Exploring the Characteristics of Public Research Spinoff Founders: Evidence from the Bologna Area

Transcription

1 UNIVERSITA DEGLI STUDI DI BOLOGNA FACOLTA DI INGEGNERIA Corso di Laurea Specialistica in Ingegneria Gestionale Tesi in Gestione dell Innovazione LS Exploring the Characteristics of Public Research Spinoff Founders: Evidence from the Bologna Area Correlatore: Chiar.ma Prof.ssa Rosa Grimaldi Relatore: Chiar.mo Prof. Maurizio Sobrero Correlatore: Chiar.mo Prof. Alessandro Grandi Anno Accademico 2006/07 Sessione I 1

2 Contents Acknowledgements 4 1. The importance of public research spinoffs Introduction and definition of public research spinoff Successful examples of public research spin offs The importance of public research spin offs Features of public research spinoffs in Italy An integrated framework for entrepreneurship Introduction to literature overview Personal dimension General overview of indidual level related factors Motivational aspects Personal traits and characteristics Prior knowledge Individual skills The theory of planned behavior Attitude toward behavior Subjective norms Perceived behavioral control External factors Introduction Local context factors Government support mechanism Industry and technology related characteristics University level support mechanisms Entrepreneurial orientation Entrepreneurial behavior The survey of public research spinoff entrepreneurs in Bologna The sample The questionnaire 43

3 3.3 The firms Which sectors register the highest concentration of spinoffs? Type of company and IPO rate Year of establishment Institution of origin The analysis and discussion of results The sample of entrepreneurs The descriptive analysis Prior knowledge Patent & inventors Individual skills Personal traits and involvement in the company Risk taking Attitudes toward innovation and business growth Subjective norms and perceived behavioral control Entrepreneurial orientation Forecasts in sales revenues and number of employees The business environment Competitive strategy Motivations and income change Deeper analysis Introduction Academics & public Sector researchers versus the rest Prior experience in the establishment of a new venture Professors versus doctoral students and researchers Concluding remarks Concluding remarks 87 References 90 3

4 Acknowledgements Like many sole authored papers, this thesis was the product of the efforts of many people. The most important contributors to my efforts to write this paper are Rosa Grimaldi and Riccardo Fini who inspired this work with theirs ideas. Maurizio Sobrero and Alessandro Grandi also provided me support in the accomplishment of this work. I need to thank the Collegio Superiore for its support during these years of my university career. I also want to thank my parents, for the support they have always given to me, and my brother Michele, too. I also have to thank Stefania, who supported me in this work in the worse periods. Moreover, I want to give a special acknowledgement to Stephen Hobday, who helped me in correcting my english mistakes. Last, a special acknowledgement goes to the entrepreneurs of the spinoffs of Bologna that participated in the interviews. Without their participation, this thesis would not have been possible. 4

5 Chapter 1 The Importance of Public Research Spinoffs 1.1 Introduction and Definition of Public Research Spinoff The importance of academic spinoffs in fostering economic growth and technological development for our society has already been much studied and widely acknowledged by scholars all over the world. Nevertheless, it has to be remarked that this subject has not been tackled at all until recent years when it has started to attract ever increasing numbers of researchers who have been focusing on it and studying its dimensions. First of all is important to define what an academic spin-off is. Here the first complications in our subject are encountered, because, as has been highlighted by the European Commission, there is no commonly accepted definition of what an academic spinoff is. 1. Shane defines an academic spinoff as a new company founded to exploit a piece of intellectual property created in an academic institution. He does not include in his definition those companies established by current or former members of universities, which do not commercialize intellectual property created in academic institutions. Thus, his idea of academic spinoff is a subset of all start-up companies created by students and employees of academic institutions (Shane, 2004). Pirnay (2003) has a similar interpretation, proposing that an academic spin-off is to be defined as a new firm created to exploit commercially some knowledge, technology or research results developed within a university. On the contrary Roberts (1991), one of the first scholars to approach this field of research, gave a broader sense to this definition, stating that university spin-offs are companies founded by anyone who has studied or worked at a university. This change shows how much the definition of this concept has been refined in the last ten years. In Italy the network of Italian University Technology Transfer Offices has reached consesus on a more narrow sense/definition: a university spin-off is a 1 European Commission: The changing role of public support to academic spin-offs - Trendchart Workshop summary paper - 17/05/

6 business founded by a researcher to valorize the results of his/her own research activity and his/her scientific knowledge. This paper will not limit its invesigations to academic spin-offs, but will also analyze public research center spinoffs. These two categories will constitute a broader set labeled public research spin-offs. Figure 1 will help the reader to better understand the different categories. Figure 1 Different kinds of spinoffs source: Author s compilation Most scholars, especially those in the United States, focus their studies of the subject on university spinoffs only, while in Italy the trend is to analyze the wider category of public research spinoffs. This is because, firstly, they have very similar features and, secondly, given the smaller number of Italian university spinoffs compared to American ones, it is possible in this way to have a larger sample to produce better results in statistical analysis. Nevetheless, some international economic organizations prefer to also address the public research topic, recognizing these similarities. For instance, the Organization for Economic Co-operation and Development (OECD) has offered a definition of public research spin-offs which considers three cases: any new entrant (1) which licenses a new technology from a university or public research organization; (2) which includes a public sector or a university employee as a founder; and/or (3) a university or national laboratory has made an equity investment (Callan, 2001). 6

7 In this paper public research spin-offs are defined as companies created to exploit technological knowledge which originated within universities. Such a definition, which is similar to the OECD one, includes the following cases : - the university/public research institute elects to provide the rights to the technology to an external, independent entrepreneur, nonuniversity dependent, who initiates a new company; - the university/public research center starts a company on the basis of either a university/public research assigned technology (licence) or a more generic technological knowledge (non-university assigned); - the unversity/public research shares equity (Fini, 2006; slightly modified from Grimaldi & Sobrero, 2005); Apart from this definition which will be used in the rest of this thesis, an analysis of the Italian regulations as stated by d.lgs 297/99 by D.Murst 593/00 allows us to understand that there are two different definitions or typologies of university spin-offs: - those companies listed in the stock market (spa) or not listed and having limited liability (srl) in which the university shares equity are considered to be proper university spin-offs; - those companies listed in the stock market (spa) or not listed with limited liability (srl), in which the university does not shares equity are called academic spin-offs. Now that we have clearly described exactly what is considered a public research spin off, the main topic of this paper can be presented: This thesis will start by exploring the general topic of the public research spin off and its main features. Secondly, it will carry out a review of the literature review that has addressed the figure of the public research entrepreneur and in particular his personal motivations, skills, prior knowledge and perception of the external environment. Hence, a questionnaire has been drawn up in order to gather data on the personal features of university entrepreneur. This questionnaire was posed in face-to-face interviews with 80 founder entrepreneurs of public research spin offs of the 7

8 University Bologna and of the other public research centers (the CNR and the ENEA) situated in Bologna. Thus, a descriptive empirical analysis of the results of this survey will be presented. In the last part of this paper these results will be interpretated and discussed. 1.2 Successful Examples of Public Research Spinoffs: The number of university spin offs in the U.S. is outstanding. According to the Association of Technology Members in the U.S. 628 new spinoffs were created in 2005, with a total of 5171 since These spin offs led to 527 new products being introduced into the market in When the period from financial year 1998 through financial year 2005 is taken into account we see that, 3641 new products were introduced into the U.S domestic market (AUTM, FY 2005). The most widely known name of an academic spin off is certainly Google, which was founded by doctoral students Larry Paige and Sergey Brin at the University of Stanford graduate school.and was incorporated as a privately held company on September 7th It is relevant to compare this case with another famous Internet service company, that of Yahoo!. The latter was also founded by Stanford graduate students Jerry Lang and David Filo in January of 1994, but as they developed this project in their spare time, outside the University, Stanford did not get any intellectual property rights to it. Thus, Yahoo! is not considered to be an academic spin-off and the University of Stanford did not get any benefit from its success. In the semiconductor market the most remarkable spinoff company is Cirrus Logic founded in Austin, Texas, in 1984; while in the biotechnology sector Genetech is a very well known company, that emerged from the University of California at Berkeley to exploit the Cohen-Boyer genetic engineering patent. Indeed, the first biotechnology firm, Cetus, was a spinoff from the University of California at Berkeley (Parker and Zilberman, 1993). In Europe there are fewer examples of public research spin-offs that have been successful, and in any case they are certainly less famous than the American ones: Kronodoc, a finnish firm founded in 1997 as a spin-off from an engineering project of the European Organisation for Nuclear Research (CERN); Lenntech, a spin-off 8

9 of the Technical University Delft (the Netherlands); a couple of spin-offs set up by members of the University of Cambridge like Akubio or Astex 2 ; or again in the United Kingdom TurboGenset, a university spin-off from the Imperial College in London, that produces high-speed magnetic systems for power production, was worth over $ 1 billion in 2000 (Charles and Conway 2001). Restricting the analysis to Italy, the case of PharmEste, a pharmaceutical spin off of the University of Ferrara, which recently, in January 2007, received 3,2 mil financing from international investors is a highlight. PharmEste will offer new forms of care and assistance to over 7 million neuropathic-ache patients around the world, who previously suffred from a disease which was incurable. 1.3 The Importance of Public Research Spinoffs Scholars and research institutes have remarked that university based spin-offs are very robust companies, having significantly higher survival rates than other startups (Mustar 1997; AUTM 2001). Also thanks to these reports, in the last ten years the idea of the university spin-off company has attracted increasing interest among policy makers and academics. Partly this can be attributed to the fact that they represent a relatively cheap way of fostering the development of knowledge economies in different places. Policy makers have been helped in this by top research-based universities who have seen in spin offs a means of generating revenue and reducing their exposure to governmental interference (Benneworth, 2004). Now even in Italy, the legislator has enacted new laws (d.lgs 297/99) in order to support university s exploitation of their technologies and intellectual property rights through spin off company creation. According to Roberts and Malone (1995), the technology-based spin-off company appears to be a potentially powerful mechanism for transferring technology from an R&D organization to a commercial organization. Furthermore, several studies indicate that the formation of spin-off companies is a more successful route to commercialization than licensing (Gregory and Sheahen 1991; Bray and Lee 2000; Rogers, Takegami and Yin 2001). 2 source IPR-Helpdesk: l&nomfichero=es_spinoffs&idfichero=00&cod_padre=t_ &localizador=doc 9

10 identified: In this paper eleven main reasons why spin offs are important entities are I. they are supportive of local economic development; II. they knock down barriers to economic development in poor regions; III. they create high economic value; IV. they create new job opportunities; V. they induce investments in university technology; VI. they encourage inventor participation; VII. they are the best commercialization mechanism for uncertain technologies; VIII. they foster additional research; IX. they are magnets in attracting and retaining the best professors; X. they help to train students; XI. they are high performing companies. Let us discuss more specifically each of the above mentioned arguments. 1) Spin offs support Local Economic Development University spinoffs support local economic growth by transforming university technology into business opportunities. Because the economic activity of spinoffs is mainly local, their supply and production enhance specifically local economic activity. Scholars found that university spin-offs tend to locate very close to the institutions they come from. For instance, Pressman (2002) reported that 80% of US university spinoffs tend to locate in the same state as the university/research center that spawn them; for the same study applied to Canadian university spin offs this percentage climbs to the 98%. Clusters of regional spinoffs linked to key businesses such as Fairchild Semiconductors (Silicon Valley), the Digital Electronics Company (Boston) and ARM Holding (Cambridge) all exemplify Etzkowitz s view (2001) that universities can provide an entrepreneurial DNA that makes local economies more entrepreneurial and successful (Lee et al., 2000; Zhang, 2003; Garnsey & Heffernan, 2005). Lowe (2002) adds that because new technologies tend to cluster, the economic impact of university spinoffs is often magnified and new technology clusters are 10

11 formed as result of a spin off support policy. An example is the creation of a biotechnology cluster in the San Francisco Bay Area. Further studies have demonstrated the importance of geographical spillovers for firms located near academic or research centers and universities (Jaffe et al.). Mansfield and Lee (1996) also confirm that having major centers of academic research nearby is an advantage and that these companies located nearby perform better than those who reside far from academic centers. 2) Spinoffs knock down Barriers to Economic Development in Poor Regions Many of the most fascinating stories of high technology bringing local economic success intimately involve universities working notably in the totemic sites of this new economy, such as Boston, Silicon Valley and Cambridge (Armstrong, 2001). But universities do not emerge as strong actors in these stories, while culture, institutional arrangements and economic structures are more important in the creation of wealth process. On the contrary in less favoured regions culture, institutional arrangements and economic structures represent a barrier to the wealth creation process (Linders et al., 2005; Benneworth, 2006) that universities must knock down if they want to play a role as the principal actor in encouraging local economic development. On the other hand, some scholars do not agree with this interpretation, eg Autio (1997) considers as a concept of growth myopia the assumption that economic growth is entirely dependent on the existence of high technology start-up firms,. 3) Spinoffs create High Economic Value It is widely acknowledged both in the popular and in the academic literature that spinoffs create value. Taking by way of illustration, Chiron, Inktomi and Agility Communications, California headquartered companies founded by University of California graduates, had combined revenues exceeding $1.2 billion in Cohen (2000) reports that from 1980 till 1999 US university spinoffs generated $33,5 billion in EVA. Similarly Blair and Hitchens (1998), analyzing a sample of 16 new 11

12 technology private start ups and 29 university spinoffs, found that university spinoffs have a higher level of value added as a percentage of sales than private start-ups. 4) Spinoffs create New Job Opportunities Public research spinoffs are typically high-tech companies, paying good wages and promoting entrepreneurship (Etzkowitz, 2001). The Association of University Technology Managers reported that from 1980 till 1999, spinoffs from US academic institutions created new jobs (Cohen, 2000). Each spinoff on average creates 83 jobs which is a higher number than the number of jobs created in SMEs. Moreover, the number of highly educated people in academic spinoffs is reported to be higher than in other technology SMEs. For instance the number of graduates employed in university spinoffs in the United Kingdom and Ireland is reported to be three times higher than the average (Blair and Hitchens, 1998). 5) Spinoffs induce Investments in University Technology This is one of the main reasons for the passing of the Italian law 297/99 D. Murst 593/00, following the example of the Bayh-Dole Act passed in the US in University spinoffs have been proven to attract investment in the development and commercialization of university technologies more than established companies (Shane, 2004). Scholars found that the amount of money in induced investments when compared to the amount generated by royalties from licenses was 41 times bigger in MIT spinoffs (Pressman et al. 1995) and more than 23 times bigger in those of Columbia University (Golub, 2003). 6) Spinoffs encourage Inventor Participation Spinoffs are also important because they are one of the most successful tools for getting inventors involved in the process of technology commercialization. Actual invention often needs a additional development in order to enter into the market. But because this additional involvement is essential to the effective success of their invention, inventors consider it both necessary and also desirable. Furthermore, 12

13 several studies have reported that scientists consider start-ups more desirable places to work compared to established companies, because they think that start-ups are more dynamic places, where they also can find brighter people to work with (Kenney, 1986). 7) Spinoffs are the Best Commercialization Mechanism for Uncertain Technologies Since organizational capabilities are difficult and expensive to create (Hannan and Freeman, 1984), large and established firms are generally unwilling to invest in the development of uncertain and early stage university technologies, that would change their own activities and procedures. In established companies often information is filtered so that they encounter almost exclusively information related to what they are currently doing (Henderson, 1993). Moreover, established firms fear that investing in new technologies could damage their own assets (Arrow, 1962) and sales. For these three reasons, indipendent entrepreneurs, rather than managers of established firms are the ones most likely to commercialize technological developments (Shane, 2001). Hsu and Bernstein (1997) give support to this theory as they discovered that half of the inventions licensed at the MIT and at Harvard University would have been unlicensed in the absence of the formation of a spinoff. 8) Spinoffs foster Additional Research Researchers have observed that faculty research productivity is directly proportional to their entrepreneurial activity. Doutriaux and Barker (1995) found that Canadian researchers who started a spinoff company registered an increase of on average 57% in research funding over 4-6 years. Similarly, a study by Louis et al. (2001), examining the activity of those in the life sciences, reported that engagement in entrepreneurial activities, such as holding equity in a spinoff company, increased faculty research productivity. Furthermore, spinoffs often provide funding for academic research. In fact, a study from Hsu and Bernstein (1997) finds that MIT spinoffs used Small Business Innovation Research (SBIR) grants to finance sponsored research at the MIT. Other spinoffs funded the development of laboratories and donated equipment to the Institute. Moreover, some PhD students tuition fees were paid by certain other 13

14 spinoffs in cases where their thesis research involved working at these companies on research projects. Several scholars have reported that academic entrepreneurs consider university spinoffs to be a vehicle for obtaining research funding. Blair and Hitchens (1998) confirm that many academics in the United Kingdom form spinoffs because new companies are more likely to receive additional research funding than research groups or laboratories are to obtain grant money. 9) Spinoffs are Magnets for attracting and retaining the Best Professors Scholars have observed that spin offs are very important for universities also because they help to attract and retain the best professors. Indeed, spinoffs represent an important financial mechanism for two main purposes: first, it allows the best professors, who already teach in the university, to combine their academic salary with the money that comes from spinoff revenues, so that it deters them from leaving the university in order to get more highly paid jobs in firms; secondly, the best professors, working in spinoffless universities are in danger of being persuaded financially of the advantages of quitting them in favour of universities where they can have the opportunity of working in a spinoff at the same time as continuing their academic careers. So in both cases spinoffs work as a magnet for universities which have them, in attracting and retaining the best professors. In particular two studies confirm this thesis while making special reference to the biological (Powell and Owen-Smith, 1998) and biomedical (Matkin, 1990) fields. 10) Spinoffs Help to train Students Spin offs are also valuable for universities because they give an important contirbution to the enrichment of the entrepreneurial capabilities of their students. Students who study at a university, where several spinoffs are based, can interact with the world of entrepreneurship in such important years for a student education. This is a more recent and still not a solidly established development in many countries. Even now this often does not happen, especially in Italy. Richter (1986) argues that spinoffs help to increase entrepreneurial knowledge in professors and researchers who also work in spinoffs and, as an indirect consequence, in their students. McQueen and 14

15 Wallmark (1991) add that while universities usually teach scholarly uses for academic inventions, university spinoff companies also provide the commercial know-how for the exploitation of new technology. Etzkowitz (2003) contends that because university students are more likely to work in private companies than to become university researchers, it is very important that students understand the economic and commercial value of research. This argument is particularly important in many fields of science and engineering where available academic positions are in shorter supply. In these cases, it is highly formative for doctoral students to work on more commercial aspects of technology development, because in this way they have the possibility of acquiring more valuable and highly remunerative capabilities for use in jobs in the private sector. 11) Spinoffs are High Performance Companies Lastly spinoffs are important in that they are very high performance companies. As Shane (2004) reports in his survey based on MIT spinoffs established between 1980 and 1996, 24 out of 134 spinoffs (i.e. 18%) reached an initial public offering (IPO). This IPO rate is over 257 times the rate of IPO for typical startup companies in th United States 3. MIT is clearly an extreme case of success of university spinoffs, but even in less prestigious universities or public research centers, scholars reports that the IPO rate is always higher in public research spinoffs than the average. Goldfarb and Henrekson (2003) estimate that average university spinoff in the US has 8% chance of reaching an IPO, a figure which is still more than 100 times the average of any other startup company. Public research spinoffs also register astonishing results also in venture capital financing and business angel attraction. Wright et al. (2002) report that in the United Kingdom 25% of the university spinoffs established between 1996 and 2001 were granted venture capital financing and a further 17% received financing from business angels, while an average UK start-up companies chances receiving venture capital financing are less than 1%. 3 As Shane reports, between 1980 and companies were established in the USA and only 7456 companies reached an IPO, that is less than 0,00007%. Thus, MIT spinoffs were 257 times more likely to reach IPO than an average American company. 15

16 Moreover, the survival rate of university spinoff companies is also very high. Out of 3376 US university spinoffs founded between 1980 and 2000, 68% were still in business in 2001 (Pressman, 2002). This rate is much higher than that for the average American start-up. For the best universities the survival rate is even higher, for instance, considering the companies spun off from MIT from 1980 to 1997 the survival rate was 80% (Shane, 2004). Lowe (2002), analyzing data from the University of California, reported that only 6% have declared bankruptcy, while Golub (2003) found that 11 out 13 spinoffs from New York University are still in business. Studies analyzing European public research spinoffs provide similar results. Blair and Hitchens (1998) found that only one spinoff out of the 17 created between 1984 and 1995, had failed by Dahlstrand (1997) reported that the failure rate of the spinoffs from the Chalmers Institute of Technology in Sweden founded between 1960 and 1993 was only 13%. The failure rate in France is acknowledged to be 16% by Mustar (1997). Similarly, Kobus (1992) reported that at the University of Twente, the Netherlands, founded 92 spinoff companies and 76 were still operational in Features of Public Research Spinoffs in Italy Public research spinoffs in Italy represent quite a new phenomenon. The first spinoffs attempts can be traced back to the 1970 s but it is only from 2000 on that spinoff creation becomes a significant phenomenon. Figure 2 shows that from 1969 till spinoffs were established, but 80% has been created from 2000 onwards. Piccaluga and Balderi (2006) report that the peak of new spinoff creations was in 2004 with 75 companies. However, the year 2006 may have exceeded this figure, because data about the months October-Nov-Dec are not available yet. 16

17 Source: Author s compilation based on data in Piccaluga and Balderi (2006) The two Italian scholars also highlight that the survival rate of Italian spinoffs is the highest reported in the world, being assessed at more than 97%. Many scholars argue that this is not a positive sign, but it rather shows that they have a very low risktaking attitude. As far as geographical location is concerned, empirical results show that public research spinoffs are mostly located in the North (62,11%), with 24,01% in Center and 13,88% in South. Empirical evidence shows that over 70% of Italian spinoffs work in 5 main sectors: Information Technoloy and Multimedia (29%), Energy and Environment (13,1%), Electronics (12,2%), Biotechnologies (10,3%), Services for Innovation (8,4%). Information Technology and Multimedia spinoffs (n=124) are mainly located in Emilia-Romagna (21%), followed by Tuscany (16,9%) and Lombardy (12,9%). Emilia-Romagna is the region with the highest concentration also for the Energy and Environment sector, with a percentage of 33,9% that is 19 companies out of a total of 56. Lombardy and Umbria with 10% each are other regions with a remakable concentration. Still in the Electronics sector, third main sector with 52 companies, Emilia-Romagna leads the ranking (over 28%), while Lombardy remains in second place (11,5%) and Piedmont is third (9,6%). The 17

18 Biotechnology sector shows different figures, because in this field 34% of the spinoffs are situated in the South, while the average concentration is only 13,88%. Lombardy and Tuscany lead the way with 8 companies each (out of n=44) representing 18%. Apulia, Marche and Friuli follow with 13,6% each(ie 6 spinoffs). The fifth most represented sector, Services for Innovation registers 36 firms, mainly hosted by Emilia Romagna (19,4%) and Piedmont (13,9%). Source: Author s compilation based on data contained in Piccaluga and Balderi (2006) Figure 3 shows in which regions public research spinoffs are mainly concentrated, while Figure 4 offer a ranking of the most active universities and public research centers in terms of spin off productivity (n=414). 18

19 Figure 4 University/Public Research Center and Frequency of Spinoffs Freq. % Freq. % Politecnico di Torino 46 11,1% Università di Camerino 4 1,0% INFM 44 10,6% Univerisità del Piemonte Orientale 'Amedeo Avogadro' 4 1,0% Università di Bologna 40 9,7% Università di Trieste 4 1,0% Università di Padova 22 5,3% Istituto Trentito di Cultura 3 0,7% Scuola Superiore Sant'Anna (PI) 19 4,6% Scuola Internazionale Superiore di Studi Avanzati (TS) 3 0,7% Università di Perugia 19 4,6% Università di Cagliari 3 0,7% Consiglio Nazionale delle Ricerche 17 4,1% Università di Lecce 3 0,7% Università di Milano 16 3,9% Università di Bari 2 0,5% Università di Ferrara 14 3,4% Università di Catania 2 0,5% Università di Udine 12 2,9% Università di Foggia 2 0,5% Politecnico di Milano 11 2,7% Università di Napoli 'Federico II' 2 0,5% Università di Genova 11 2,7% Università di Palermo 2 0,5% Università di Pisa 11 2,7% Università di Pavia 2 0,5% Università della Calabria 10 2,4% Università di Torino 2 0,5% Università Politecnica delle Marche 10 2,4% Università 'La Sapienza' di Roma 2 0,5% Università di Modena e Reggio-Emilia 10 2,4% Istituto Nazionale di Fauna Selvatica 1 0,2% Politecnico di Bari 9 2,2% Università di Roma 'Tor Vergata' 1 0,2% Università di Firenze 9 2,2% Università di Bergamo 1 0,2% Università di Siena 8 1,9% Università di Brescia 1 0,2% ENEA 6 1,4% Università Cattolica del Sacro Cuore (MI) 1 0,2% Università di Milano Bicocca 6 1,4% Università del Sannio 1 0,2% Università di Parma 6 1,4% Università di Trento 1 0,2% INFN 5 1,2% Università de L'Aquila 1 0,2% Università di Urbino 5 1,2% Total ,0% source: Piccaluga and Balderi (2006) 19

20 Chapter 2 An Integrated Framework for Entrepreneurship 2.1 Introduction to the Literature Overview Academic spinoffs, as said at the beginning of chapter 1, have been largely studied, as well as private start ups. Some studies regarding academic spinoffs have been focused especially on factors relative to individuals such as the analysis of institutional networks (Grandi & Grimaldi, 2003; Degroof & Roberts, 2004) or some also have focused on the social capital dimensions (Louis & Blumental, 1989). On the other side, some others have concentrated only on external factors, such government policies supporting the creation of spinoffs, or local context and infrastructures (Roberts & Malone, 1995). Few studies have tried to create an integrated framework for academic entrepreneurship encompassing individually related and external factors. One of these few is represented by the work of Fini, Grimaldi & Sobrero (2006). This thesis will concentrate on internal and external features affecting public research entrepreneurship, through the analysis of face to face interviews with its founders. Interviews have been carried out on the area of Bologna, that is one of the areas with the highest public research spinoff concetration. The importance of founders point of view has often been underestimated, in fact similar works are not many. Researches through face to face interviews are quite an arduos task to carry out, but provide more reliable results. But, in order to better understand the analysis of results, that will be proposed in the following chapters, in the second chapter scientific work on factors affecting entrepreneurship will be presented. Recently, several scholars have often focused on macrolevel environmental forces and on charachteristics of entrepreneurial oportunities, in order to understand the dynamics of entrepreneurship and to create a theorical framework. In contrast, other authors argue that the focus of investigation should be features related to individuals. In the last decade in particular two scholars have argued that entrepreneurial success relies largely on macrolevel environmental forces influencing the foundings 20

21 of firms (Aldrich, 2000) and on the charachteristics of entrepreneurial opportunities (Christiansen, 1997). Those researchers have greatly enhanced the understanding of entrepreneurial activity, but they do completely ignore (or at least greatly underestimate) the role of human motivation in entrepreneurship. On the other side, a different school of thought, is represented by those such as Lumpkin & Dess, Wiklund, Gartner, Covin & Slevin, inspired by Miller s works, have developped the theory that entrepreneurial success can be predicted by psychological traits of the entrepreneur, at least in small firms. Within this current of studies two important concepts have been highlighted: entrepreneurial orientation (EO) and entrepreneurial behaviour (EB). These two concept have often been misunderstood by scholars The entrepreneurial orientation can be defined as the CEO s strategic orientation reflecting a willingness of a firm to engage in entrepreneurial behaviours (Wiklund, 1999). The entrepreneurial behaviour is defined in this thesis as the performing behavior that indicates a dediction to the physical creation of a business venture. Given the choice of concentrating the analysis of this paper on public research entrepreneurship, a precise definition of what an entrepreneur is must be provided, too. The first scholar to develop studies of entrepreneursip was Joseph Schumpeter, who is considered the father of research in the field of entrepreneurship. In his first thesis he stated that the entrepreneurs are individuals who make things work in the economy of the country. Schumpeter grew up in the stimulating atmosphere of fin de siècle Vienna, where he encountered other important personalities of the turn of the nineteenth century such as Freud, Klimt and Schoenberg. Schumpeter is also credited with many significant developments in economic theory, including the notion of "perfect competition" in an infinite marketplace. More to the point with reference to the topic of this chapter, Schumpeter's (1912) Theorie der wirtschaftlichen Entwicklung (or The Theory of Economic Development) directed the attention of his contemporary economists away from static systems and toward economic advancement. In this book, entrepreneurship, which Schumpeter considered to be extremely difficult, is described as the fundamental engine of economic development. The innovation of entrepreneurship allows economic systems to avert repetition and progress to more advanced states. A famous sentence of Schumpeter referring to entrepreneurship is: "without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion". 21

22 Taking this into consideration, the definition of entrepreneur which will be used in this paper is: entrepreneurs are those who create a new organization to pursue an opportunity, drawing on individual skills, by devoting the necessary time and effort, assuming the accompanying financial, physics and social risks, and receiving the resulting rewards of monetary and personal satisfacion, Fini (2006); slightly modified from Hirish & Peters (1989); Begley (1995); Collins et al (2004). 2.2 The Personal Dimension A General Overview of Factors related to Indidual Most entrepreneurship scholars have highlighted that entrepreneurs differ from normal people in their psychological attributes, especially in their desire to apply technology, their desire for wealth and their desire for independence. Fini, Grimaldi and Sobrero (2006) in their recent empirical survey on Emilia Romagna academic entrepreneurs found out that the decision by most Italian academics to found a new company is not driven by entrepreneurial attitude, but rather by the expectation of some positive outcomes/benefits for them as academics. They add that Italian academics typically create new spinoffs in order to enhance their academic position. These results share something common with those found in other European countries. In contrast, American entrepreneurs personal reasons for creating spinoffs are reported to be quite different. For example Roberts and Wainer (1971) found out that the desire of autonomy was the main reason for MIT spinoffs entrepreneurs in creating new spinoffs, whilst McQueen and Wollmark (1981) reported the desire to commercialize their own technologies to be the major motive for American entreprenuers at the Chalmers Institute of Technology for creating spin-offs. In the following subparagraphs each of the major personal factors affecting entrepreneurial behavior will be analyzed more specifically. 22

23 2.2.2 Motivational aspects Motivation is among the most studied of all concepts. The first studies on this topic can be traced back to ancient greek philosophers. In fact, motivation has been addressed by several different disciplines, including philosophy, psychology and economics. In over twenty-four centuries many different definitions of motivation have been proposed. Kleinginna and Kleinginna (1981) collated 140 different definitions of motivation which appeared in academic and scientific literature. The first academic study of motivation in the entrepreneurial field stretches back to the studies of McClelland (1961). He developped the so called achievementpower-affiliation theory. It is based on the concepts of motives, considered as networks of emotions, disposed on a hierarchy of intensity and importance. According to him, motives (or needs) can be classified into three types: need for achievement (n-ach), need for power (n-pow), need for affiliation (n-affil). His thesis is that each individual is dominated by one of these needs. People with a high need for achievement (nach) seek to excel and thus tend to avoid both low-risk and high-risk situations. Achievers avoid low-risk situations because the easily attained success is not a genuine achievement. In high-risk projects, achievers perceive the outcome as being one which is determined by chance rather than by thier own effort. High nach individuals prefer work that has a moderate probability of success, ideally a 50% chance. Achievers need regular feedback in order to monitor the progress of their acheivements. They prefer either to work alone or with other high achievers. Money is not a determinant motivating factor, however it is more perceived as an indication of positive feedback. While at the beginning of this study the author hypothesised that most top managers had a high need for achievement, empirical studies demonstrated that they did not have particularly high n-ach levels. Thus, he went on to further hypothese that they might instead have a higher need for power level and in this case empirical tests confirmed his intuition. The need for power is the necessity to impose ownself to the attention of the public and create, keep or re-establish the own prestige. The latter resembles the need to belong that is the need to create social relations with other people which is described by Maslow. He also found out that persons with high need for achievement are more likely to work harder and longer at laboratory tasks, to learn faster, to be more resistant to 23

24 social pressures, to prefer experts instead of friends as work partners, to lead more active lives, to perform better under longer odds, and to choose moderate risks over either safe or speculative ones. In short, all these features let us suppose that spin off entrepreneurs should have a high n-ach. Moreover, according to this theory spin off entrepreneurs should register as having a higher average risk-taking propensity level. As far as risk is concerned, Norton and Moore (2006) have tested differences in risk-taking propensity through an exploratory study of 53 questionnaires proposed to 30 people defining themselves as entrepreneurs and 23 who designed themselves as non-entrepreneurs. Their results show no difference between entrepreneurs and nonentrepreneurs in the measured risk taking propensity. They argue that entrepreneurs do not necessarily engage in riskier behavior than nonentrepreneurs; rather, entrepreneurs may assess risks differently. Sitkin and Pablo (1992) distinguished three determinants of risk taking propensity, they are risk preferences, outcome history and inertia. They also provide a definition of risk propensity as the simple tendency to take or avoid risk. Brockhaus (1980) also found that more than the majority (64%) of established entrepreneurs have a propensity for moderate levels of risk taking. Two observations can be made. First, as the percentage of the population having moderate propensity for taking risks is 68%, these data only demonstrate that the average entrepreneurs propensity towards risktaking is not very different from that of normal people. Second, as the survey was carried out on a group of established entrepreneurs, this would suggest only entrepreneurs who do have a moderate risk-taking propensity survive under free market conditions, while those who have a high or low propensity for risk are more likely to fail, and thus are less represented in established enterprises. Katz (1988) criticised this argument, analyzing a sample of individuals, whose self-employment aspirations had been surveyed in Katz observed that expressed intent for self-employment was followed up in 30 % of the cases during the subsequent four-year period (10 out of 33). On the macro level, Katz found intention to be a poor predictor, however: of the remaining 2218 people in the sample, 195 (8.7%) entered self-employment at some point. This suggests a high influence of situational factors. Nevertheless, more recently Shane et al. (2003) also remarked that the development of entrepreneurship theory needs consideration of the motivation of 24

25 people undertaking entrepreneurial decisions. They argued that the pursuit of entrepreneurial opportunity is an evolutionary process which is strongly influenced by the decisions made by the entrepreneurs themselves. Human decisions are the result of motivations and cognitive factors, the latter composed of ability, intelligence and skills. However, they recognize the importance of external factors like the status of the economy, the availability of venture capital, the actions of competitors and government regulations, but believe that all other things being equal, the most crucial role is played by human motivation. Their paper is very important for providing support to the motivational approach to the study of entrepreneurship because it also demonstrates how even sociologists who have argued strongly against the usefulness of trait-based research in entrepreneurship implicitly acknowledge the importance of motivation. They show the example of Aldrich and Zimmer (1986) who write that the entrepreneurial activity can be conceptualized as a function of opportunity structures and motivated entrepreneurs with access to resources. Empirical research confirms that entrepreneurial motivation is a central factor in the formation of spinoffs. A survey of spinoff activity in the United Kingdom showed that the presence of a motivated entrepreneur is crucial in the formation of a spinoff firm (Wright et al., 2002). Similarly, Blair and Hitchens (1998), analyzing spinoffs of UK academic institutions, found that in almost all cases entrepreneurial behavior occurred when the inventor was enthusiastic about starting a new firm Personal Traits and Characteristics Although some authors argue that the traits school of thought regarding entrepreneurship has been relatively unproductive, some scholars have found that the study of personal traits and chacteristics is useful when applied to a specific subset of entrepreneurs (such as national laboratory scientific and technical inventors) and their nonentrepreneurial counterparts. Autio and Kauranen (1994), for example, found that technical entrepreneurs differed from technical non-entrepreneurs in that they exhibited stronger internal personal motivations. Trait-oriented studies have also been conducted to explore differences between subgroups of technical entrepreneurs. Schrage (1965) found no correlation between personal-achievement motivation and degree of success of technical entrepreneurs. Perry (1982) argued that further refinement of the taxonomy of technical entrepreneurs may reveal different motives. 25

26 More recently, Baum & Locke (2004) have noticed that tenacity and passion are statistically reliable in the prediction of EB indirectly through the motivational dimension. Other scholars have confirmed that tenacity and passion have a direct influence on entrepreneurial behavior, in particular Smilor (1997) describes entrepreneurs as dreamers who do and compares them to the chess players more than simple risk-takers. In fact, while simple gamblers are simply blindly betting, chess players can do a bold move, but in general they know the parameters of the game, can foresee the possible counter-moves and take calculated risks. He also highlights the importance of the passion of the entrepreneur that makes the improbable possible, however he does not submit his thesis to the test of an empirical survey. A study from Kassicieh et al. (1997) proved that personal characteristics are an efficient prediction variable for entrepreneurial behavior. They found that those who are predicted to become entrepreneurs generally have already undertaken some preliminary steps, such as securing their personal interest in the intellectual property created by their inventions, being involved in other business activities (including previous spin-off attempts), and having close role models of entrepreneurship Prior Knowledge Many scholars argue that personal traits, personal characteristics and motivational aspects, are not enough in order to have a complete understanding of entrepreneurial behavior antecedents and they add two other concepts: prior knowledge and individual skills. Roberts (1991) highlights that prior information, whether developed from work experience, education, or other means, influences the entrepreneur's ability to comprehend, extrapolate, interpret, and apply new information in ways that those lacking that prior information cannot replicate. For example, a person who had previously worked in a market as a customer, manufacturer, or supplier might already possess information that is not publicly available about how a new technology might influence that market. This prior information enables him or her to discover an opportunity to use the new technology. As for individual skills, he found out that entrepreneurs almost always have at least a college degree and very often a master s degree in a technical subject. 26

27 Although according to Chandler and Jansen (1992) the number of businesses previously initiated and the years spent as an owner manager are not strongly related to the performance of the venture, Kolvereid (1996) remarked that prior or contemporary self-employment attempts has definetely an indirect effect on EB. Venkataraman (1997) adds that individuals who have developed particular skills and acquired particular knowledge through education and work experience will be more likely than other people to discover particular entrepreneurial opportunities in response to a given technological change. He also argues that prior knowledge can be developed through a variety of roles, including experience as a supplier, user, and manufacturer, and education in a variety of dimensions of the commercial/industrial world such as production processes, inputs, and user needs. Shane (2000), inspired by these studies, found out that diffences in prior information influence greatly who discovers entrepreneurial opportunities to exploit new technology. In particular, he distinguished three major dimensions of prior knowledge: prior knowledge of markets, prior knowledge of ways to serve markets, and prior knowledge of customer problems. He argues that an individual must perceive an entrepreneurial opportunity, before technological change can influence output. Because not all entrepreneurs will perceive the same opportunities, some desirable entrepreneurial opportunities may go unexploited or unnoticed. In particular, a small amount of technological change may generate a large amount of economic output because entrepreneurs discover a large number of ways in which to exploit a technology. These are the most desirable entrepreneurs for the economy. Besides, still Shane (2004) remarks that academic researchers are more likely to establish spinoffs later in their careers, after having reached the top in their academic career. He suggests that inventors who have reached higher university rank can found spinoff companies more easily than other inventor. This is because their status helps them to acquire resources necessary to sustain their spinoff in circumstances where there is uncertainty about the outcome of the venture Individual Skills Passing to the analysis of individual skills, Chandler and Jansen (1992) proposed a questionnaire to allow founders to provide self-evaluations of their competencies in the entrepreneurial, managerial, and technical-functional roles. The results of their analysis proved self-evaluation to be a reliable measurement for 27