CISAlpino Institute for Comparative Studies in Europe (CCSE) Symposium Academic Entrepreneurship: a comparative view from Germany and Italy Massimiliano Guerini, Marcel Hülsbeck, Erik E. Lehmann, Silvio Vismara, Susanne Warning The 74th Annual Meeting of the German Academic Association for Business Research (VHB) at the Free University of Bozen/Bolzano Motivation Global competition is about regional competition (Moore/Rugman, 2005) interrelation of markets, companies, countries and regions, speed and dynamic of interrelation, necessity of an effective innovation process, regions are the driving forces of innovations with universities as the intellectual focal point within regions Academic entrepreneurship enhances regional competitiveness transformation of scientific knowledge into economically relevant knowledge universities adopt third mission to enhance knowledge transfer into the industry academic policy and innovation policy become synonymous for policy makers 2 1
The need for comparative studies A quick comparison of CCSE base regions and our host region reveals that similar success stories may be based on very different determinants Population density (km 2 ) GDP per capita Lombardy Bavaria South Tyrol 430 173 68 31 600 35 337 32 000 Regional characteristics main industrial region in Italy (former) agricultural state agricultural and touristic region Growth finance, services on life sciences, microsystems, energy, logistics, areas top of industrial base materials, environmental environmental Tertiary education 211 000 students in 12 HEI 320 000 students in 26 HEI 18 000 students in 2 HEI Innovation trigger linkage of traditional SMEs with industrial R&D academic and technology policy academic policy 3 Aim of the Symposium Providing a synoptic outlook on European research on academic entrepreneurship Presenting evidence from regional university and firm level Combining views from spatial economics endogenous growth corporate governance and corporate finance Raising awareness for the need of comparative studies 4 2
Agenda and Format I. Regional Capital (Guerini) IV. Entrepreneurial Capital (Lehmann) Academic Entrepreneurship Presentations are given in turn by an Italian and German panel member Every presentation is followed by a short comparative comment by a panel member of the opposite nationality III. Financial Capital (Vismara) II. Human Capital (Hülsbeck) The last half hour of the symposium is reserved for group discussion 5 The Knowledge filter of Academic Entrepreneurship: embeddedness, spillovers and regional capital Massimiliano Guerini Università di Pisa DESE 6 3
Background Traditional university missions: teaching and fundamental research Increasing orientation of universities towards the third mission: commercialization of university inventions licensing, sponsored research, university industry collaborations, academic spin off A huge literature on academic entrepreneurship (Rothaermel et al 2007) Need to consider the academic entrepreneurship in a broader sense? Recent studies documents the positive impact of university knowledge on new firm creation at the regional/local level (see Acosta et al. 2011): Proximity to university allow entrepreneurs access university knowledge Different transmission channels However, the issue of how far university knowledge travels from its source to fertilize entrepreneurship across space has gone rather underresearched: Extant studies focus on incumbent firms (Belenzon and Schankerman 2012; Laursen et al. 2011) 7 Motivation Existence of a knowledge filter for incumbents firms (Acs and Plummer 2005): it hampers the commercial exploitation of university knowledge incumbents often neglect new opportunities as they are unwilling to face the risk of implementing new products or processes sunk investments such as dedicated human capital, physical capital and vertical relationships Entrepreneurship is a very effective mechanism to exploit university knowledge (Carree et al. 2012; Mueller 2006) Entrepreneurship becomes a fundamental ingredient of innovation and regional development: it can boost innovation and new job creation (Audretsch and Keilbach 2004; 2005; Piergiovanni et al. 2011) 8 4
Research questions How far in space university knowledge exerts its effects on new firm creation? We argue that the spatial range of university depends on: the nature of university knowledge (different transmission channels): codified knowledge (i.e., academic patents and scientific publications) knowledge embodied in individuals (i.e., university graduates) the quality of the university where knowledge is produced: Reputation effects 9 Illustrative analysis I We focus on the creation of new firms in industries where knowledge is the primary value creating asset (knowledge intensive firms, KIFs) The dependent variable is the number of new KIFs in a Italian province: Count data: negative binomial regression To assess the spatial range of university knowledge, we consider knowledge produced by Italian universities at different distance intervals: Local (in the same province) Up to 200 km Up to 500 km Nature of university knowledge: We consider three channels: academic patents, t publications, and university it graduates Data from EUMIDA and ISI Web of Knowledge Quality of university knowledge: We distinguish between knowledge produced in universities which are ranked in the top 40 in Italy according to the Scimago Institutions Ranking and 10 knowledge produced by other universities 5
Illustrative analysis II I II III Patents Publications Graduates High Quality University Knowledge Local 0.255 ** 0.145 ** 0.193 ** 0-200 km 0.237 * -0.055 0.029 200-500 km 0.064-0.221-0.139 Low Quality University Knowledge Local 0.265-0.028 0.195 0-200 km -0.123 0.163 0.107 200-500 km -0.226 0.325-0.048 Controls Incumbents 0.338 ** 0.389 *** 0.380 *** Value added 0.106 *** 0.112 *** 0.104 *** Density 0.483 ** 0.347 * 0.237 Unemployment 0.082 *** 0.078 *** 0.071 *** Business Incubators 0.330 *** 0.329 *** 0.305 ** Constant -1.242 * -1.141-0.620 NUTS 1 dummies Yes Yes Yes Number of observations 103 103 103 Log Likelihood -409.079-409.481-408.817 11 Results and discussion Knowledge produced by low quality universities has no effect whatsoever on local/distant entrepreneurship: the (high) quality of the university system is a necessary condition for university knowledge to have a positive impact on entrepreneurship Only high quality, technological knowledge codified in patents exerts a positive effect on entrepreneurship at long distance: high quality universities are only partially of help in stimulating entrepreneurship in peripheral areas Knowledge codified in academic publications is highly localized: design policy schemes aimed at facilitating direct interactions between academic personnel and prospectiveentrepreneurs entrepreneurs organization of dedicated meetings and workshops, improvements in information and communication technologies Knowledge embodied in graduates is highly localized: fostering mobility of individuals across space policies supporting the effort made by universities to attract applications by student that reside in distant areas 12 6
Comment Marcel Hülsbeck Augsburg University & CCSE 13 The Creation of Academic Entrepreneurship: Universities as producers of human capital Marcel Hülsbeck Augsburg University & CCSE 14 7
Background Universities as innovation hubs have been in the center of policy makers and scholars for the last two decades Beyond research and teaching the third mission of fostering academic entrepreneurship has emerged Policy makers worldwide have initiated legislations (like the Bayh Dole and Stevenson Weidler Act) to push university knowledge into the market A growing body of research investigates which university characteristics improve technology transfer, licensing, university spin offs or contract research Nevertheless, the question whether the three missions of universities are complements or substitutes has been neglected so far 15 Motivation The idea of a third mission of universities stems from a neoliberal ideology with profound implications for the university s role in society classic university Universitas magistrorum et scholarium Knowledgeasa public good Focus on basic research l i i it entrepreneurial university it Knowledge factory (Machlup, 1962) Unityof education and research Peer democratic governance Liberal model Technology production Research groups as quasi firms (Etzkowitz, 2003) Study programs designed to fit labor market New public management Neoliberal model Questions: Which model is more beneficial for academic entrepreneurship? Does the third mission complement/substitute the classic role? 16 8
Hypotheses classic university entrepreneurial university Research as production of public knowledge should foster entrepreneurship The dissemination of knowledge through education should foster entrepreneurship Technology production is based on research Technology production is based on education Technology production should foster entrepreneurship 17 Illustrative Analysis I To shed first light on this issue I combined datasets from two research projects On the one hand regional high tech entrepreneurship is used as measure of academic entrepreneurship to capture the broadest possible impact of universities On the other hand university patents are used as a narrow indicator of technology production These indicators are regressed on measures for the first two missions (education and research) and the third mission (technology transfer) MoreoverI control for regional embeddedness of universities 18 9
Illustrative Analysis II Dependent variable Regional High Tech Start up Rate University Patents Sample 54 University Regions 69 MINT Universities Estimation OLS NegBin University: Education ln (# Students) *** + Phd Students / Prof. + *** + University: Research Publications/Researcher/Year * University: "Third Mission" Transfer Experience + *** Third party funding + + *** Region: Industry controls Regional Innovation + *** + Industry Concentration + *** + Industry Diversity + *** + Ind. Conc.* Ind. Div. *** East (Dummy) +** +* Constant + *** + 19 Results & Discussion Tertiary academic human capital (PhDs) enhances academic entrepreneurship Entrepreneurship policy is education policy. Investments in graduate schools or PhD grants. Teachingandpublishing and byresearchers (Post docandabove) above) have negative effect on academic entrepreurship Trade offs due to time constraints of researchers and budget restraints of universities. Pursuit of third mission has no significant effect on academic entrepreneurship Technology production of universities seems to be an independent process. Investments into technology transfer might be redirected to classic university missions. But: There might be unobservable long term benefits, e.g. social networks with industry In conclusion Economic research into that matter is at least implicitly based on neoliberal assumptions The basic issue of entrepreneurial impact of the classic, liberal university has been neglected so far The exemplary results presented here clearly favor the liberal model of universities as producers of high value human capital 20 10
Comment Silvio Vismara University of Bergamo & CCSE 21 The Finance of Academic Entrepreneurship: the acquisition of financial capital Silvio Vismara University of Bergamo & CCSE 22 11
Background: entrepreneurial university The commercialization of university activities has become a key objective for governments and universities Main reasons: foster the process of TT and contribute to economic development raise alternative source of financing for universities Since the number of spin offs created is becoming an indicator of the performance of universities, Europe has seen the creation of many very small firms without real business models (Colombo et al., 2010) 23 Motivation: financial perspective on Acad. Entrep. The perceived importance of academic is reflected in the explosion of research publications: the role of national legislation in stimulating acad. entrep. (Shane, 2004) factors facilitating the creation of spin offs (O Shea et al., 2005) institutional conditions under they are incubated (Lockett et al., 2005) characteristics of individuals becoming entrepreneurs (Landry et al., 2006) benefits firms derive from affiliation with universities (Mian, 1997) Concerns remain that the goal of achieving substantial/financial returns from the commercialization of university research is yet to be achieved 24 12
Research questions At the IPO: This paper relates two critical resources: access to scientificcompetenciesandcompetencies to capital markets Does the market of investors perceive the benefits of university affiliation and are they reflected in higher valuations and better performances? After the IPO: A common trait of existing studies is to consider the IPO as a final state: we move forward into the market for corporate control Does the affiliation with a university increases the probability that a firm will be acquired? 25 Illustrative Analysis I: Data and sample Stock markets of the 4 largest European economies (Germany: Deutsche Börse, UK: London S.E., France: Euronext, Italy: Borsa Italiana) Data: The list of IPOs is selected from the EURIPO database (www.euripo.eu) The data on M&A deals are from Thomson One Banker Deals database University based firms: companies that were developed by faculty members based on their research, or companies created to capitalise on research carried out in universities (Druilhe and Garnsey, 2004, p. 274) Among the 499 high tech SMEs, 131 were university based firms 26 13
Illustrative Analysis II: OLS regression on Tobin s Q Size -0.19** -0.22** -0.23** -0.25** Age -0.09** -0.10** -0.10** -0.14** Leverage -0.12-0.13-0.10-0.11 Profitability 0.23** 0.25** 0.23** 0.26** Dilution ratio -0.36-0.40-0.44-0.44 Participation ratio -0.45* -0.43-0.40-0.35 Institutional Affiliation University-based 0.13* 0.09 0.10 0.10 Academics in the TMT 0.31*** 0.26** 0.30*** 0.30*** VC-backed 0.04 0.05 0.04 0.04 Innovation Patents 0.42 0.48 0.40 R&D investments 0.61** 0.69** 0.75** TMT advisory role Ph.D. in the TMT 0.24* 0.28* MBA in the TMT -0.25-0.25 TMT Experience 004 0.04 004 0.04 TMT Relational Capital 0.94*** 0.94*** TMT agency role Concentration Change -0.21 TMT ownership Change 0.41 Independent directors 0.12 R 2 % b 19.61*** 21.72*** 26.61*** 26.98*** White Test Ho: homoskedasticity (p value) 0.47 0.79 0.75 0.75 Variance Inflation Factors 2.03 2.08 2.29 2.45 27 Results & Discussion Results: Academic affiliation enhances the valuation of firms and how it facilitate interaction with other partners, also by means of M&A deals Discussion: The long term success of spin offs is more important than sheer numbers Policies designed to stimulate academic entrepreneurship may not support their post entry development Policy makers should recognize that IPOs and acquisitions by incumbent firms could often be the most efficient mechanism to complete technology transfer If universities want to maximize the profit of their entrepreneurial initiatives, they should devote considerable attention to their most successful cases 28 14
Avenues for further research Cross border M&As of biotech firms affiliated with internationalized universities The university firm relationship enables international bidders to overcome their dff difficulties in assessing the value of the target resources, by conveying a credible dbl quality signal Scientists play a boundary spanner role by providing connectivity to universities and other sources of knowledge (international mobility of researchers and brain circulation..) Acquirer s liability of foreignness in the form of unfamiliarity with the target country, its culture, and its institutions (Zaheer 1995): academics engaged in a firm can soften geographical and cultural barriers in accessing these knowledge sources 29 Comment Erik E. Lehmann Augsburg University & CCSE 30 15
The Corporate Governance of Academic Entrepreneurship: the supply and demand of entrepreneurial capital Erik E. Lehmann Augsburg University & CCSE 31 Agenda Regional entrepreneurial capital Academic entrepreneurship Thoughts and testable hypotheses Results & Discussion Concluding Remarks 32 16
Entrepreneurial Capital Emergence of regional entrepreneurial capital combination of entrepreneurial competence and entrepreneurial commitment on the regional level: academic entrepreneurship (Erikson, 2002) supply of academic human capital reflecting entrepreneurial competence opportunity of academics to commit themselves to new ventures reflecting the demand for this kind of capital 33 Academic Entrepreneurship necessary strategic orientation to cope with the changing environment (Wright et al. 2007) from teaching to large scaleprojects... from new venture creation, to academic spin offs and academic board membership (Clarysse et al. 2007) to foster regional competitiveness (Colombo et al. 2010) academic spillover effects by board membership disseminating of academic knowledge into high tech firms advice, complementary skills, monitoring absorbing external knowledge academics as a scarce and necessary ressource for high tech firms 34 17
Academic Board Members demand for academic board members firm characteristics level and intensity of technological innovativeness (Marvel/Lumbkin, 2007) firm age; life cycle argument (Vanaelst et al. 2006) regional competition industry concentration (specialized) industry concentration (diversified) supply of academic board members regional universities stock and flow of scientific human capital 35 Hypotheses regional dema and for academic huma an capital regional supp ply of academic human capital firm characteristics innovativeness youth (nonlinear) + + knowledge flow Academics on Board provide scientific advisory, experience and social networks + + university structure regional competition diversified knowledge stock specialized 36 18
Dataset & Variables German IPO from 1997 2007, 150 travel to work areas based on 440 administrative districts, research ranking and statistics of 66 German public universities Endogenous variable percentage of board members with PhD Exogenous variables Firm characteristics size, patents, age, patents by the CEO, IPO pricing, industry dummies University characteristics Departments (Med, Eng, Biotec, Physics) Research (citations/publication/researcher, patents, funding/res ) Human capital (Students, researchers, ) Regional indicators Patents, workforce/(bio,physics,eng.), productivity, Diversity, Concentration Tobit regressions 37 Hypotheses regional dema and for academic huma an capital regional supp ply of academic human capital firm characteristics innovativeness Age (nonlinear) + + knowledge flow Academics on Board provide scientific advisory, experience and social networks + + university structure regional competition diversified knowledge stock specialized 38 19
Results Percentage of academics on the executive board is shaped by complementary assets (human capital of board members of the supervisory board, firm patents) varies with firm age (life cycle concept) differs across industries (BioMedical) is rather independent from the kind of industrial clusters (MAR Spillovers, Jacobs Spillovers) is shaped by the universities within the region in particular the flow of knowledge (knowledge filter) matters 39 Concluding Remarks Academic entrepreneurship policy should increase the incentives for academics to take positions within the board of directors in entrepreneurial firms reducing administrative complexity and bureaucracy increasing the monetary incentives should encourage academics to build complementary teams (natural science with management, finance, law) should be institutionalized as a necessary strategy of universities 40 20
Comment Massimiliano Guerini Università di Pisa DESE 41 21