A Firm Demographic Approach to Academic Spin-Off Survival and Growth

Abstract

Delft is known as a city of knowledge and technology in the Netherlands. The research institute TNO, the Technical University and also the business incubator in Delft are designated to encourage the rare creation of new economic activity. Academic spin off firms believed to be the new potential source of innovation leveraging the economic growth in the region. Although the number of academic spin-off firms in Delft has increased in the last few years there seems no significant contribution to the GDP growth and employment growth in the region of Delft. Further, the GDP growth of Delft region is below the average GDP growth in South Holland Province and also below the GDP growth at the national level. This leads to the question to what extent the academic spin off firms do survive and grow. With respect to this argument, our research aims to analyze the factors that influence the spin off firm survival and growth. We conducted an empirical research using 105 academic spin off firms to reach this aim. The sample contains spin off firms in Delft and also in Trondheim, Norway. Our study emphasized the demographic approach and we identified ten demographic components that potentially influence the firm survival and growth. These include firm age, birth cohort, size of the founding team, number PhD student in the founding team, discipline diversity of the founding team, managerial experience of the founding team, technology, market, financial support and office support from incubators. These variables acted as the independent variables. In our analysis we defined firm growth in terms of average annual turnover growth and average annual FTE growth. Therefore, our models comprise of three dependent variables: firm survival, average annual turnover growth and average annual FTE growth. The result of single correlation and regression analysis identified the factors that significantly influence the firm survival and growth. The statistical analysis shows that the firm survival influenced by age, discipline diversity, technology, market, and financial support from or with help from the incubator. The firms’ average annual turnover growth influenced by size of the founding team, number of managerial experience in the founding team, and office support from or with help from the incubator. The firms average annual FTE growth influenced by number of PhD in the founding team and technology. Our research concludes that the founding team composition will determine the capabilities of firm to survive and growth. We also deduce that the technology used by the firms and the market they choose determine their ability to survive growth. We suggest that it is better off for the firms using science-based technology and market their products in manufacturing industry. We also suggest a policy to connect spin-off firms and potential customers in so-called ‘living labs’. In addition, the general economic climate tends to influence the behavior of business actors such as investors and banks, and customers. After the crisis situation particularly venture capitalists seem to avoid investments in spin-off firms. Therefore, policymakers at the regional or even national level need to be able to ‘organize’ supply of venture capital with a set of different stakeholders in those cases of spin-offs.