smilor, R. and Gill, M. (1986). The New Business Incubator: Linking Talent, Technology, Capital, and Know-how. Heath and Company, Lexington Massachusetts: D.C. Weiss, L. (1981). Start-up Businesses: A Comparison of Performance. Sloan Management Review, 23(1):37 53.

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