An application of lemon theory to the case of university spin-offs

Julio Pombo-Romero, María Jesús Rodríguez-Gulías, David Rodeiro-Pazos

Abstract


Purpose: Policies implemented by different government administrations to promote the transfer of research results have significantly increased the number of university spin-offs created and their survival rate. However, these companies are frequently perceived by investors as less market or commercial oriented than non-academic start-ups. This paper test this hypothesis and discusses in the framework of Akerlof ´s lemon market theory the implications of the evidence found for the growth, performance and capacity of attracting private investors to these companies.

Design: We analysed a sample of 20 USOs of the University of Santiago de Compostela, Spain, using their financial statements and the R&D grants received during their initial five years. We carried out an analysis of conglomerates to identify the market orientation of the USOs, and the moment when it is clearly developed.

Findings: Evidence shows that some of these companies appear to have been set up to provide continuity to research projects, rather than to exploit research results. In these companies most of the revenues are consistently mainly obtained by obtaining R&D public grants. This introduces "orientation risk" in addition to the common risks of start-ups in general.

Practical Implications: To solve this problem a series of measures used in other lemon market situations can be adapted to the university spin-offs issue. This includes the promotion of commercial activities over R&D grants and reducing agency problems between academic entrepreneurs and professional investors among others.

Original Value: We find that the market orientation of USOs cannot be identified in their earlier stages by conventional financial analysis and discuss the implications for attracting investors to these companies.

Keywords: lemon theory; university spin-offs; Akerlof; market orientation; agency problems


Full Text:

PDF

References


Akerlof, G. (1970): “The Market for "Lemons”: Quality Uncertainty and the Market Mechanism”, The Quarterly Journal of Economics, Vol. 84, No. 3, pp. 488-500.

Bank of England (2003): Finance for Small Firms-A Ninth Report, Bank of England, April.

Bray, M.J. and Lee, J.N. (2000): “University revenues from technology transfer: Licensing Fees vs Equity Positions”, Journal of Business Venturing, Vol. 15, No. 5/6, pp. 385-392.

Brown, J.; Earle, J. and Lup, D. (2004): “What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania”, IZA discussion paper No. 1343, Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor, October 2004.

Callan, B. (2001): “Generating Spin-offs: Evidence From the OECD”, Science Technology Industry Review, Special Issue on Fostering High Tech Spin-offs: A Public Strategy for Innovation, Vol. 26, No 1, pp. 13-56.

Cardone, C. and Cassasola, M. J., (2004): “Comportamiento financiero de la PYME española: una visión desde la teoría del orden de preferencias”, XII Foro de Finanzas, Diciembre, Barcelona.

Cardozo, R. and Engleman, R . (2004): “University technology and business opportunities. Frontiers of entrepreneurship research”, 24th Babson-Kauffman Entrepreneurship Research Conference, Glasgow, Scotland.

Chiesa, V. and Piccaluga, A. (2000): “Exploitation & diffusion of public research: the case of academia spin-off companies in Italy”. R&D Management, Vol. 30, No. 4, pp. 329-339.

Comisión Europea (2000): “Progress Report on the Risk Capital Action Plan”, Communication from the Commission to the Council and the European Parliament, Comisión de las comunidades europeas, Brussels.

Díaz, S. (2004): “Una Experiencia de Transferencia Tecnológica: un estudio de casos DICTUC”, Seminario-Curso Internacional Gestión de empresas tecnológicas universitarias, Universidad Curitiba, Brasil, Num. 20-22.

Dyson, J. (2010): Ingenious Britain: Making the UK the Leading High Tech Exporter in Europe, March 2010. A report of James Dyson.

Etzkowitz, H. (2003): Triple Helix: A Manifest for Innovation, Incubation and Growth, Stockholm, SNS Press

Evans, D. and Leighton, L. (1989): “Some Empirical Aspects of Entrepreneurship”, American Economic Review, Vol. 79, Num. 3, pp. 519-535.

Cotec Foundation for Technological Innovation, (2007): Relations in the Spanish innovation system. Libro Blanco. Madrid.

Harrison, R. and Leitch, C. (2005): “Growth dynamics in university spin-out companies: entrepreneurial ventures or technology lifestyle businesses”, in:

Clarysse B, Roure J, Schamp T (eds) The role of private equity in growing new ventures, Cheltenham, Edward Elgar Publishing.

Hernández, C.; Graña, R. and López, J. (2003): “¿Y por qué no? La experiencia del programa de creación de empresas UNIEMPRENDE en Galicia”. Iniciativa emprendedora, No. 41, pp. 75-87.

Hughes, A. (2007): University-Industry Linkages and UK Science and Innovation Policy. ITEC Working Paper Series, 07-24.

Kantis, H.; Ishida, M and Komori, M., (2002): Empresarialidad en economías emergentes: Creación y desarrollo de nuevas empresas en América Latina y el Este de Asia, Banco Interamericano de Desarrollo, Departamento de Desarrollo Sostenible, División de Micro, Pequeñas y Medianas Empresas.

Lester, R. (2005): Universities, Innovation, and the Competitiveness of Local Economies. Summary report from the local innovation project - Phase I. Industrial Performance Center Working Paper Series. Cambridge, MA, MIT. Industrial Performance Center.

Lambert, R. (2003): Lambert Review of Business-University Collaboration 2003: Final Report, HM Treasur.

Migliori, S., Pittino, D., Consorti, A., & Lucianetti, L. (2017). The relationship between entrepreneurial orientation, market orientation and performance in university spin-offs. International Entrepreneurship and Management Journal, First online, 1–22.

Mustar, P.; Wright, M., and Clarysse, B. (2007): “University spin-off firms: Lessons from ten years of experience in Europe”, Science and Public Policy, Vol. 35, No. 2, pp. 67-80.

OCDE (1998): Fostering entrepreneurship, OCDE, París.

Ortín, P. and Vendrell, F. (2010): “University Spin-offs vs. other NTBFs: Productivity Differences at the Outset and Evolution”, Searle Center working paper.

Ortín, P.; Salas, V.; Trujillo, M. and Vendrell, F. (2007): El Spin-off Universitario en España como modelo de creación de empresas intensivas en tecnología. Madrid: Ministerio de Industria, Turismo y Comercio.

Pombo Romero, J.; Rodeiro Pazos, D. and Rodríguez Gulías, M.J. (2016): “The orientation risk in investing in university spin-offs. Does it exist? Is it possible to identify it during the spin-offs´ first years?”, Cuadernos de Gestión, Vol. 16, No. 2, pp. 29-47.

Postigo, S. and Tamborini, F., (2002): “Entrepreneurship Education in Argentina: The case of San Andrés University”, Internationalizing Entrepreneurship Education and Training Conference-IntEnt 2002, Malasia.

Rodeiro, D.; Fernández, S.; Vivel, M. and Rodríguez, M. (2013): “The creation of new technology-based firms at Spanish public research institutions: an analysis of their financial statements”, International Journal of Innovation and Learning, Vol. 14, No 3/4.

Rodeiro, D.; Fernández, S.: Rodríguez, A. and Otero, L. (2008). La creación de empresas en el sistema universitario español. Servicio de Publicacións da Universidade de Santiago de Compostela, Santiago de Compostela.

Sbragia, R. and Ozório, E. (2004), “Determinantes de êxito de empresas tecnológicas de base universitária: um estudo de multiplos casos no contexto do CIETEC/USP”, Seminario Internacional Gestión de empresas tecnológicas universitarias, pp. 26-29, Barcelona.

Shane, S. (2004): Academic Entrepreneurship, University Spin-offs and Wealth Creation, New Horizons in Entrepreneurship Series, Edward Edgar Publishing Limited, Northampton, EE.UU.

Red OTRI (2016). Encuesta Red OTRI de Universidades, Conferencia de Rectores de las Universidades Españolas, CRUE, Madrid. Available in http://www.redotriuniversidades.net/

Tobar, M. (2004), “Análisis de experiencias y factores claves en la formación de Empresas Tecnológicas Universitarias”, Seminario Internacional Gestión de empresas tecnológicas universitarias, Barcelona.

Veciana, J.M. (2005), “La creación de empresas. Un enfoque gerencial”, Colección Estudios económicos, nº. 33, Servicio de estudios La Caixa, Barcelona.

Vohora, A.; Wright, M. and Lockett, A. (2004): “Critical junctures in the development of university high-tech spinout companies”, Research Policy, No. 33, pp. 147-175.

Wright, M.; Lockett, A.; Clarysse, B. and Binks, M. (2006): “University spin-out companies and venture capital”, Research Policy, No. 35, pp. 481-501.

Zucker, L.; Darby, M. and Brewer, M. (1998): “Intellectual human capital and the birth of US biotechnology enterprises”. American Economic Review, Vol. 88, No. 1, pp. 290-306.




ISSN 2183-5594

Indexing: GOOGLE SCHOLAR - LATINDEX - DRJI