NOTE
5. Processes at the fi rm level: phases and models of development 1
8.2 CONCLUSIONS AND MAIN FINDINGS
In this section we summarize the conclusions and main findings on a chapter by chapter basis.
Chapter 2: Various Policy Mechanisms Have Been Developed to Bridge the So-called Knowledge and Financial Gap. However, Their Efficiency and Effectiveness Need Further Evaluation
Our review in Chapter 2 showed that European countries have developed various framework conditions to facilitate the process of start-up creation in general. These countries’ experiences have shown that neither these frameworks, nor money alone (VC funds) were enough to create a dynamic spin-offsector. It was necessary to create diverse micro (or meso) schemes or instruments. These measures concern (1) the ownership of IP, (2) the change of researcher status so that academics, who are public servants in many countries, are able to create a company, (3) the support for a project
171
or firm, and (4) the development of TTOs, incubators and seed capital funds in or around universities and public research institutions.
Although there is debate about the aims of national-level initiatives and the growth of regional and European initiatives, the national level was gen- erally the engine of policy to encourage spin-offs. In the UK and France, for example, the ministry or the department in charge of research launched the programmes: the office for Science and Technology (OST) in the UK, and the Ministry of Research in France. In contrast, in Germany, support from the Länderhas played a more important political role (Audretsch and Beckman, 2005). For example, the biotechnology spin-offlocated in BioM receives 75 per cent of its support from the state and city of Bayern and only 25 per cent from the federal government.
The ownership of IP and the legislative changes, which make it possible for an academic to take equity, are so-called facilitators. However, each European country also developed stimulators for spin-offpolicy. At first, the general opinion was that researchers were facing a so-called ‘finance gap’. This gap implied that there was not sufficient friends, family and fools (3F) money to cover the pre-seed and even the seed phase, which researchers faced at the moment they had an idea. It is common knowledge that in the US, so-called 3Fs provide the first financial resources to start- ups (Roberts, 1991). In Europe, the various Global Enterprise Monitor (GEM) reports have clearly shown that 3F money lags behind in compar- ison with the US. This immobility of capital has inspired national govern- ments to develop a range of initiatives financially to support innovative start-ups and spin-offs in particular. We have classified these initiatives into six categories, ranging from loan guarantee schemes to 100 per cent public funds. The countries included in this book have launched initiatives in each of the categories described in Chapter 2.
There is little doubt about the fact that the various public forms of finance have boosted the number of spin-offs created in the mid and late 1990s. However, it remains questionable whether these spin-offs will become sustainable companies. There exist very few evaluations of the various sorts offinancing schemes and those that do exist are not disclosed to the public. Heirman and Clarysse (2006) have shown that in the Belgian population of young technology-based firms, spin-offs are the fastest- growing subpopulation. Although promising, a true evaluation is too early.
Most of the spin-offs have been founded since the mid-1990s and were therefore less than ten years old at the time of our data collection. The rapid growth might just be a reflection of the larger amounts of capital these companies can dispose of.
After the boost in the number of VSOs created following the develop- ment of various financing schemes, the average number of companies
created gradually began to fall. Universities complained about the lack of projects among their researchers and the low level of entrepreneurial ini- tiative among their academics. So, business plan competitions and various forms of entrepreneurship training were developed to bridge the so-called
‘knowledge gap’. This knowledge gap refers both to the lack of awareness among the researchers to engage in entrepreneurial activities and the lack of knowledge among them about how to develop a business plan.
Along these lines, various sorts of business incubation initiatives were stimulated. Although these business incubators have theoretically a very clear role, they apparently lack in-depth knowledge about the sector or the technology in order to be really useful. The tenant companies included in our analysis were not impressed with the services offered to them by the incubator in which they were located. Only Chalmers incubator, which clearly focuses on the commercialization of research results from Chalmers University, delivers services that match expectations to a large degree. This finding suggests that incubators are most useful when they are really focused on a certain technology, sector or at least the main departments of a technological university. If not, the services that are offered tend to be of marginal importance only and remain limited to the facility management offer.
Since incubators have been a subject of policy attention in many countries for several years, the finding of their relatively low value-added to the tenant companies is very intriguing. If they have so little value added, why do policy-makers then repeatedly use incubators as an instrument to leverage business plans. One explanation might be the legitimacy which these organizations have developed. Legitimacy of an organizational form leads to institutional isomorphism. This means that policy-makers use benchmarks from the initiatives taken in other countries upon which to base their own policy actions. Incubators are clearly such a benchmark result. Despite their low value added, they continue to receive large amounts of public money.
Next to the analysis of the different policy initiatives independently. An important policy concern relates to the complementarity between the diverse initiatives taken to promote spin-offs. The SQW (2005) evaluation report shows that in July 2003, fewer than 50 per cent of the funded higher education institutions (HEIs) in the UK received funding from more than one programme. On the other hand, 51 HEIs received only HEIF funding, seven only SEC funding and three only UCF funding. However, SQW (2005) note that the activity additionality of all programmes is high in terms of the recruitment of extra staff, which the institutions would not have funded on a similar scale from their own budgets, and the generation of additional commercialization of research ideas and company formation.
In the French case, there appears to be a degree of complementary, with 32 per cent of the creators being involved in more than one of the four incentive measures. The most important overlap is observed between the competition and the incubators. Of the total companies resulting from the competition and the incubators, 23 per cent are common to both measures, the 315 companies concerned accounting respectively for 47 per cent of the companies created from the incubators and for 45 per cent of the compa- nies resulting from the competition.
However, our analysis of the available data and our discussion with the managers of the incubators and the public seed capital funds show that there is a significant gap between these two instruments. The government intervention model in its present form functions only partially. The linear model adopted by governments is limited as only a very small percentage of the start-ups financed by seed capital funds are from public-sector incu- bators. Although the French government perceived there to be comple- mentarity in its measures concerning incubators and start-up funds, this complementarity did not materialize, since only eight of the 344 firms created from incubators by the end of 2001 had benefited from seed capital funds. Indeed, 77 per cent of the firms supported by the seed capital funds (that is, 27 out of 35) were not created from incubators. Conversely, only 2 per cent of the firms created in incubators (eight out of 344) benefited from seed capital. Even by the end of 2005, companies funded by public seed funds represented only 6 per cent of the total companies generated by the incubators. This result would seem to undermine the main premise of French policy towards spin-offs.
Chapter 3: Spin-offs Are Not a Homogeneous Group of Companies. Policy