Early-stage finance and the role of external entrepreneurs in the commercialization of university-generated knowledge

Abstract

The past decade has seen a plethora of policy initiatives that seek to bridge the chasm between investments in public R&D and its effective diffusion in society. This article uses a case study approach to explore and contrast the effectiveness of different entrepreneur models in financing and developing university spin-offs (USOs). The distinction between different entrepreneur models is based on whether the USOs are championed by university employees that seek to commercialize their own inventions or by external entrepreneurs who are not the original inventors but with acquired rights to develop and commercialize technology originating from university research. Our analysis show that external entrepreneurs have a different mind-set that makes them better equipped to deal with opportunities and obstacles related to financing and developing USOs. However, the development paths of USOs are embedded in a more complex web of path-dependent interactions, where the championship of the USO becomes interwoven with existing and emerging social relationships and opportunities, and challenges related to the technology that is commercialized.

Keywords:

• academic entrepreneurship
• early-stage finance
• external entrepreneurs
• high-technology
• public R&D
• university spin-offs

Acknowledgements

The first author has conducted this work within the research program How do we trace, measure and explain the societal effects of academic R&D?, financed by VINNOVA. The second author has conducted this work within the Linnaeus research program Innovation, Entrepreneurship and Knowledge Creation – Dynamics in Globalising Learning Economies, financed by the Swedish Research Council. The authors are also grateful for the helpful contributions from two anonymous reviewers and the special issue editors Einar Rasmussen and Roger Sørheim in the course of developing this work.

Notes

1. A ‘soft loan’ is a special means of debt finance provided by government agencies to start-ups. Usually, the loan is offered at lower-than-market interest rates and with flexible or lenient terms for repayment.

2. VINNOVA is a Swedish government agency created in 2001 to promote sustainable growth in Sweden by funding needs-driven research and the development of effective innovation systems.

3. The Agency for Business Development (NUTEK) was created in 1991 with the aim of supporting business development and regional development activities. It was in operation during the case study period. However, the activities carried out by NUTEK were in 2009 taken over by the Swedish Agency for Economic and Regional Growth (Tillväxtverket).

4. ALMI Business Partners (ALMI) is a state-owned organization consisting of 21 regional offices spread over Sweden. ALMI was created in 1991 with the aim to create growth and innovation in Sweden by promoting the development of new and small businesses.

5. Innovationsbron was created in 2005 and is an organization specifically focused on turning research and innovation into business. The overall vision is that Sweden will become an international leader in commercializing research-related business ideas.

6. For more information about this type of companies, see Wright, Vohora, and Lockett (2004).

7. For one of the firms (see ‘Beta’ section), it was impossible to get access to annual reports due to its early stage of development.

8. Innovation Centre Foundation stopped their financing of early-stage ventures in 2004 and their operations were replaced by ALMI Business Partner.

9. As we have no detailed case data from this period, we do not make any analysis of possible connections between the continued development of the spin-offs and the entrepreneur model on which they based their start-up and early development. However, as will be emphasized in the coming analysis, it seems unlikely that any such strong connections exist.