New Technology-based Firms Research Articles

English

One of the most important reasons for developing university technology business incubators (UTBIs) is to permit the commercialisation of technology and research by setting up new firms to graduate into fully-fledged businesses, which are normally referred to as new technology-based firms (NTBFs). Relying on the resource-based theory (RBT) and incubation models, the present research is concerned with proposing a theoretical framework for the enabling factors that influence the graduation of new technology-based firms (NTBFs) that result from the commercialisation of research and technology through to becoming established businesses from a university technology business incubator (UTBIs). A pragmatic philosophy informed the researcher’s theoretical lens. This involved the use of a multiple case study using mixed methods that entailed the use of both quantitative and qualitative research techniques in the form of semi-structured interviews with the UTBI’s management team. The most significant finding of the research is that there are a number of enabling factors that influence the graduation of NTBFs within a UTBI, the most significant of which are stringent selection and admission criteria, the business support services, financial resources, university entrepreneurial network/ mediation and organisational resources. Each of these factors is grouped into three stages: the pre incubation stage, the incubation stage and the graduation stage. The unit of analysis for this research consists of the management team within three UTBIs located in one of the University of Technology in Gauteng Province. Owing to the nature of the sample, the results may not be representative of the remaining UoTs in Gauteng. The study attempts to link the development of business ideas to factors that influence their progression into graduated businesses. Key words: Commercialisation, enabling factors, new technology-based firms, University of Technology, university technology business incubators.

How do social skills enable nascent entrepreneurs to enact perseverance strategies in the face of challenges? A comparative case study of success and failure

Purpose – This paper seeks to advance ongoing research in entrepreneurial perseverance. While the concept of perseverance is not new, few researchers paid attention to behavioural persistence in the entrepreneurial context. The purpose of this paper is to explore the emergence of new technology based firms (NTBF) by focusing on the role of nascent entrepreneurs’ social skills in the meeting the changes of entrepreneurial perseverance. Design/methodology/approach – In this paper the authors study the start-up phase of entrepreneurial process. The authors opted for a longitudinal case study approach in order to enhance the knowledge on entrepreneurs’ social skills and perseverance. For triangulation purpose the data were gathered using four different information sources. The use of Nvivo8 as the data analysis tool helped to impose a discipline and structure which facilitated the extraction of core insights. Findings – This paper contributes to the understanding of the entrepreneurial perseverance in the context of new venture creation. Particularly, reading the entrepreneurial process through the lens of the perseverance strategies model (Van Gelderen, 2012) provided a way to identify and then to assess the impact of the social skills on the overall entrepreneurial perseverance and their combined impact on the performance of NTBF creation process. In doing so, the authors identify the impact of entrepreneurs’ social skills to deal with a series of entrepreneurial problems such as scarcity of resources, uncertainty and ambiguity and consequently their impact on the likelihood of survival for new ventures. The issues that arose mostly reflected the inherent complexity of technology transfer processes, the university and entrepreneurs’ diverging cultures, and the very characteristics of the start-up phase of NTBFs. The findings reveal how social skills impact the entrepreneurial paths and probable outcomes. Research limitations/implications – This paper contributes to the understanding of the entrepreneurial perseverance in the context of NTBF creation. The findings reveal how social skills and perseverance impact the entrepreneurial paths and probable outcomes. Practical implications – The paper has implications for entrepreneurial support mechanisms such as technology business incubators in helping them to improve the efficacy and efficiency of their assistance to entrepreneurs through the development of their skill-sets and perseverance and providing enabling networking. In addition, the research has implications for entrepreneurship education and training. Indeed, there is an urgent need to design and implement courses and programs aiming at developing soft skills in entrepreneurship. Originality/value – In exploring networking and issues of perseverance for nascent entrepreneurs operating in new technology-based sectors, which the authors consider as an under searched area in entrepreneurial literature.

High-Tech Entrepreneurship in Europe: A Heuristic Firm Growth Model and Three “(Un-)easy Pieces” for Policy-Making

Increasing the number of rapid-growth new technology-based firms (NTBFs) is considered one of the key priorities of innovation policy adopted by the European Commission. Grounded in the empirical literature on the determinants of high-tech start-up growth in Europe, this paper develops a heuristic firm growth model for European NTBFs to individuate three primary areas of intervention for policy-making aimed to sustain the growth of NTBFs: (i) reducing the social and regulatory burdens arising from (honest) firm failure, (ii) acknowledging the local nature of the venture capital industry and promoting territorial marketing initiatives to attract (international) venture capitalist players and (iii) leveraging the “halo and certification” effect of directs public subsidies and grants towards NTBFs. If recent initiatives of the European Commission go in these directions, much remains to be done to increase the growth potential of high-tech start-ups on the European landscape.

Entrepreneurship and survival over the business cycle: how do new technology-based firms differ?

We investigate the survival performance of new technology-based firms (NTBFs) over the business cycle and compare them against other entrepreneurial firms. Our data comprise the entire population of entrepreneurial firms entering the Swedish economy from 1991 to 2002, which we follow until 2007. Discrete-time duration models are employed to investigate whether the business cycle impacts differently on the survival likelihood of NTBFs vis-à-vis other entrepreneurial firms. Our main findings are three. First, NTBFs generally experience a lower hazard rate compared to other entrepreneurial firms, which is interpreted as a sign of their high ‘quality.’ Second, all entrepreneurial firms are sensitive to and follow a pro-cyclical pattern of survival likelihood over the business cycle. Three, when comparing NTBFs with the broader group of other entrepreneurial firms, we find that NTBFs are more sensitive to business cycle fluctuations. The above results come with a qualification, though. The sensitivity during the business cycle mainly pertains to self-employed NTBFs. Also, NTBFs’ higher survivability is only linked to not being characterized as self-employed.

Um framework de fatores e esforços determinantes para a captação de recursos financeiros por Empresas Nascentes de Base Tecnológica

Fundraising by New Technology Based Firms (NTBFs) is critical for them to be able to start their operations and get established in the market. The aim of this study was to investigate how entrepreneurs, on the basis of processes and management actions, have attracted external private investors. The methodological procedure consisted of analyzing fundraising processes in 16 NTBFs of Minas Gerais and São Paulo, using a multi-case study. Initially we designed a preliminary framework based on a literature review, using the methods of action research (PA), in-depth semi-structured interviews and documentary analysis to assess its validity. Among the observed factors that influence fundraising, the following ones stand out in terms of importance: the adoption of a just-do-it strategy by the entrepreneurs; their ability to develop and incorporate basic management skills; their ability to form partnerships and to carry out bootstrapping activities; the entrepreneurs’ complete dedication to the company; activities of strategic planning, culminating in the preparation of a business plan; previous fundraising from other sources; and the disclosure of “first cases”. On the basis of these results we also designed a framework that relates the factors influencing the process of raising private funds from external sources and the early stages of the firms’ development. This framework represents a temporal configuration with a new proposition of early stages of NTBFs and a comparison of the factors relevant to fundraising mentioned in the literature review and what was found in the field research.Key words: New Technology Based Firms, fundraising, investors.

Academic Spin-off Performance: Revealing the Impact of the Core Academic Entrepreneurial Team

Academic spin-offs (ASOs) are particular new technology-based firms (NTBFs) originating from public or university-based research institutions. One of their major challenges is to integrate scientific knowledge with the commercial knowledge in the entrepreneurial team (ET). The effect of ET composition on ASO performance has generally been examined through human capital theory or upper echelons theory. These traditional approaches have their merits and generally conclude to the necessity to add surrogate (external) entrepreneurs to the core team of academics. However, this would create a faultline, i.e. a divide between these two subgroups that negatively impacts team processes, and might explain why these artificially created ETs are not as successful as expected. We argue that a combination of these different lenses on ET composition and its relationship with performance may lead to a better understanding. Drawing on the human capital and upper echelons theories on the one hand and on the faultline theory on the other, we develop interaction hypotheses to test for their combined effect on a sample of 172 Italian ASOs. Our results permit to reveal the significant impact on performance of subtle compositional dimensions of the core academic ET that would have otherwise gone unnoticed. They also allow us to stress the importance of cognitive distance optimizers and show how they contribute not only to prevent the negative effects of diversity but also to create the preconditions for the positive effects. Theoretical and practical implications are drawn and future avenues of research suggested.

Factors Affecting the Development of Clean-tech Start-ups: A Literature Review

In this paper, we carry out a literature review of the studies investigating the factors that affect the performance and growth of clean technology start-up firms. The importance of clean-tech start-ups lies in their mission to protect the environment by facilitating the increased use of clean energy and environmentally friendly solutions. At the same time, the entrepreneurial nature of many of these firms enables introduction of radical innovations necessary for making breakthroughs in the industries of renewable energy and environmental technology that in turn are essential for the industry development. Given their significance, there are surprisingly few studies with the focus on the factors affecting the growth of clean-tech start-ups. Our search in leading management, entrepreneurship and energy journals has yielded a total of 13 articles, almost all of which focus on such external factors as policies. We argue that this gives us an incomplete picture of the factors enabling a clean-tech firm's development. As clean-tech firms are a subset of the population of new technology-based firms (NTBFs), we draw on the literature dealing with the factors that promote growth of NTBFs in order to build our framework for structuring the results. The analysis uncovers what future research areas can be pursued in order to gain a more balanced understanding of what enables the development of a clean-tech start-up. We suggest that in addition to the macro-studies of policies and regulations, future research needs to examine the individual and firm-specific factors, e.g. characteristics of the clean-tech entrepreneurs, teams, governance mechanisms and network structures. Furthermore, the existing focus on the environmental and innovative performance of clean-tech start-ups should be complemented by examining the alternative firm outcomes related to e.g. financial performance, social identity, alliance portfolio and internationalization.

How the Firm networks Affect the foundation and development of NTBF: Empirical evidence on the Propositions of Hite and Hesterly

Network has drawn attention from different fields and its contributions on the businesses have been discussed; however, Hite and Hesterly (2001) propose that it is significant for companies to change from closed networks to dispersed networks as the firm grows. Similarly, scholars argue that firm network, development and resources are “co-evolved”. These authors further state that changing of networks are affected by (a) individual difference of entrepreneurs, (b) industrial differences for resources, and (c) difference in the compositional quality. Thus, this paper tests their propositions to see “why” it is essential to change networks and to pinpoint “what”, “when” and “how” the necessity is needed in the formation and development of New Technology Based Firms (NTBFs). To achieve the objectives, four case studies are developed and the empirical results show that the origin of firm network determines the necessity for changing networks, the quality of network member affects the changes but individual difference of technology-based entrepreneur may or may not affect the changes.

Institutional Frameworks, Venture Capital and the Financing of European New Technology‐based Firms

AbstractManuscript TypeEmpiricalResearch Question/IssueWe first study how cross‐country differences in shareholder protection against self‐dealing and personal bankruptcy laws affect the financing of new technology‐based firms (NTBFs). Second, we study how venture capital (VC) investors – as expert monitors and initiators of “good” governance practices in firms – moderate aforementioned relationships.Research Findings/InsightsUsing a unique longitudinal dataset of 6,813 NTBFs from six European countries, we find that better shareholder protection rights increase the probability of raising external equity financing and allow firms to raise larger amounts of equity financing. Less forgiving personal bankruptcy laws decrease the probability of raising debt financing and limit the amount of debt financing that is raised. VC ownership strengthens the aforementioned relationships.Theoretical/Academic ImplicationsThis study is one of the first to provide evidence on the relationship between national legal systems and the financing of private NTBFs. We further address a recurring call for more research on the interaction between country‐level legal systems and firm‐level corporate governance. In particular, we show that expert monitors, such as VC investors, strengthen the relationship between national legal systems and NTBF's access to external financing.Practitioner/Policy ImplicationsPolicy makers often focus on increasing the supply of VC financing as a panacea for external financing constraints experienced by NTBFs. This study shows that VC ownership is particularly effective at increasing firms' access to external financing in countries with strong investor protection rights and entrepreneur‐friendly personal bankruptcy laws.

University spin-offs vs. other NTBFs: Total factor productivity differences at outset and evolution

Previous empirical research suggests that university spin-offs under-perform in economic terms compared to other new technology-based firms (NTBFs) in their early years. The usual explanations suggest a lower capabilities endowment of university spin-offs compared to other NTBFs. Using a longitudinal Spanish dataset we compare the evolution of firms′ total factor productivity (capabilities endowment) in both kinds of firm. Productivity grew faster in university spin-offs and their initial underperformance disappeared after 2 or 3 years of operation. The evidence therefore suggests that university spin-offs have lower initial substantive capabilities but greater dynamic capabilities than independent NTBFs. Possible explanations are discussed.

The effect of public subsidies on firms’ investment–cash flow sensitivity: Transient or persistent?

This work analyses the effect of public subsidies on firms’ investments and investment–cash flow sensitivity in a longitudinal sample of 288 Italian unlisted non-venture capital backed owner-managed new-technology-based firms (NTBFs), observed over a 15-year period from 1994 to 2008. Seventy five of these firms received one or more public subsidies in the observation period. We use an error correction model (ECM) specification and system generalised method of moment (GMM) techniques that take into account the endogeneity of public subsidies. First, we find that the investments of small NTBFs are sensitive to internal cash flows, while those of large NTBFs are not. Receipt of public subsidies by small NTBFs results in an increased investment rate and a reduced investment–cash flow sensitivity, in the immediately following year. We interpret these results as an indication of the relaxation of financial constraints. Moreover, while the increase in the investment rate does not persist in the long run, the dependence of investments on cash flow remains negligible after receipt of the first public subsidy. These results support the view that public subsidies can help small NTBFs in persistently removing the financial constraints that bind their investment activity.

Founding angels as an emerging subtype of the angel investment model in high-tech businesses

Some important hurdles hamper the commercialisation of (scientific) knowledge, especially in Europe. Currently, the support provided by investors and technology transfer offices seems insufficient for new technology-based firms (NTBFs) and academic spin-offs to overcome these. Both from a financial perspective and from an operational perspective, opportunities are emerging for investment models to support their development. This paper introduces the founding angels' (FAs) concept as an emerging subtype of the angel investment model and provides empirical evidence based on 16 case studies in Germany and Switzerland to elucidate the potential of this investment model. FAs join the start-up teams of NTBFs, complementing the scientific members coming mainly from universities and research institutions with business expertise and scientific understanding. They make significantly fewer investments than in the case of business angels (BAs), but because of their very early engagement, they hold more shares and are much more engaged operationally. FAs have more the role of a founder and an entrepreneur and less that of an investor because of their early engagement in the venture. They complement BAs and venture capitalists and normally support the start-up's efforts to raise funding.

The Imprinting of Founders’ Human Capital on Entrepreneurial Venture Growth: Evidence from New Technology-Based Firms

This paper tests the presence of an imprinting of founders' human capital on entrepreneurial ventures' performance. More specifically, we empirically explore the impact of entrepreneurs' human capital on a firm's sales growth performance by disentangling the effect of the stock of human capital possessed at foundation from the potential injections and losses of human capital due to exit of founders and/or addition of new owner-managers in the entrepreneurial team over time. Our analysis is based on a panel dataset composed of 338 Italian new technology-based firms (NTBFs) observed from 1995 (or since their foundation) to 2008 (or until their exit from the dataset). We consider the effects of several dimensions of entrepreneurial human capital on firm sales growth and estimate Gibrat law-type dynamic panel data models using OLS estimator and GMM-system estimator to control for endogeneity. Overall, our results point to a positive and significant presence of an imprinting exerted by founders' specific work experience on venture growth which is robust to a series of controls.

Communication in new technology based‐firms

PurposeThe paper aims at identifying the main social media applications used by new technology based‐firms (NTBFs) and at calculating the volume of followers they have in each application. It also focuses on the amount of activity generated by the firms in those social networks, identifying the key thematic content of their social media activity, analyzing the ability to create dialogue with their stakeholders and clarifying which style of communication they use.Design/methodology/approachThe paper presents an exploratory study of the use of social media tools by NTBFs, located in Spanish Science Parks, as an important resource network for firms in the corresponding sector. A total of 432 new technology‐based firms were analyzed to identify which social media applications are more frequently used, as well as to establish the number of followers they registered in the month of February, 2012.FindingsThe results contribute towards a better understanding of how firms monitor public perception of their brand, products, and services in real time. The main conclusion of this study is the low presence of technology‐based firms in the five social media applications analyzed herein.Research limitations/implicationsThe main limitations of this study are related to the time period analyzed, given that the authors just observed one month of a year, which can lead to distortions regarding the activity of firms throughout the year.Practical implicationsThe paper includes implications for the need of businesses to develop communication strategies focused on social media, which are designed to enable the development of a dialogue with stakeholders and allow firms to implement a communication strategy based on the principles of relational marketing.Originality/valueThis paper fulfils an identified need to study thoroughly how firms use social media.

Performance analysis of NTBFs in knowledge-intensive industries: Evidence from the human health sector

This study aims to shed some light on the differences in performance between New Technology-Based Firms (NTBFs) and others in a knowledge intensive industry, in this case the Human Health (HH) sector. With that purpose in mind, this work involves applying a new model for performance assessment to a representative sample of firms pertaining to the Human Health sector in the Valencia region of Spain. Application of several statistical techniques confirms the presence of an NTBF effect which ascribes a more favorable performance profile to the NTBF group. The analysis also reveals significant disparities at the territorial level between the core of the region and the rest. The Biomedicine branch appears to be a good business opportunity for investors and entrepreneurs but the differences in performance with the other two sectors are not statistically significant.

Gestión y Desarrollo de Empresas Innovadoras

The New Technology-Based Firms (NTBFs) represent, for its flexibility and organizational and business capacity, a source of innovation that leverages the local development potentials in which they are found. However, the difficulties such enterprises have to confront if they want to be inserted in a competitive market can become barriers to its development. The NTBFs success is strongly influenced by the management model in place since the start of its activities, even before the legal incorporation of the company. This paper presents a method of NTBFs management and development based on a methodology called CEC (Collaborative Venture Capital) developed by a group of angel investors acting since 2008 in Brazil. For illustrative purposes, we analyze the case of a successful startup, supported by that group.

Financing patterns in new technology-based firms: an extension of the pecking order theory

Understanding financial strategies and patterns of new firms is crucial to the theoretical unravelling of the entrepreneurial process as well as to the elaboration of appropriate support programs from practitioner and policy maker. The aim of this paper is to investigate whether a pecking order theory underlies the financing strategies of new technology-based firms (NTBFs). From the analysis of previous literature on the subject, controversial results emerge: while some authors have confirmed a traditional pecking order theory for NTBFs, others, on grounds of NTBFs major financial constraints derived from higher information asymmetry, have proposed a revised pecking order, where access to equity (in particular private equity) occurs prior to debt. This research has been carried out applying an approach based on estimation of internal financial gap (Cosh et al., ECOJ 119:71494-1533, 2009) using data from the Kauffman Firm Survey. Additionally, we extend the pecking order prediction by examining the effect of human capital as determinants for financing decisions, given its crucial role in shaping entrepreneurial dynamics of NTBFs. Our results support the existence of a revised pecking order in the case of NTBFs; moreover entrepreneur’s age and experience play a role in clarifying financial priorities of NTBFs.

The development process of new technology-based firms

This work investigates the paths of development of new technology-based firms (NTBFs). The existing literature on new venture development processes is largely built on a linear stages approach. Recent insights however, indicate that in order to better grasp the firms’ development routes such linear models per se are no longer sufficient. This work investigates how firms evolve through time with respect to the main variables which literature highlight as strategic for the growth of firms. By clustering the firms in similar organisational configurations at constitution and some years after being on the market, the results highlight the complexity and variety of firm development processes. Our findings contribute to an understanding of the dynamics of the entrepreneurial process.

Public subsidies and the employment growth of high-tech start-ups: assessing the impact of selective and automatic support schemes

The aim of this article is to assess the impact of public subsidies on the employment growth of new technology-based firms (NTBFs), contingent on (i) the type of policy scheme (either selective or automatic) and (ii) the age of the firms at the time of receipt of the subsidy. For this purpose, we analyze a sample composed of 536 Italian independent NTBFs observed during a 10-year period (1994�2003). We estimate augmented Gibrat law-type dynamic panel data models using different techniques aimed at controlling for the potentially endogenous nature of public financing, namely the Generalized Method of Moments System, Fixed Effect Instrumental Variable, and Inverse Probability Treatment Weights estimators. The results of the estimates show that selective support schemes had a larger impact on employment growth than automatic ones, but only if they were awarded in the very early period of the recipient firms� lives. However, selective subsidies awarded to young NTBFs are rare in Italy, calling into question the capability of the Italian industrial policy to sustain the growth of the high-tech entrepreneurial sector.

Unraveling the need for innovation support services in new technology-based firms: The impact of commercialization strategy

New technology-based firms (NTBFs) are considered to contribute significantly to the economy. Given that NTBFs face many challenges and liabilities, the academic literature has tried to identify how public policy measures could help to overcome challenges related to innovation, amongst other factors, by identifying NTBFs' need for innovation support services. Our study contributes to this stream of research by exploring the determinants of the need for innovation support services by this particular set of firms. Specifically, we focus on the commercialization strategy of firms, which can either operate in a market for technology or a market for products. We find that NTBFs pursuing a technology strategy are very much in need of finance-related services, whereas their counterparts targeting a product market have much more need for soft services and market-related services. Our findings have implications for policy-makers, high-tech entrepreneurs and academia.