Introduction to Entrepreneurship

Lecture 13
’Hard’ Support: Science Parks
 Support Knowledge-Based Firms?

• Significant growth in new firms, particularly consumer

services firms
• Focus on new firm ‘quality’ and high growth ventures
• Increase the supply of ‘knowledge-based’ firms whose
competitive advantage is ‘knowledge’ and not low
price
• Initiatives to increase the supply of firms from Higher
Education Institutes (HEIs) and research laboratories
 Knowledge-Based Firms: Benefits

• Encourage national economic development

• Broaden the industrial base of regions
• Improve the competitive capability of industry
• Job generation and wealth creation
• Reduce local new firm displacement – ‘born-
global’ firms that export
 Neo-Classical Location Theory
• Location of individual firms is influenced by direct economic costs (Weber,
1929; Smith, 1981):
• Distance from markets, transport costs, labour costs and agglomeration
economies
• Cost and availability of premises
• Cost and availability of skilled labour
• Availability of financial grants and subsidies
• Provision of complementary services to overcome an entrepreneur’s
weaknesses in core business skills
• Environmental quality
• Presence of a local HEI (MacGregor et al., 1986; Flynn 1993)
 Behaviourial Location Theory
• “…the role of people throughout the process of technological
change is crucial” (Malecki, 1991, p.372)
• Satisfying rather than profit maximising can be a key factor
influencing the location decisions made by entrepreneurs (Autio
and Kauranen, 1994)
• Consider the influence and effect of uncertainty (or lack of full
information) on decision-making
• Gate-keepers (i.e., Science Park managers) can act as a
formal mechanism (Johannisson et al., 1994) to reduce
uncertainty (and associated costs)
Gate-Keepers / Science Park Managers

• Minimize some of the liabilities of firm small size

and youthfulness (Van de Ven, 1993)
• Channel information to a firm with limited
legitimacy
• Broaden business networks
• Facilitate access to resources from HEIs, banks,
venture capitalists and enterprise agencies
 Structural Theory

• Structure of an entire industrial system has a key

role influencing the location of economic activity
• Sought to explain locational agglomeration
• An innovative milieu (Aydalot and Keeble, 1988) and
the notion of an industrial district (Piore and Sabel,
1984)
• Non-physical resources, proximity, relational capital
and co-operation and learning influence the
development of territorial synergy (Maillat, 1995)
 Structural Theory (II)
• Combination of clusters of science-based knowledge,
together with institutions and skilled labour encourage
innovation (Castells and Hall, 1994)
• Science Park can provide and gain access to structural
elements which encourage synergy between technology-
based firms
• Institutional factors within a Science Park locale (Giddens,
1979) can provide a context for acquiring knowledge and
experience and for the routinising of many activities (Thrift,
1996)
 Network Theory

• Model of emerging networks focusing upon the relational

structure of exchange between individuals (Johannisson et al.,
1994)
• Science Park is a formal institution that is deliberately created
to deal with collective concerns
• Formal administrative structure of a Science Park is created to
manage the property and / or to manage the delivery of
services
• Science Park management agreement can influence the ability
of firms to acquire services and resources
 Social and Business Networks
• A firm’s social network:
– Genuine dialogue between firms on Science Parks is due to talk
networks (an instrumental communication dimension and
socialising based on affection)
– Acquaintances networks (a potential for solicited and unsolicited
expressive exchange) are encouraged by peers or gate-keepers
who can legitimize the activities of academic entrepreneurs who
are managerially inexperienced
• A firm’s business network:
– Commercial networks (access to local product and resource
markets)
– Professional networks (access to problem-oriented information
retrieval)
 Sponsored Environments
• Address attitudinal, resource and operational barriers
• Property-based Science Parks (Westhead and Batstone, 1998):
– Reduce uncertainty and risk
– Provide resources
– Reduce direct costs
– Increase flow of information
– Encourage development of business networks
– Encourage links with adjacent university and large firms
• Universities – new income streams, student placements, student
employment in local region
 Science Parks: Definition

• United Kingdom Science Park Association (UKSPA, 1999)

• Encourages and supports the start-up and incubation of
innovation-led, high-growth, knowledge-based businesses
• Provides an environment where larger and international
businesses can develop specific and close interactions with a
particular centre of knowledge creation for their mutual
benefit
• Has formal and operational links with centres of knowledge
creation such as universities, higher education institutes and
research organisations
Science Park Developers: Assumptions

• Firms desire high specification and flexible premises

• Firms desire landscaped environments
• Firms are concerned with business image and want
to increase their credibility and status
• Firms want to be linked to a local HEI
• Firms want to co-operate with other tenants
• Firms are prepared to pay a ‘rent premium’
 What is Provided on a Science Park?

• Intellectual and physical infrastructure that

includes:
– Built environment
– Immediate surroundings
– Communications, telecommunication, IT, business
services and business support services

• Management support actively engaged in the

transfer of both technology and business skills
 Objectives of Science Parks
(Massey et al., 1992, p.21)
• Promote Higher Education Institute (HEI) / industry
linkages and the transfer of technology from HEIs to
Science Park firms (linear innovation model is
assumed)
• Promote the formation of new technology-based firms
• Encourage spin-off firms started by academics
• Encourage the growth of existing technology-based firms
• Attract firms involved in leading-edge technologies
 Supply-side Perspective

• Create synergy between firms

• Improve the performance of the local economy
• Improve the image of the location, particularly for
areas of industrial decline
• Create new jobs directly (and indirectly)
• Enhance the competitiveness of new and existing
firms in the region
 Science Parks in the UK
• Silicon Valley (San Francisco, USA) role model; 3,000 electronic
manufacturing firms; 5,000 firms providing producer services
(research laboratories, design, market research, recruitment, venture
capital)
• 85% of firms in the area employed less than 50 people (Castells and
Hall, 1994)
• Stanford University in Palo Alto and Massachusetts Institute of
Technology (MIT) in USA role models (Saxenian, 1994)
• In 1972, Cambridge and Heriot-Watt Science Parks
• 7 Science Parks (1983), 32 (1989) and 46 (1999)
• Most HEIs now have an adjacent Science Park
 Management Strategies
(Carter, 1989; Grayson, 1993)
• University led and funded strategy: Established and managed by
a HEI on its own (this is the least common model) - Cambridge,
Heriot-Watt and Surrey
• Joint venture company strategy: Run as a separate legal entity
but a continuing role for the HEI and other investors - Aston
(Birmingham Technology Limited), Southampton (Chilworth
Centre Limited) and Warwick (University of Warwick Science Park
Limited)
• Co-operative venture strategy: Partners work together within a
flexible and informal framework. Local authority or development
agency leader. Least input from the HEI. Most common strategy
- Aberystwyth, Antrim, Durham and Stirling Science Parks
 Management Agreements
(Grayson, 1993)

• Informal teams: Cheapest and most flexible

approach. Partners divide the various
management tasks between themselves. No full-
time, on-site management presence. Property
management may be carried out by a development
agency or local authority, and tenants have access
to the general business and technical advisory
services of the university, local authority,
enterprise agency etc. as required
 Management Agreements (II)

• Single, on-site manager: Allows the build-up of

expertise relating to the specific needs of Science
Park firms. Property management generally
remains the responsibility of the local authority or
development agency. Science Park manager
chosen for his / her industrially related scientific
skills to enable the informed selection of tenants
and the promotion of technology transfer links,
other aspects of management may be neglected
 Management Agreements (III)

• On-site management company: Formal integrated

management structure will give a more secure
basis for long term development. Management
team include representatives from all the Science
Park partners and provide a wide range of full time
tenant support services as well as undertaking
property management and marketing (e.g., Aston
and Warwick Science Parks)
 Services Provided by Science Parks

• Management should go beyond tenant selection,

lettings, rent collection and rent review negotiation
• Provide a supportive environment (Flynn 1993) to
ensure rental growth and reduce business closures
• Jointly used services can help firms to reduce their
fixed overhead costs (Sternberg 1990)
• Flexible leasing agreements and the provision of
units of various sizes
 Services Provided (II)

• Proactively stimulate technology transfer and promote

links between the local HEI and tenant firms through visits
from a HEI’s Industrial Liaison Officer
• Seminars and magazines to raise awareness of the HEI’s
resources and skills
• Shared social and recreational facilities facilitate informal
contacts between HEI and Science Park employees
• Provision of business advice and services related to
financial and marketing skills and intellectual property
protection
 Services Provided (III)

• Provide training or use skills of HEI business school

• Encourage tenants to utilize the local HEI’s library service in
order to gain access to the latest technical and commercial
information
• Provide finance (i.e., Aston Science Park Fund) or act as
brokers linking firms to formal and informal sources of finance
(Westhead and Storey, 1997)
• Advice from the Science Park manager (i.e., gate-keeper) can
legitimize the activities of entrepreneurs and can increase and
diversify an entrepreneur’s networks
 Demand-side Perspective
• Location decisions reported by owners of independent Science Park (n
= 46) and off-Park firms (n = 48)
• Science Park firms were significantly more likely to emphasize
(Westhead and Batstone, 1998):
– ‘prestige and image of the overall site’ (83% of Science Park firms
compared with 33% of off-Park firms)
– ‘provision of on-site management and common services’ (48%: 6%)
– ‘access to facilities of HEI / centre of research’ (44%: 0%)
– ‘prestige of being linked to the HEI / centre of research’ (37%: 0%)
– ‘scope for attracting graduate HEI staff’ (28%: 6%)
– ‘friendly atmosphere among tenants on site’ (22%: 8%)
 Demand-side Perspective (II)
• Off-Park firms emphasized (but not significantly):

– ‘cost of premises’ (46% compared with 60%)

– ‘the firm was already based in the area’ (37%
compared with 56%)
 ‘Managed’ Science Parks

• ‘Managed’ Science Park has a (generally full-time)

manager on site whose principal task is to manage
the Park (Westhead and Storey, 1994)

• UKSPA identified: Aberdeen, Aberystwyth,

Cambridge, Highfields (Nottingham), Listerhills
(Bradford) and Loughborough
 ‘Managed’ Park Firm Profile

• Assisted areas
• Firms dependent on a small number of customers
• Firms provide products / services perceived to be risky /
leading edge
• Firms wanted to:
– Address dependency problems
– Increase legitimacy
– Access to low cost producer services
– Gate-keeper to expand networks
 ‘Non-Managed’ Park Firm Profile

• Older and larger firms; manufacturing products

• Taken out patents to protect their products
• Do not require a proactive gate-keeper who facilitates
producer services
• Firms wanted to:
– Status and prestige
– Links with HEIs and multinational firms
– Diverse social and business networks
 ‘Managed’ and ‘non-Managed’ Firms
Westhead and Batstone (1999)
• ‘Managed’ firms (6.7) used twice as many facilities as ‘non-
managed’ firms (3.3)
• Over 41% of ‘managed’ firms used:
– Reception (77%), conference rooms (75%)
– Mail service (73%), business services (64%)
– Photocopying services (54%),
– Restaurant / cafeteria (52%),
– Audio-visual equipment (48%)
– Telephone answering service (46%)
– Fax / telex service (43%)
 Role of Science Park Manager
• Significantly more respondents on ‘managed’ parks suggested
the SP manager had a high level of involvement with regard to
the following roles:
– 'approachability: how easy is s/he to talk to in person'
– 'accessibility: how easy is s/he to get to see‘
– 'does s/he run the science park efficiently on the whole‘
– 'how effective has the management been in responding to your
property needs‘
– 'how well informed is s/he on subjects of interest to your firm‘
– 'does s/he provide a useful range of services for companies on site‘
– 'does s/he provide a useful facility to sources of information'
 Science Park Manager Concerns

• Science Park managers on ‘managed’ parks

effectively respond to the property needs of
firms

• Less effective in providing signposting facilities

to sources of information and HEI services /
skills
 Conclusions

• Entrepreneurs located on ‘managed’ and ‘non-managed’

Science Parks appreciated the benefits provided by
property-based initiatives
• Owners of ‘non-managed’ and ‘managed’ Science Parks
are committed to the needs of technology-based firms
• Science Parks are beacons to encourage the spontaneous
clustering of technology-based firms
• Science Parks provide premises and postal addresses that
can increase the legitimacy of new and small technology-
based firms
 Conclusions (II)

• Owners of ‘managed’ and ‘non-managed’ Science

Parks provide essential resources and services
• Owners of firms value a supportive environment
• Firms address some of the liabilities associated with
small firm size and youthfulness by expanding their
social and business networks
• Firms are prepared to pay a rental premium for a
prestige address to signal their increased legitimacy
and status
 Conclusions (III)

• By linking with a local HEI, Science Park firms are able to

minimize the direct personal cost (and associated risk)
associated with R & D
• Managers of ‘managed’ Parks are less selective (and more
prepared to take risks) surrounding the choice of tenants
• Firms located on ‘managed’ Parks are not a homogeneous
entity
• Profiles of firms located on ‘managed’ and ‘non-managed’
Parks are not identical
 Conclusions (IV)
• ‘Managed’ Parks selected to:
– Gain access to resources
– Access to low cost producer services
– Increase legitimacy
– Gate-keepers that actively expand networks

• ‘Managed’ Park firms used more services and appreciated the

role of the manager on site
• Established and resource rich firms located on ‘non-managed’
Parks did not require proactive gate-keepers but they benefited
from prestige, links with a local HEI and broadened networks
 Conclusions (V)

• Science Park managers deal effectively with

property needs but were less likely to be seen as a
conduit to the facilities of the HEI

• Science Parks need to strengthen their managerial

function, in the sense of being seen to be less of a
property-based initiative
 Conclusions (VI)

• “Faced with the magnitude of the task of innovation,

appendixing to the science park the role of innovation
‘seedbed’ or regional development ‘growth pole’ may
be an unrealistic expectation from a project that in
many instances is not much more than a real-estate
development. Thus, if there is some disappointment
in the fact that science parks are often not much more
than high-tech ‘islands’ with minimal interactions both
between themselves and with their neighbouring
universities, it could be that hopes were pitched too
high in the first place” (Felsenstein, 1994, p.108)
 References
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