THE REGIONAL IMPACTS OF UNIVERSITY SPIN-OFFS. Einar Rasmussen Presented at the University of Pécs, December 1st 2017

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1 THE REGIONAL IMPACTS OF UNIVERSITY SPIN-OFFS Einar Rasmussen Presented at the University of Pécs, December 1st 2017

2 Science as an Endless Frontier (Bush, 1945) outlined the importance of science for solving societal challenges: the battle against diseases, national security, job creation, food production, quality of life Today we can add the increasing concerns for the natural environment The solution of many of today s challenges depends on scientific progress that is put to practical use, i.e. science commercialization

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4 Universities and entrepreneurship The link between the presence of a university and the creation of innovative start-ups in a region is well established (Baptista et al., 2011; Fritsch & Aamoucke, 2013) University knowledge improves industrial innovation and foster the creation of knowledge intensive firms in the nearby region (Bonaccorsi et al., 2014) More than 10% of new products and processes introduced by large firms in seven industries was critically dependent on recent academic research (Mansfield, 1998).

5 Universities and entrepreneurship The exact mechanisms behind this effect is not well understood Do University spin-offs play a role? as the archetypal innovative start-up, or as a facilitator for technology transfer (Autio, 1997)

6 Science-based new firms (SBNFs) SBNFs: new entrepreneurial ventures based on scientific knowledge and inventions (from universities or public research organizations) A growing phenomenon that is currently promoted by governments and universities across the globe A very tangible and measurable output from universities (spin-offs), and often highly supported and profiled Most SBNFs locate close to their parent institution (regional role)

7 SBNF economic impact Long-term studies find strong economic impacts of SBNFs The role of SBNFs for successful innovation hot-spots (e.g. Stanford, MIT) Vincett (2010) following university spin-offs in Canada: estimate a total Present Value of all sales of $73.1B (NSExm) Europe: 60% of biotechnology (SMEs) that go public are SBNFs (Bonardo et al., 2010)

8 Or marginal? Some studies report disappointing impacts of SBNFs (Bathelt et al., 2011; Borlaug et al., 2009; Brown et al., 2015; Harrison & Leitch, 2010). University spin-offs are relatively rare AUTM: mean of 2 SBNFs per university, median is 0. Appears as insignificant in comparison with other types of outputs from universities such as collaboration with firms and student start-ups

9 Hughes, A., & Kitson, M. (2012). Pathways to Impact and the Strategic Role of Universities. Centre for Business Research, University of Cambridge.

10 Number of faculty spin-offs and alumni start-ups from MIT between 1980 and Åstebro et al. 2012

11 Complementary activity Different technology transfer mechanisms are linked Contract research and spin off activities tend to facilitate each other at university level (van Looy et al. 2011) SBNFs are research intensive and often retain linkages with their parent university SBNFs are often acquired at an early stage

12 How do SBNFs generate impacts? The academic entrepreneurship literature tends to examine issues related to the establishment and economic performance of SBNFs Determinants of the number of SBNFs SNBF early performance Studies examining the impact of universities rarely examine spin-offs in any detail What are the potential impacts?

13 University level impact Direct economic impact Royalty from licenses and sale of equity (Bray & Lee, 2000) Very modest for most institutions Indirect economic impact Generate research income and enhanced reputation Quantity and quality of spin-offs explain 13% of external research funding among UK universities (Pitsakis et al., 2015) Impact on research and teaching Commercialization has positive impact on teaching (Wang et al. 2016) Academics engaged in SBNFs have diverse motives, including technology development and obtaining research funding (Hayter, 2011)

14 SBNF firm level impacts Profit and value creation performance premium (Czarnitzki et al., 2014) Jobs and salary (taxes) But rarely economic benefits for the entrepreneurs (Åstebro et al., 2013) Small wage premium (Dorner et al., 2017) Total economic impacts driven by rare success cases Very few firms accounts for the majority of impacts (e.g. profits or new jobs) Particular (unique) regional contexts Silicon Valley, Boston, Cambridge These effects are highly skewed Power law distributions (Crawford et al. 2015)

15 Value creation of 470 SBNFs in Norway Nr 2 Nr 3 Nr 10

16 Industry spillovers The customers of the SBNFs Access to research and innovations Cost savings, improved products and services Systemic knowledge conversion (Autio, 1997) Other industry actors Dissemination of innovations and knowledge E.g.: SBNFs are often acquired (Rasmussen and Mathisen 2017) Little systematic research at micro level

17 Regional cluster spillovers Contribute to the establishment of new industries E.g. biotech (Jong, 2006) Transforming local economy into high-tech cluster E.g. Cambridge (Garnsey and Heffernan, 2005) SBNFs as intermediaries SBNFs are highly research intensive SBNFs tend to maintain their linkages to the parent university

18 Entrepreneurial spillovers of SBNFs Secondary spin-offs (Leitch & Harrison, 2005) Increased entrepreneurship capital (in the region) Link to (entrepreneurship) education and commercial engagement by scientists Can SBNFs increase the entreprepreneurial competencies of persons linked to scientific knowledge?

19 Societal impacts Solving societal challenges (e.g. health, environment, safety) Contributions to social wellbeing (Langford et al., 2006) Example: New vaccine development for tuberculosis (Li and Garnsey 2014) The Association of University Technology Managers (AUTM) emphasizes the social impact of the university spin-offs through the Better World Project

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21 Conclusion SBNFs are by themselves unlikely to be high growth firms with high economic impact But they may contribute to other impacts in several ways

22 SBNFs: a broader view Not only economic significance as independent firms, but agents of technology transfer from universities. In this view, SBEFs are not an outcome, but a enabler of impacts From what is the impact of SBEFs?, to: How do SBEFs enable. Higher university impact? New innovative business activities? Competitive industry? Solving societal challenges?

23 Policy implications SBNFs are usually heavily subsidized by public funds. Can the support to SBNFs be used more wisely by considering: Relevance for university research and education? Relevance for industrial innovation? Relevance for entrepreneurial ecosystem? Approaches are likely to be specific to local/regional context Complementary assets, industry structure Ecosystem, level of proximity and networks between actors

24 The critical question Are the impacts of the SBNFs additional? Considering the counterfactual situation that the SBNF was not created: would similar impacts still have been achieved? Research are commercialized through many channels, and larger firms may be in a better position to bring new innovations to the market compared to new ventures. From a regional perspective, however, spin-offs may be preferred because they often settle locally.

25 Suggestions for a research agenda Follow a cohort of university SBNFs over time Assessing multipe outcomes and impacts Map the role of SBNFs in specific industries or for the development of specific technologies. Examine the interplay of different technology transfer mechanisms Do SBNFs enable university-industry linkages? Explore role of SBNF in linkages between the university and region Do SBNFs collaborate with other firms in the region (e.g. R&D projects), and what is the effect on performance/capabilities of these firms?

26 Thank you for your attention