NOTE
4.2 MODELS OF SPIN-OFF ACTIVITY
4.2.2 Departures from the Reference Models
Approaches to spin-offdevelopment may depart from our three reference models by virtue of their resources and activities. We identify two principal suboptimal types: resource deficient and competence deficient. Their characteristics in terms of number of researchers, number of technology transfer employees, technological focus and age are compared with the three reference models in Table 4.4.
Resource deficient
We labelled as resource deficient those spin-offsupport services with high ambitions in terms of objectives but which lack the resources to realize these ambitions. The deficiency in resources has a number of implications for PROs. First, they do not have the financial resources to make decisions autonomously from the university and invest in spin-off generation over a sufficient period of time. Second, they do not have the right mix of com- petencies or people in terms of experience and networking to deploy these activities. Third, they are not supported by a university board with an entre- preneurial orientation and/or they cannot rely on a strong regional network that supports enterprise. These factors produce structural shortcomings that lead these spin-off services to be positioned as weakly supportive models, and therefore unable to generate the type of returns that were ini- tially sought. The objectives in terms of spin-offs of these resource- deficient models are usually not clear and tend to follow the visibly successful examples in their immediate region. For instance, the Flemish universities tend to look at the Leuven R&D model and mimic its ambition, even without having the key success elements of this model. These key success elements lie in its structure/culture (trigger for the professors/
researchers) and its broader regional environment as well as in its unique resource base built up over a long period of time. Imitation of such a stra- tegy without these relevant resources tends to be unsuccessful. It seems that the lack of clarity about the kind of outcome possible within the
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Table 4.4Key figures on 43 validation cases Number ofcasesNumber ofPeople employed Technological researchersat the technology focus transfer service Low Selective10Average1462.65.3No Median17373 Maximum300015 Minimum461 Standard deviation1060.544.58 Researchers/TTS people274.2 Supportive7Average1808.16.9No Median7454.5 Maximum1170025 Minimum1201 Standard deviation 2902.196.59 Researchers/TTS people262.3 Incubator2Average1928.310.6No Median1720.510 Maximum300016 Minimum10242 Standard deviation817.814.89 Researchers/TTS people182.4
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Resource deficient18Average1678.34.2No Median11753 Maximum495010 Minimum701 Standard deviation 1836.793.56 Researchers/TTS people399.6 Competence deficient6Average55012.5Yes Maximum75015 Minimum35010 Researchers/TTS people44.0
culture/structure of the PRO and the characteristics of the broader envir- onment is the first reason why this hybrid type of organization exists.
Competence deficient
We labelled those interface services which havethe resources to implement one of the above models, but which do not have sufficient ability to perform the activities needed to build up a successful interface service, as ‘compe- tence deficient’. There was a lack of knowledge in the form of competen- cies that have been developed to employ resources productively in activities that will eventually result in the economic and social returns desired. These cases show what can happen if a PRO is supplied with a large amount of resources to create what the Supportive and Incubator PRO models. Even with a desire to create the economically and financially attractive spin-offs these models produce, without the requisite knowledge to acquire and inte- grate resources to create the required competencies it is impossible to fulfil this ambition.
Performance of these activities requires specialized competencies that can only be developed over time. For example, at Scientific Generics, over time, teams have learnt to develop these competencies which include creating technology platforms, performing business development and raising rounds of venture capital. Some of the competence-deficient PROs tried to shortcut this learning phase by acquiring specialists from other organizations who could supply the knowledge to build competencies.
These PROs continued to depart from the behaviour seen in the reference models because they lacked the ability to integrate and coordinate these competencies efficiently enough to produce results reflecting their desired objectives. Some PROs in this category can best be described as being ‘in transition’ from one normative model to another. Having already decided to make this shift, their current state of evolution has left them in a posi- tion somewhere between the two and resulted in an inability to deliver returns characterized by either model.
We did not find any indication that the prevalence of any model is higher in one specific region or country under study. The observed frequencies of incidence of each model are equally spread over the different regions.
Further, the resource-deficient models tend to be associated with public research organizations that might be just below critical mass in number of researchers (Table 4.4). The public research organizations tend to spread their resources too thinly to achieve a critical mass in any one domain, which tends to be the starting point of a successful interface model.
Taken together, the public research organizations falling into each of the two categories that departed from the reference models failed to achieve their intended objectives. Typically, inexperienced practitioners and
ill-informed policy-makers set out with the objective of creating economic growth and development by producing large numbers of ‘high-value’ spin- outs. These high-value spin-offs are characterized as high-tech ventures expected to generate high levels offinancial returns for investors and entre- preneurs plus highly skilled employment growth for the region. In reality, the spin-offs emerging from these public research organizations tended to be under-capitalized with little or no growth. This emphasizes our earlier observation concerning the orthogonality of the different models that there is an inherent conflict in trying to create ‘self-employment’, ‘economically profitable’ and ‘exit’ orientated spin-offs through one business model.
Public research organizations creating high value or financially attractive spin-offs have over time acquired specialized resources and developed com- petencies focused on creating a small number of ventures with the capacity to become established corporations. They have built up an international social network to attract top-level researchers and to team up with venture capitalists downstream. In this process, a lot of economically viable pro- jects are not supported because it is financially more attractive to license out the technology to an established partner. Self-employment orientated projects are deliberately not considered. The Supportive model is less selec- tive, but still looks for economic-profitability orientated companies with a reasonable growth potential and time to break even. They support projects at a point when other financial investors are unlikely to be interested. This approach might be too slow for exit-orientated projects requiring more resources and a speed-up of the time to market from spin-off. Incubator models are not well suited to evaluate these projects since they typically do not find VCs to syndicate with. This means that often these companies have difficulties finding follow-up money if the initial starting capital is not sufficient to cover the time to breakeven.