Hinnovic » Knowledge Flows in the Incubation Process: Lessons Learned from a Comparative Study

Knowledge Flows in the Incubation Process: Lessons Learned from a Comparative Study

knowledge_flow

photo credits: Tanisha Mehra

Tzameret H. Rubin (Ph.D.) is senior research and enterprise associate at University of Loughborough, UK. In 2015, she published a comparative study with her colleagues Tor Helge Aas and Andrew Stead. This study aims to better understand the knowledge flows between incubatees, former incubatees and incubators. Among other things, the findings suggest that universities play a modest role as a source of new ideas for incubatees, but a more important role in later stages of incubatees׳ new product development processes.

 

 

What is a business incubator? What role does it play in systems of innovation?
Tzameret_Rubin

Dr. Tzameret H. Rubin

We think we know what a business incubator is, but actually definition varies a lot, in terms of organisational structures, operation policies and institutional affiliations. The definition varies because it allows the business incubator to fit into local (countries and regions) needs. Saying that, it is agreed that the role of a business incubator is to be a catalyst tool for economic development, which provides entrepreneurs with a range of business resources and services. Services provided by incubators typically include: access to co-located premises at a low-priced rent; access to networks; assistance in developing business and marketing plans; management assistance; and administrative services.

The business incubator definition is not the only challenge for academics; they also struggle to provide cutting evidence about their performance, for many reasons – deciding about relevant key performance indicators (inputs, outputs and outcomes) across fields or technology; graduation rate definition; incubator’s business cycle and other reasons. It doesn’t mean though that business incubators mission is not accomplished, it just says that a systematic method of data collection and classification should be developed. There are good attempts, for example the United Kingdom Science Park Association (UKSPA).

 

In a study published in 2015, you and your colleagues (Tor Helge Aas and Andrew Stead) analyzed the nature of knowledge flows experienced by incubatees in Australia and Israel. Would you please define what knowledge flows are?

Since we could not put our finger on quantifiable measurements of business incubators’ outcomes, we changed our focus to show their added value – the Knowledge Bearers, as we called them, which are the channels through which the incubator networks work. We thought we made our life easier by avoiding performance analysis but the truth is that it was not the case because knowledge has an intangible nature that is very hard to trace.

In order to tackle this challenge, we classified the knowledge flow into three types of bearer: (1) Technological knowledge bearer, (2) Market knowledge bearer and (3) Financial resources bearer. What was interesting to see is that this classification holds for different business incubator models (i.e., Israel and Australia). We thus invite other researchers to test this classification.

 

Your study clarified that, in the early stages of idea generation, universities are modest sources of ideas for incubators due to the fact that they are typically large, risk-averse organizations. Could universities, in partnership with business incubators, become better players in the innovation process?  

“ Business incubators are likely to gravitate around universities and be in the mind of stakeholders (in particular policy makers) since one key goal is to get research ideas out there (through the mechanism of the business incubator). But, I think that one of our major finding is that, regardless of the model, business incubators do not tend to use the university as a source of ideas, but rather for an ongoing R&D process i.e., using their labs, consultants, etc. What we also learned is that the majority of incubatees under the Israeli Technology Incubators Programme are working on the development of medical devices. This is a sector where incubatees tend to use hospitals and university facilities in the development process more, as pointed out above, for the R&D process and less for commercialization ideas.

Other researchers argue that business incubators are close to university to enjoy their prestige too, but we didn’t observe this.

 

You also found that certain types of knowledge flow are underestimated by both incubators and incubatees. Would you explain this observation? Does it depend on the R&D field?

In our study, we highlight the fact that existing studies in this area typically have a narrow focus on technological knowledge that flows from universities to incubatees. However, we aimed to contribute in filling this literature gap by acknowledging that a university is only one potential source of knowledge for incubatees, and also by exploring the nature of other types of knowledge flow used by incubatees.

Our findings suggest that Technological knowledge is critical for an incubatee and for the incubator either through university knowledge sources or  sources of know-how (across fields of R&D).

Regarding the Market knowledge bearers in the Israeli cases, because the incubator management owns a significant portion of equity in its incubatees, the incubator management’s goal for each incubatee is to reach a “fundable milestone.” This enables them to find new financial resources following the joint government and incubator financial support. Sticking to the predefined milestones was very valuable for the incubatee.

By contrast, an incubatee in Australia typically enters the incubator in different stages in the market and R&D vectors. Some will have a strong and established prototype with a less robust business plan, whereas others may enter with an established understanding of their market, but in an early stage in their R&D process, or any other combination between these market and technology vectors. Australian incubators are expected to support the incubatees in their different stages. All Australian incubator interviewees noted that accepting a firm to their incubator required having a business plan. However, as a result of their work in the incubator, the business plan may be modified following ongoing consultancy with the incubator’s management

Regarding the Financial resources bearer, our findings suggest that one of the key support mechanisms provided by incubators is the provision of assistance to secure financial resources. The incubator management provided a better estimates of a novel technology’s success by screening the procedures of the firms that are joining the incubator and by compensating for the lack of incubatees’ managerial experience by using its networks and experience to link its incubatees with potential financial resources.

 

Comparative studies like the one you conducted are rare and often prompt novel insights. How do Australia and Israel differ in their approach? What lessons other countries may learn from their experiences?

True. I guess that like many academics who study abroad, my personal story was dictated by the knowledge and experience gained at the places where I conducted research. I was working for many years in the Hi-Tech industry in Israel. I was a technical engineer in the Israeli Defence Forces (intelligence unit), but did my PhD in Australia. When I developed my research questions for my dissertation (that was mostly based on Australian data sources), I thought that a comparison to the Israeli Incubation programme could be very interesting.

Israel has had its Incubation programme going for more than 20 years – (back then) one of the first countries to have an incubation programme (outside the US); it has a different business incubator model than the Australian model (which could allow us to generalise our findings to the different incubation types) but, both countries still have several similarities (on a macro level).

It’s difficult to identify lessons for other countries, but two policy implications may be underscored:

  1. Business incubator data should be collected and analysed in a systematic way, not only the known Key Performance Indicator (KPI) but also the sources of knowledge flows, as identified in our article.
  2. Consistency of government programmes is essential to develop an eco-system and networks around the business incubator. It is relevant to Australia because of the government R&D cuts in the last few years that could jeopardize business incubators. It also speaks to Israel, in particular, because of the structural changes in the Office of the Chief Scientist (OCS) where a new entity – The National Council for R&D and Innovation is about to replace the OCS in the Israeli Ministry of Economy – the responsible body for the Incubation programme.

Policy consistency is relevant not only for incubators, but in general for R&D intensive firms.  Consistency and government support that helps developing fields of research is critical for the long run, in any country. I am now working on linking Israeli OCS funding for businesses with their productivity, something that will improve our understanding not only of how government-led dedicated R&D funding programmes can improve innovation outcomes, but also the businesses’ productivity over the years. This ongoing research supports the argument of the required policy consistency.

 

Guest : Tzameret H. Rubin, Ph.D.
Senior Research and Enterprise Associate.
School of Business and Economics, Loughborough University, UK.
Journalist : Jérémy Bouchez
Hinnovic.org

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