Spin-off Companies

Entrepreneurship and Innovation in spin-off companies

Introduction

The materialization of today's entrepreneurial universities is associated with the perceived increase on importance of skills/knowledge in regional and national innovation systems, as well as the belief that university is an instrument for creative innovation and technology and knowledge transfer. Modern universities have a paramount role in adding value to the USO's (University Spin-outs) in a bid to realize entrepreneur cultural among academia. There is dire need to involve greater participation as well as entrepreneur training among students focused in academic research commercialization (Etzkowitz et al, 2000). Required funding as well as intensive research culture among Universities has worked out to build young entrepreneurs across U.S, Europe and UK. Driven by the quest for meeting market technological as well as innovation need, Universities have some resource endowed universities have concentrated in creating entrepreneurship opportunity through research-based activities. In order to realize effective entrepreneurship culture, early intervention in the growth and development stages of spin-offs would act to alter the attitude associated with modern university capacity in building techno-entrepreneurs. University practitioners have a duty in developing vital technology skills in assisting students comprehend market trends and after-sought commercial proposition in order to be informed entrepreneurs.

Involvement of universities in developing spin-offs

Entrepreneurship is founded on the education capability and the industrial related competence that the entrepreneur posses through higher education training. These two basic blocks are developed in institutions of higher learning, usually the universities. University academia creates university spin-off companies. Spin-offs companies may be described as the new; initially minute and technology/knowledge intensive ventures whose intellectual capital and subsequent involvement is traced from research work in a university or a public research institution (Vohora et al, 2003). The researches subsequently running such companies could be continuing students or those who just quit. Any company requires a productive base and/or a commercial base for its operations. Productive base includes all company's physical amenities while commercial base provides the legal and marketing competence that support partnerships and collaborations. As entrepreneurs, university academia need a variety of resources that depend on the entrepreneurial activity selected as well as the already accumulated resources, including experience, contacts and the prior knowledge. These resources determine the manner in which the spin-offs reach their market with the innovations (Leydesdorff & Etzkowitz, 2000). Some Universities and research institutions usually miss out in preparing entrepreneurs as compared to other community institutions. Indeed, there is disparity across these institutions in the quality, strength and quantity of spin-offs they produce. Most scientists and academia at large lack in the business background as well as the investment capital necessary to cater for expenditure incurred in the lengthy enterprise development.

The disconnect between innovation and target market

The academia seems detached with the target market though rich in innovativeness. For them, their niche market is the provision of consultancy or research services. Such an undertaking is close to scientific-entrepreneur work in academic and is unlikely to have a base on patents or to significantly demand technology development. In contrast, a production base requires capital investment which is lacking in the scientist's experience. A research on Cambridge University and its research centers' spin-offs based in high-tech firms showed a decreasing trend in the number of founders of such companies from a twenty five percent in 1985 to seventeen percent in barely fifteen years. Following this alarming research findings, the academic staff were to have outside involvements as long as such commitments were geared towards advancement of the teaching, research and scholarship of the university. The commitments undertaken included business creation and private consultancy. The university never provided entrepreneurship support but its Laissez fair orientation to technology transfer coupled with the lack of formal policy allowed academic investors to take their technologies into the market. The university would then possess the intellectual property rights (IPR), share loyalties when such innovations were diffused into the market. Cambridge University went ahead to take equity stake in the spin-off companies. The intentional avoidance of a deliberate structured policy that would govern the university with industry did create a favourable environment that was perceived as flexible and lacking in bureaucracy. Industrial links prospered and there was a spontaneous creativity of research. The alarming trend changed such that for the past twenty years, spin-offs from Cambridge University increased indicating improvement of the entrepreneurship environment. The approach differed from other universities in many European countries that regulated involvement of scientists with outside work in efforts to avoid conflicts of interests that would arise and to ensure total commitment to core activities (De Coster & Butler, 2005). Engagement with the industry and participation in entrepreneurial activities develops the relevant experience and knowledge in academic investors and as such an improvement of perception of opportunities. The participation also clarifies resource configuration strategies in pursuance of newly or refined perceived opportunities. Targeting of the niche market is therefore indispensable in capturing returns. This is only possible if the academia engages in practical business practices within the target market (Druilhe & Garnsey, 2004).

Accounts for university's spin-off differences

The cross university differences being experienced in production of entrepreneurs can be attributed to poor practices that some universities ascribe to. First, although such universities posses well developed technologies there little or even no intensive reach undertakings to underpin market as well as entrepreneur commercialization need. There is a lack of commercial expertise within such universities to overcome the deficiencies so as to develop fundable opportunities. Second, such universities do restrict networks amongst academia that would necessitate availability of finances. Third, the entrepreneur students are taught to attune to the challenges in accessing resources, their acquisition as well as the coordination of the allocation of such resources (Vohora et al, 2003). This kind of training is wanting in hands-on experience on the industrial trends as well as the target market. As a result, the academia in such institutions possess significant technology expertise but hold inadequate knowledge in serving markets and has unrealistic expectations of returns that could possibly accrue from their discovered technologies. The said universities also fail to allocate sufficient resources towards entrepreneurial activities in addition to failing to develop deep networks of external factors such as financiers and surrogate entrepreneurs as well as the industry at large. The policies and guidelines for relating with such external relationships have been neglected. Moreover, these institutions expose their potential entrepreneurs to extended years of scientific know-how but offer little training in entrepreneurship and business. Basically this approach aims at creating entrepreneurship competency level, which is usually lowly rated entrepreneurship factors. This results to learners being restricted to the university environment instead of presenting them to the customers so that the process of marketing would kick off (Druilhe & Garnsey, 2004). The difference that arises in the universities' and research institutions' spin-offs can be attributed to four factors. First, the Perceived protection on Intellectual property right on special design or artistic works. Universities that properly integrate commercialization and academia emphasize on protecting the competitive advantage by their spin-offs. The emphasis can be attributed to university's need to protect its intellectual property (Ko & Smith, 2006). Such a property is rewarded with equity stake in the formed company. Second, the employment of professionals in the spin-offs determines the strength of the spin-offs. There is dire need to have an experienced team in the running of the new company. Such a team should possess a repertoire of experience that is grounded on a formal educational training. This ensures a realistic projection and understanding of the business environment and more specifically the trends in the target market. A professional team also understands the concept of delegation so that it not everything is left to the subordinates in avoidance of work. Third, the product innovation distinguishes between a stable and non-stable spin-off. The dynamism in technology dictates that a company's product undergoes changes so as to fit in the market. Technological changes will sometimes dictate a complete overhaul of a product so that it can be of use by others in the market. For example, a change in the raw materials dictates a change in the production plant. The other factor is the market driven strategies. A company must properly study the market trends so as to cope up with the market demands. The strategies adopted must among other things be appealing to the clients, defeat the competitors' strategies and influence the acquisition of the desired market share. The strategy must however be within the reach of the company's resources. It is marketing that informs the target market of the existence of a technology for use. In many instances, marketing has been considered more important than product innovation. It is possible to influence the market and sustain or increase a market share without necessarily increasing a product's innovations. In comparison with other community business enterprises the achievement of spin-off companies were rated in the following decreasing order; protection of IPR, employment of professionals, product innovation, market driven strategies (De Coster& Butler, 2005). From this order, it is clear that spin-off companies do not put much emphasis on the target market. They highly concentrate on maintaining their competitive advantage elements which, though important, may not translate to returns. More emphasis on maintenance of competitive advantage by protection of IPR ensures survival of a company for a longer period of time. However this would only be varied if the IPR are so distinctive such that the competitors can't produce substitutes.

Commercialization of innovations

All institutions attempting to produce entrepreneurs must commit themselves to four strategies. First, the institutions must influence availability of venture capital around the university area. This will be achieved by encouraging financier relationships. The students should also not be restricted to the institution environment, but rather oriented to adopt dynamic technological-based skills vital in either regional or even national development levels (Vohora et al, 2003). Secondly, the institutions should adopt a commercial orientation. This can be achieved by the institutions funding commercially oriented researches. This should however not disable the technological researches. Thirdly, institutions should create and maintain intellectual eminence. Quality researchers are highly likely to use their innovation capabilities in starting firms than lesser quality researchers. On average, high quality researchers can only be found in those institutions that are more eminent. Institutions should therefore work towards their reputation and prestigiousness. Prestigious institutions can easily get funds for commercial research in form of gifts, and perhaps donations from development partners. Finally, research institutions should develop clear policies that allow technology transfers. It is only such a move that the graduates and the general academia staff can have a hands-on experience in the commercial sector. Issues of sharing of loyalties for IPR should be properly spelt out. The institution's share of loyalties of IPR should be moderate so that the spin-offs get substantial revenue in utilizing the IPR. The institution should also have policies that enhance availability of venture capital funds from internal sources. Furthermore, the institution should be willing to have a share of equity stake with the technology licensing offices. Such a practice displays the important role that the institution is playing in the business world. The above strategies would enhance a change in institution's culture towards spin-offs and the general approach to innovation commercializing. Governments also have a share in development of entrepreneurs from universities and public research institutions. Since universities are public institutions, the government should have a keen interest on the outputs that such institutions are producing to the economy. The government should therefore be a keen observer so that, through the relevant government agencies, it can advise the universities on the influence the outputs form those institutions are having on the economy. In attaining entrepreneurship culture among University students, government ought to devolve funds the institutions in a bid to enhance commercial oriented researches. The government should then have a mechanism to monitor such funds. The government should also pass legislations that would IPR ownership by universities (Ko & Smith, 2006).

Conclusion

It's paramount to reckon that, the entrepreneur world is commercial and so every innovation that is discovered should be properly channeled to the market. Universities should be at the forefront in bridging the disconnect that exists between technology and its commercialization. The government should play its role as discussed in the paper in enhancing integration of the academia community with the business community within the country and beyond. Nevertheless, individual responsibility in terms of putting efforts to integrate the technology gained in universities with the society is also important. The academia community must have a self motivation to practice the innovative concepts learnt in class. The essence of learning will only be realized by a complete harmony between theory and practice, which is the ability to correctly interpret and use knowledge from class in the real life.

References

De Coster, R. & Butler, C. (2005). Assessment of proposals for new technology ventures in the UK: characteristics of university spin-off companies. Journal of Technovation. 25; 535-543. Di Gregorio, D. & Shane, S. (2003). Why do some universities generate more start-ups than others? Research Policy. 32; 209-227. Druilhe, C. & Garnsey, E. (2004). Do Academic Spin-outs Differ and Does it Matter? In: Journal of Technology Transfer. 29(3/4). 269-285. Etzkowitz, H., Webster, A., Gebhardt, C. & Terra, B.R. (2000). The future of the university and the University of the Future: evolution of ivory tower to entrepreneurial paradigm. Research Policy. 29(2):313-330. Ko, H.& Smith, H.L. (October, 2006). Measuring the performance of Oxford University, Oxford Brookes University and the government laboratories' spin-off companies. Research Policy. 35; 1554-1568. Leydesdorff, L. & Etzkowitz, H. (2000). The dynamics of innovation: from National Systems and ‘‘Mode 2'' to a Triple Helix of university-industry-government relations. Research Policy. 29; 109-123. Vohora, A., Wright, M. & Locakett, A. (June, 2003). Critical junctures in the development of university high-tech spinout companies. Research Policy. 33; 147-175.

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