Proceedings of the 8th European Conference on Innovation and Entrepreneurship ECIE 2013 by ACPIL

Proceedings of the 8th European Conference on Innovation and Entrepreneurship Hogeschool-Universiteit Brussel Brussels Belgium Volume Two 19-20 September 2013

Edited Edi d by b Dr Peter Teirlinck and Stijn Kelchtermans Hogeschool-Universiteit Brussel, Belgium and Filip de Beule Th Thomas More M Antwerpen, A t Antwerp A t Belgium A conference managed by ACPI, UK www.academic-conferences.org

The Proceedings of the 8th European Conference on Innovation and Entrepreneurship ECIE 2013 Volume Two Hogeschool‐Universiteit Brussel (HUBrussel) Brussels, Belgium 19‐20 September 2013

Edited by Dr Peter Teirlinck and Stijn Kelchtermans Hogeschool‐Universiteit Brussel, Belgium and Filip de Beule Thomas More Antwerpen, Antwerp Belgium

Copyright The Authors, 2013. All Rights Reserved. No reproduction, copy or transmission may be made without written permission from the individual authors. Papers have been double-blind peer reviewed before final submission to the conference. Initially, paper abstracts were read and selected by the conference panel for submission as possible papers for the conference. Many thanks to the reviewers who helped ensure the quality of the full papers. These Conference Proceedings have been submitted to Thomson ISI for indexing. Please note that the process of indexing can take up to a year to complete. Further copies of this book and previous yearâ&#x20AC;&#x2122;s proceedings can be purchased from http://academicbookshop.com E-Book ISBN: 978-1-909507-61-6 E-Book ISSN: 2049-1069 Book version ISBN: 978-1-909507-59-3 Book Version ISSN: 2049-1050 CD Version ISBN: 978-1-909507-62-3 CD Version ISSN: 2049-1077 The Electronic version of the Proceedings is available to download at ISSUU.com. You will need to sign up to become an ISSUU user (no cost involved) and follow the link to http://issuu.com Published by Academic Conferences and Publishing International Limited Reading UK 44-118-972-4148 www.academic-publishing.org

Contents Paper Title

Author(s)

Page No.

Preface

vii

Committee

viii

Biographies

Volume One Examining Determinants of Innovation Culture in Egyptian Organizations

Hadia Abdel Aziz and Sandra Marcos

Rethinking Employee Contribution: A Framework for Promoting Employee-Driven Innovation

Tuomo Alasoini

Environmental Innovation and Financial Performance: The Moderating Effect of Motives and Firm Size

Petra Andries and Ute Stephan

Organizational Innovation as Leverage for Open Innovation Practices: A Business Model Perspective

Paula Anzola Román, Cristina Bayona-Sáez and Teresa García-Marco

Spin-Up: A Comprehensive Program Aimed to Accelerate University Spin-Off Growth

Manuel Au-Yong Oliveira, João José Pinto Ferreira, Qing Ye and Marina van Geenhuizen

Entrepreneurship Versus Self-Employment in the Context of Social Changes in Romania: Individual and Contextual Factors

Alina Badulescu and Roxana Hatos

Environmental Obstacles and Support Factors of Social Entrepreneurship

Alina Badulescu, Sebastian Sipos-Gug and Adriana Borza

Narrative Analysis of a Highly Creative Entrepreneur Pursuant to Scientific Evaluation Criteria

Zuhal Baltas and Handan Odaman

A Comparative Study of the Entrepreneurial Potential of Economics Students of the University of Oradea, Romania and Adnan Menderes University, Turkey

Olimpia Ban, Esin Sayin, Dorin Coita and Ali Eleren

Key Factors Affecting Strategy-Minded Decision Makers in Their Innovations Choices

Fernando Barbosa and Fernando Romero

Business Strategies in Contexts of High Uncertainty: A Case Study on the Innovation and Internationalization Processes of a Technological Portuguese SME

Fernando Barbosa and Fernando Romero

Co-Ownership of Intellectual Property: Exploring the Value Appropriation and Value Creation Implications of Co-Patenting With Different Partners

Rene Belderbos, Bruno Cassiman, Dries Faems, Bart Leten and Bart Van Looy

Organizational Innovations – Constituents and Determinants Within Underdeveloped and Immature Markets

Muamer Bezdroband Aziz Šunje

105

Paper Title

Author(s)

Page No.

How Organizational Creativity Influence Firm’s Profitability: The Moderating Role of Corporate Entrepreneurship

Katarzyna Bratnicka, Bartłomiej Gabryś and Mariusz Bratnicki

118

Innovation and Entrepreneurship Assessment Initiatives: A Critical View

Cagri Bulut, Eda Evla Mutlu and Murat Nazli

126

Innovation Through Offset Agreements: An Empirical Study in the Brazilian Defence Industry

Alex Carlos and Regina Leite

136

Individual and Mandatory Innovation in Automotive Industry: A Case Study

Cristian Chiru, Versavia Ancusa, Razvan Bogdan and Bogdan Suta

145

Costs as a Decision-Making Criteria in the Planning of Innovation Processes

Piotr Chwastyk

154

Platform Strategies for Open Government Innovation

Brian Cleland, Brendan Galbraith, Barry Quinn and Paul Humphreys

162

Small and Medium Enterprises (SME) and Competitiveness: An Empirical Study

Teresa Costa and Luísa Carvalho

173

Innovation in Energy Sector – a Comparative Study in Brazil and Portugal

Teresa Costa, Luísa Carvalho, Geciane Porto and Priscila Rezende da Costa

180

Innovation and Entrepreneurship by Academic Spin-Offs: The UNITI Business Case

Renata Paola Dameri, Federico Fontana and Roberto Garelli

189

Students’ Gains in Entrepreneurial Self-Efficacy: A Comparison of ‘Learning-By-Doing’ Versus Lecture-Based Courses

Luc De Grez and Dirk Van Lindt

198

Rewards Work? Researching the Relation Between Monetary Reward and Employee Innovativeness

Stan De Spiegelaere , Guy Van Gyes and Geert Van Hootegem

Significant Competitiveness Factors of Companies in the Czech Part of the Euroregion Neisse-NisaNysa

Jaroslava Dědková and Denisa Skrbková

212

Towards Sustainable Business Models: Necessity, Opportunity or Challenge?

Nikolay Dentchev and Jan Jonker

221

Standardization- the Source of Innovation and Sustainable Development of Companies in Romania

Dan Constantin Dumitrescu, Nicoleta Trandafir Mănescu and Edward Debelka

228

Employee-Driven Innovation in a Higher Educational Institution: Organisational and Cultural Influences

Smile Dzisi, Joshua Ofori-Amanfo and Benjamin Kwofie

235

Firm Capabilities, Complementarities and Innovation in the Latin American Coffee Sector

Luis Figueroa

243

Intellectual Capital Between Innovation and Innovative Adaptation- Opportunities to Obtain Performance

Nicoleta Valentina Florea and Mihaela Badea

252

SMEs’ Internationalisation Through Strategic Alliances: A Qualitative Study

Mário Franco, Heiko Haase and Sandra Figueiredo

261

204

Paper Title

Author(s)

Page No.

The Business Model of the Entrepreneurial University

Olaf Gaus and Matthias Raith

268

National Innovation System and Public Innovation Policy: Theory and Practice Problems

Oleg Golichenko and Svetlana Samovoleva

278

Involving Students in Ideas Generation – a Bulgarian Case

Elissaveta Gourova, Tzvetelina Teneva and Tsvetoslava Kyoseva

287

Emancipatory Māori Entrepreneurship in Screen Production: Theory and Application

Ella Henry

296

Research on the Trust Governance in the Venture Capital Syndication

Heyin Hou and Weixing Qu

303

Employee-Driven Innovation (EDI): Toward an Extended Concept of Innovation

Steen Høyrup

313

Innovative Approach in Managing the Process of Manufacturing Removable Partial Dentures

Danut Iorga, Alexandru Ghiban and Cezar Scarlat

322

Entrepreneurial behavior and interactivity of Sri Lankan farmer groups

Chandana Jayawardena and Madushi Abeyrathne

333

Business Modeling for Sustainability: Identifying Five Modeling Principles and Demonstrating Their Role and Function in an Explorative Case Study

Jan Jonker and Nikolay Dentchev

340

Innovation Process Planning: Aim, Scope and Constraints

Magdalena Jurczyk – Bunkowska

347

Higher-Order Learning in Entrepreneurship: A key-Issue for Lifelong Learning and Career Counselling?

Alexandros Kakouris, , Niki Perdikaki and Panagiotis Georgiadis

355

Innovation Capital as a Driver of Eco-Innovations: A Case of European Enterprises

Tomasz Kijek

363

Employee Driven Innovation: Bridging Open and Close Innovation Management Practices

Eric Michael Laviolette, Renaud RedienCollot and Ann-Charlotte Teglborg

370

Social Capital, Knowledge Strategy, and new Venture Performance: Evidence From Graduate Entrepreneurial Ventures in China

Jun Li and Weihe Gao

378

For Strategic Environmental Sustainability not to be Lost in Translation(s) Anymore

Sophie Liénart and Annick Castiaux

384

Social Responsibility Like aim of Innovation Activity in Information and Communication Industry: The Spanish Case

María Jesús Luengo, Teresa Areitio and María Obeso

392

State Parenting Entrepreneurship - the Process of Seizing Opportunities – a Case of a Chinese Entrepreneur

Sabrina Luthfa Karim and Hanjun Huang

401

The Impact of the Economic Downturn on Innovative Performance in Poland

Anna Matras-Bolibok

409

iii

Paper Title

Author(s)

Page No.

Céline Maximin-Tieu

417

Failing to Succeed: A Network Theoretic Comparison of Global Accelerators

Patrick McHugh, Chris Whipple and Xiaoyang Yang

425

Sustainability Among Tourism and Hospitality Industry’s Ventures: From Awareness to Specific Practices

Ioana Mester and Daniel Badulescu

434

Innovation, Design and Competitiveness: Results From a Portuguese Online Questionnaire

José Monteiro-Barata

442

Using Strategic Alliances to Facilitate Community Based new Venture Creation

Peter Moroz, Bob Kayseas and Robert Anderson

454

Senior- & Juniorpreneurship: An Intergenerational Approach in Engineering and Entrepreneurship for Value Creation

Bernd Neutschel, Olaf Gaus, Matthias Raith and Sándor Vajna

463

Cooperation Activities for Innovation: An Empirical Analysis Applied to Iberian Countries

Sandra Nunes, Teresa Costa and Luísa Carvalho

471

Organizational Innovation – can job Enrichment Enhance Employee?

Morena Paulišić, Tea Golja and Barbara Unković

482

The Institutions of Social Entrepreneurship in the USA, UK and Germany Within a Context of Market-Based vs. Bank-Based Systems

Ruslan Pavlov

490

Collaborative Strategies for Innovation CapacityBuilding: A Study of MIT’s International Partnerships

Sebastian Pfotenhauer, Dan Roos, and Dava Newman

498

The Internationalization Process of German HighTech SMEs: An Empirical Analysis

Andreas Pinkwart and Dorian Proksch

507

Entrepreneurship - Successes and Failures of Start-Up SMEs on Regional and International Markets

Aneta Ptak-ChmielewskaI

515

Entrepreneurship Education: A View Across Outcome Expectations and Antecedents in Students of Higher Education

Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati

525

Institutional Support Program for Entrepreneurship: The Experience of the University of Minho

Cristina Rodrigues and Filipa Vieira

533

Factors Influencing Innovation and Competitiveness – a Comparative Analysis of Selected Economies

Anna Sacio – Szymańska

543

Experiential Entrepreneurship Education in Canada – new Venture Creation While Earning a Masters Degree

Tarek Sadek and Rafik Loutfy

555

How to Conciliate Best Enemies? The Case of Competitive Chemical Industries in Ecofriendly Cultures Volume Two

Paper Title

Author(s)

Page No.

Knowledge Sharing, Innovation Networks, and Innovation Capability: The Case of Uruguayan Software Firms

Josune Sáenz and Andrea Pérez-Bouvier

564

IS Resilience in SMEs in Post-Earthquake Christchurch

Amitrajit Sarkar and Stephen Wingreen

573

The Institutional Support as a Factor for Technology Internationalization From Developing Countries

Viktor Stojmanovski, Velimir Stojkovski, Mijalce Santa and Beti Kostadinovska Dimitrovska

581

How SMEs Mitigate Risks When Embarking in Open Innovation Projects

Adrian Dumitru Tanţău and Eliza Laura Paicu (Coraş)

588

How Planguage Measurement Metrics: Shapes System Quality

Man-Chie Tse and Ravinder Singh Kahlon

597

A Study of Customer Feedback and Employee Driven Innovation

Jiro Usugami

605

Space Technology Transfer: A Systematic Literature Review

Karen Venturini and Chiara Verbano

613

The Evolution of Resources in Research-Based Spinoffs: Learning from a Case Study

Chiara Verbano, Karen Venturini and Avi Wasser

623

Companies’ Innovativeness Influenced by Organizational Structures

Annika Vesterinen and Kalle Elfvengren

633

Structuring the Unstructured: Service Innovation in a UK Small Business Services Firm

Vessela Warren and Barry Davies

641

Student Entrepreneurial Intentions: Two Perspectives

Doan Winkel, Jeff Vanevenhoven, Mark James and Eric Liguori

649

Complex Technology Assessment as a Determinant for Marketing Activities in Innovation Commercialisation

Urszula Wnuk and Ludmiła Łopacińska

661

Disruptive Innovation in Public Service Sectors: Ambidexterity and the Role of Incumbents

Danielle Wood, Sebastian Pfotenhauer, Wiljeana Glover and Dava Newman

669

Entrepreneurial Attitudes and Entrepreneurship’s Potential in East Timor

Tomas Xavier, Filipa Vieira and Cristina Rodrigues

677

PHD Papers

687

Marketing Support of Innovative Projects

Gulnara Chernobaeva

689

Public and Private Sector Approaches to SMME Development in the Ethekwini Municipality

Anneline Chetty

698

Factors Influencing an Upscaling Process of Grassroots Innovations: Preliminary Evidence From India

Ann De Keersmaecker, Prabhu Kandachar, Vikram Parmar, Koen Vandenbempt and Chris Baelus

705

Collective Entrepreneurship, a Solution to Conflicting Institutional Logics in the Entrepreneurship Process?

Frédéric Dufays

715

Innovations, Standards and Quality Management Systems: Analysis of Interrelation

Raimonda Liepiņa, Inga Lapiņa, Jolanta Janauska and Jānis Mazais

723

Paper Title

Author(s)

Page No.

Achieving Performance of Organization by Developing a Model of Innovation Management

Andreea Maier, Marieta Olaru, Dorin Maier and Mihai Marinescu

731

Integrating Concepts of Creativity and Innovation - a key to Business Excellence

Dorin Maier, Marieta Olaru and Andreea Maier

739

Entrepreneurs’ Access to Public Finance as a Gendered Structure Case Finland

Petra Merenheimo

747

Firms’ Response to Peer Behaviour

Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck

755

Firm Structure and Problems of Governance in the Italian SMEs

Adalberto Rangone

762

Understanding Entrepreneurial Performance in a Networked Social Environment

Carla Riverola and Francesc Miralles

773

Performance Measurement and Management in SMEs

Ted Sarmiento and David Devins

782

Effects of Technological Innovation on Knowledge Acquisition Inside the Organization: A Case Study

Dorotéa Silva, Fernando Romero and Filipa Vieira

791

Measuring the Validity of a Text Based Indicator for Exploration and Exploitation Activities

Nazlihan Ugur

797

Non Academic Papers

808

Incubators as Enablers for Academic Entrepreneurship

Frank Gielen, Sven De Cleyn and Jan Coppens

809

Applying the Disruptive Israeli Innovation Model to Re-Inventing Corporate Education

Janet Lea Sernack

818

Work in Progress Papers

825

Entrepreneurship as Future Career for PostGraduate Business Students: A Realistic Option?

Daniel Badulescu and Mariana Vancea

827

How Strategic and Social Entrepreneurship can Create Sustainable Economic and Social Value: A Proposed Model for the Cooperative Sector

Vítor Figueiredo and Mário Franco

831

Exploring the Social Dimension of Entrepreneurial Resourcefulness: A Case Study Among Family Business Entrepreneurs

Bart Henssen

835

Dragging One's Feet Along the way: How (In)Congruent Motives Influence Entrepreneurial Performance

Julie Hermans

838

Finding New Competitive Intelligence: Using Structured and Unstructured Data

Ravinder Singh Kahlon and Man-Chie Tse

842

Implications of an Emerging Model for Product Ideation, Design and Development Using Bridging Enterprises and Open Communities of Practice

Karla Phlypo

847

Internationalisation by SMEs as a Strategy to Cope With Weakness in the Domestic Market : The Case of Spain, Ireland and France

Angela Poulakidas, Robert Hisrich and Claudine Kearney

851

Preface These proceedings represent the work of contributors to the 8th European Conference on Entrepreneurship and Innovation (ECIE 2013), hosted this year by Hogeschool-Universiteit Brussel (HUBrussel) in Belgium.The Conference Chair is Dr Peter Teirlinck from HUBrussel(KU Leuven) and the Programme Co-Chairs are Dr Stijn Kelchtermans from HUBrussel(KU Leuven) and Dr Filip de Beule from Thomas More Antwerpen (KU Leuven). Keynote presentations are given by Katrien Mondt, Director-General at Innoviris, Brussels Institute for Science and Innovation on the topic “Regional Innovation Policy: the case of the Brussels Capital Region”. Cornelis J.J. Eldering from the European Space Agency, Noordwijk, The Netherlands will address the topic “Technology Transfer at the European Space Agency” and Prof. Dr. Ir. Koenraad Debackere, KU Leuven, Belgium will talk about “Smart entrepreneurship in the Triple Helix”. ECIE continues to develop and evolve. Now in its 7th year the key aim remains the opportunity for participants to share ideas and meet the people who hold them. The scope of papers will ensure an interesting two days. The subjects covered illustrate the wide range of topics that fall into this important and growing area of research. With an initial submission of 244 abstracts, after the double blind, peer review process there are 79 academic papers, 14 PhD papers, 2 non academic papers and 7 work-in-progress papers published in these Conference Proceedings. These papers represent research from Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Deutschland, Egypt, Finland, France, Germany, Ghana, Greece, Israel, Italy, Japan, Köln, Latvia, Macedonia, México, Morocco, New Zealand, People's Republic of China, Poland, Portugal, Republic of San Marino, Romania, Russia, South Africa, Spain, Sweden, Turkey, UK, and the USA. We hope that you enjoy reading these Proceedings. Stijn Kelchtermans and Filip de Beule Co-Programme Chairs September 2013

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Conference Executive Professor Peter Teirlinck Hogeschool-Universiteit Brussel, Belgium Professor Stijn Kelchtermans Hogeschool-Universiteit Brussel, Belgium Bart Leten Catholic University of Leuven, Belgium Mini Track Chairs Doan Winkel Illinois State University, USA Dr Alexandros Kakouris, University of Athens, Greece Dr Ella Henry Auckland University of Technology, New Zealand Dr Filip De Beule Lessius University College, Antwerp, Belgium Milan Todorovic Union Nikola Tesla University in Belgrade, Serbia Dr Yipeng Liu University of Kent, UK Dr Jun Li University of Essex, UK Prof Dr Alina Badulescu University of Oradea, Romania Dr Ann-Charlotte Teglborg Novancia, Business School Paris, France Dr Liang Guo Rouen Business School, France Dr Ke Rong Bournemouth University, UK Committee Members The 2013 conference programme committee consists of key people in the entrepreneurship and innovation community, both from the UK and overseas. The following people have confirmed their participation: Kamarulzaman Ab. Aziz (Multimedia University, Malaysia); Assoc.Prof.Dr. Zafer Acar (Okan University, Istanbul, Turkey); Dr. Bulent Acma (Anadolu University, Turkey); Dr Hassanali Aghajani (University of Mazandaran(UMZ), Iran, ); Jaione Aguirre (Tekniker technological centre, Spain,); Prof. Ruth Alas(Estonian Business School, Estonia); Dr Laurice Alexandre Leclaire (Sorbonne Paris Cité University, France); Dr. Saleh Al-Jufout (Tafila Technical University, Jordan); Prof. Khedidja Allia (University of Science and Technology, Algiers, Algeria); Dr. Hanadi AlMubaraki (Kuwait University, Kuwait,); Dr. Rumen Andreev (Bulgarian Academy of Sciences, Sofia, Bulgaria); Dr. Zacharoula Andreopoulou (Aristotle University of Thessaloniki, Greece); Dr Christos Apostolakis (Bournemouth University, UK); Erik Arntsen (University of Agder, Kristiansand, Norway); Omid Askarzadeh (Polad Saab Shargh, Tehran, Iran); Samantha Aspinall (University of Leeds, UK); Dr. Claire Auplat (Imperial College Business School, London, UK); Prof. Miroslav Baca(University of Zagreb, Varaždin, Croatia); Prof Alina Badulescu (University of Oradea, Romania); Susan Bagwell (London Metropolitan University, UK);Prof.Dr. Mihai Berinde (University of Oradea, Faculty of Economic Sciences, Romania,); Prof. Cristin Bigan (Ecological University of Bucharest, Romania);Prof. Dr. Ferrucio Bilich (University of Aveiro, Portugal); Dr. Adam Jay Bock (University of Edinburgh, United Kingdom,); Prof. Dr. Dietmar Boenke(Reutlingen University, Germany); Ana Maria Bojica (University of Granada, Spain); Prof Raymond Boyle (University of Glasgow, UK); Tina Bratkovic(University of Primorska, Slovenia); Dr. Alexander Brem (University of Erlangen-Nuremberg, , Germany); Fraser Bruce (University of Dundee, UK); Dr. Cagri Bulut (Yasar University, Izmir, Turkey); Dr Cagri Bulut (Yasar University, Turkey); Jeffrey Burke (National Pollution Prevention Roundtable, Washington DC, USA); Kevin Burt (University of Lincoln, UK); Prof Luisa Carvalho (Institute Polytechnic of Setubal, Portugal, Portugal); Dr. Toly Chen (Feng Chia University, Taichung, Taiwan); Ph.D. Kuo-Sheng Cheng (National Cheng Kung University/Institute of Biomedical Engineering, Taiwan); Prof Chuang-Chun Chiou (Dayeh University, Changhua, Taiwan); Dr. Nick Clifton (Cardiff Metropolitan University, UK); Prof. Costas N. Costa (Cyprus University of Technology, Lemesos, Cyprus); Prof. Teresa Costa (Instituto Polit cino de Set bal | Escola Superior de Ci ncias Empresariais, Portugal); Dr. Fengzhi Dai (Tianjin University of Science and Technology, , China); Dr Leo-Paul Dana (University of Canterbury, Christchurch, New Zealand); Dr Filip De Beule (Thomas More Antwerpen, Antwerp,, Belgium); Prof. Rogerio Atem De Carvalho (Instituto Federal Fluminense, Campos, Brazil); Sven H. de Cleyn (University of Antwerp, Antwerp, , Belgium); Dr. Luc De Grez (Hogeschool Universiteit Brussel, Belgium); Prof. Armando Carlos de Pina Filho (Federal University of Rio de Janeiro , Brazil); Carine Desleee (University of Lille 2- IMMD,France); Maria Chiara Demartini (University of Pavia, Italy); Dr Izabela Dembińska (University of Szczecin, Poland); Charles Despres (Conservatoire des Arts et Metiers, Paris, France); Prof. Dr. Anca Dodescu (University of Oradea, Romania); Prof. Dr. Michael Doellinger (University Hospital Erlangen, Germany); Prof. Salah Doma (Sinai University, El-Arish, Egypt); Dr. Nelson Duarte (Porto Politechnic - School of Management and Technology, Portugal,); Dr Smile Dzisi (Koforidua Polytechnic, Ghana); Prof Vasco Eiriz (University of

viii

Minho, , Portugal); Dr Hatem El-Gohary (Birmingham City University, UK,); Dr Scott Erickson (Ithaca College, USA); Prof. Engin Deniz Eris (Dokuz Eylul University, Turkey); Dr. Mahtab Farshchi (London South Bank University, UK); Professor Luis Fé De Pinho (Universidade Lusíada de Lisboa, Portugal,); Burca Felekoglu(University of Cambridge, Turkey); Professor Paula Odete Fernandes (Polytechnic Institute of Bragança, Portugal,); Prof. João Ferreira (University of Beira Interior, Covilhã, Portugal); Prof Maria Joao Ferreira (Universidade Portucalense, Porto, Portugal); Dr Heather Fulford (Aberdeen Business School, UK); Dr Erdei Gábor (University of Debrecen, Hungary); Brendan Galbraith (University of Ulster, UK); Dr. Laura Galloway (Heriott-Watt University, Edinburgh, UK);Dr Cephas Gbande (Nasarawa State University, Nigeria,); Prof Panagiotis Georgiadis (University of Athens, Greece); Prof. Alan Gillies (Hope Street Centre, UK); Ass. Prof. Dr. Andriana Giurgiu (University of Oradea, Romania); Dr Andrew Goh (University of South Australia, Australia); Dr Sayed Mahdi Golestan Hashemi (Iranian Research Center for Creatology, TRIZ & Innovation Management, Iran); Prof Oleg Golichenko (Central Economics and Mathematics Institute of Russian Academy of Science, Russia,); Dr. Mario Gomez Aguirre (Universidad Michoacana de San Nicolas de Hidalgo, Mexico,);Dr. Elissaveta Gourova (Sofia University "St. Kliment Ohridski", Bulgaria,); Dr Izold Guihur (Université de Moncton, Canada); Dr Ebru Gunlu (Dokuz Eylul University Faculty of Business, Turkey); Dr Liang Guo (Rouen Business School, Mont Saint Aignan, France); Prof Jukka Hallikas (Lappeenranta University of Technology, Finland); Kaled Hameide (Montclair State university in New Jersey, USA); Prof Wafa Hammedi (University of Namur (FUNDP), Belgium); Dr Saskia Harkema (The Hague University of Applied Sciences, The Netherlands); Dr Jennifer Harrison (Southern Cross University, Australia,); Takashi Hirao(Tokyo University of Science, Suwa, Japan); John Howard (Public Health and Clinical Sciences, UK); Dr Amy Hsiao (Memorial University of Newfoundland, St John’s, Canada); Dr. Dil Hussain (Aalborg University, Denmark); Dr Harri Jalonen (Turku University of Applied Sciences, Finland,); Paul Jones(University of Plymouth, UK); Dr Magdalena Jurczyk-Bunkowska (Opole University of Technology, Poland); Dr Alexandros Kakouris (University of Athens, Greece); Dr. Yusniza Kamarulzaman (University of Malaya, Kuala Lumpur, Malaysia); Dr Mira Kartiwi (International Islamic University Malaysia, Malaysia);Prof stijn Kelchtermans (Hogeschool-Universiteit Brussel, Belgium); Professor Panayiotis Ketikidis (CITY College - International Faculty of the University of Sheffield, Greece); Dr Marko Kolakovic (Faculty of Economics & Business, Croatia); Sam Kongwa (Walter Sisulu University, Mthatha, South Africa); Prof Kothandaraman Kumar (Indian Institute of Management Bangalore, India); Dr Stefan Lagrosen (University West, Sweden); Prof Brent Lane (Kenan-Flager Business School, University of North Carolina, USA); DR Jonathan Lean (University of Plymouth Business School, UK); Kiefer Lee (Sheffield Hallam University, UK); Prof. Dr. Joao Leitao (University of Beira Interior, Portugal); Dr. Jun Li (University of Essex, UK); Yipeng Liu (University of Mannheim, Germany); Prof Ilidio Lopes (Polythenic Institute of Santarém, Portugal); Dr Angeline Low (University of Technology Sydney, Mosman, Australia); Prof Sam Lubbe (University of South Africa, South Africa); Dr Fernando Lucas (Polytechnic Institute of Santarém, Portugal); Phd María Jesús Luengo(University of Basque Country, Spain); Dr. Randa Mahasneh (The Hashemite University, Jordan); Anneli Manninen (Laurea University of Applied Sciencies, Finland,); Dr Maria Markatou (Technological Education Institute of Larissa, Greece,); Prof Carla Marques (University of Trás-osMontes Alto Douro (UTAD), Portugal,); Dr. Florinda Matos (ICAA - Intellectual Capital Association Accreditation, Portugal,); Philip McClenaghan (Augsburg University, Germany); Prof.Luis Mendes (Beira Interior University, Portugal,); Zoran Mitrovic (University of Western Cape, South Africa); Asst. Prof. José Monteiro-Barata (ISEG, UTL, Lisbon, Portugal); Isabel Mota (Universidade do Porto, Porto. , Portugal); Maurice Mulvenna (University of Ulster, Newtownabbey, UK); Dr Jan Nab(Utrecht University, The Netherlands); Professor Desai Narasimhalu (Singapore Management University, Singapore); Dr. Artie Ng (School of International Business, Seneca College of Applied Arts and Technology, Toronto, Canada); The Hong Kong Polytechnic University, Hong Kong); Prof. Alcina Nunes(Polytechnic Institute of Bragança, Portugal,); Ass.Prof. Birgit Oberer (Kadir Has University, Turkey); Dr Maria Obeso (University of Cantabria, Spain); Alex Obuh (Delta State University, Nigeria); Professor Jukka Ojasalo (Laurea University of Applied Sciences, Espoo, Finland); Dr. Noreen O'Shea (Novancia Business school, France,); Professor Mohand-Said Oukil (King Fahd University of Petroleum and Minerals, Dhahran,, Saudi Arabia); Dr Shaun Pather (e-Innovation Academy, Cape Peninsula University of Technology, Cape Town, South Africa); Ruslan Pavlov (Central Economics and Mathematics Institute, Russia); Prof. Dr. Ige Pirnar (Yasar University, Turkey); Dr. Nataša Pomazalová (University of Defence, Brno, Czech Republic); DR. Malgorzata Porada-Rochon (University of Szczecin, Poland,); Dr Jean-Michel Quentier (ESC-Bretange, Brest, France); Sudhanshu Rai (Copenhagen Business School, Frederiksberg, Denmark); Dr Catarina Ramalho (University of Lisbon, Portugal); Prof.Dr Ganesan Ramaswamy (Asia-Pacific Institute of Management, New Delhi, India); Prof. Ricardo Rodrigues (NECE / University of Beira Interior, Portugal); Prof Cristina Rodrigues (University of Minho, Portugal); Dr Jose Carlos Rodriguez (Economic and Business Research Institute - Instituto de Investigaciones Economicas y Empresariales, Mexico,); Prof Cristhian Rodriguez Schneider (Catholic University of Temuco, Chili); Fernando Romero (University of Minho, Portugal); Jonas Rundquist (Halmsted University, Sweden);

Prof Paulo Rupino Cunha (University of Coimbra, Portugal); Dr. Balasundaram Sadhu Ramakrishnan (National Institute of Technology, Tiruchirappalli, India); Prof Rui Pimenta (ESTSP- Instituto Politécnico Porto, Portugal); Amitrajit Sarkar (Christchurch Polytechnic Institute of Technology, New Zealand); Dr Ousanee Sawagvudcharee (Centre for the Creation of Coherent Change and Knowledge, Liverpool John Moores University, UK); Simone Scagnelli (University of Turin, Torino, Italy); Professor Dr. Cezar Scarlat (University "Politehnica" of Bucharest, Romania); Mark Schatten (University of Zagreb,Varaždin, Croatia); Prof. Jeanne Schreurs (Hasselt University, Diepenbeek, Belgium); Dr. Maria Theresia Semmelrock-Picej (Klagenfurt University Biztec, Austria); Dr Nima Shahidi (Islamic Azad University- Noorabad mamasani Branch, Iran,); Dr. Armin Shams (University College Cork, National University of Ireland, Ireland); Dr. Namchul Shin (Pace University, New York, USA); Eric Shiu (The University of Birmingham, UK); Prof Sandra Silva(Faculdade de Economia da Universidade do Porto, Portugal,); Carmen Sirbu (Danubius University, Romania); Prof Aelita Skarzauskiene (Department of Social Informatics, Mykolas Romeris University , Lithuania); Dr Dorotea Slimani (Innventia AB, Sweden); Professor David Smith (Nottingham Trent University, UK); Cristina Sousa (ISCTE-IUL, Portugal); Dr André Spithoven (Belgian Science Policy Office, Belgium); Dr Ludmila Striukova (University College London, UK); Prof Peter Teirlinck (Hogeschool-Universiteit Brussel, Belgium); Dr Aurora Teixeira (Faculdade de Economia, Universidade do Porto, Portugal,); Dr Mangaleswaran Thampoe (Vauniya Campus of the University of Jaffna, Sri Lanka); Prof Milan Todorovic (University Union Nikola Tesla, Serbia); Ana Trevino (ITESM, Mexico); Dr Marios Trigkas (Technological Educational Institute of Larissa, Greece,); Prof. Dr. Lorraine Uhlaner (EDHEC Business School , France); Armando Luis Vieira (Universidade de Aveiro, Portugal); Prof Filipa Vieira (Universidade do Minho – DPS,Portugal); Dr Marcia Villasana (Tecnologico de Monterrey, Mexico);Dr Carla Vivas (Polytechnic Institute of Santarém, Portugal); Bernard Vollmar (Carl von Ossietzky Universität Oldenburg, Oldenburg, Germany); Dr Catherine Wang (Royal Holloway University of London , UK); Dr Ismail Wekke (State College of Sorong, Indonesia, ); Dr Wioletta Wereda (Siedlce University of Natural Sciences and Humanities, Poland); Dr. Doan Winkel (Illinois State University, USA); Catherine Wright (Heriot Watt University, UK,); Fabiola Wust Zibetti (University of Sao Paulo, Brazil); Aziz Yahya (Universiti Teknikal Malaysia Melaka, Malaysia); Prof Shaker Zahra (University of Minnesota, USA); Dr Krzysztof Zieba (Gdansk University of Technology, Poland,); Dr Malgorzata Zieba(Gdansk University of Technology, Poland); Ph.D. Afonso Zinga (University of Coimbra, School of Economics, Portugal);

Biographies Conference Chair Dr Peter Teirlinck is Programme Director of the Bachelor and Master of Business Administration at Hogeschool-Universiteit Brussel. He is professor in Innovation Management. His main research interest areas include: Innovation in SMEs; Impact assessment of public funding for RTDI; The internationalisation of business research; Innovation and regional development. Peter Teirlinck also is policy adviser for the Belgian Science Policy Office and has been a detached national expert at the European Commission (DG Research). He obtained a Ph.D. in Applied Economics at the Universiteit Antwerpen in 2009 on the topic "Location of (FDI in) R&D and networking in innovation: analysis and policy making for the business enterprise sector"

Programme Co-Chairs Dr Stijn Kelchtermans (Ph.D. KULeuven, 2007) is Professor at Hogeschool-Universiteit Brussel (HUBrussel) and affiliated researcher at the department of Managerial Economics, Strategy & Innovation at the KULeuven. At HUBrussel he teaches Master-courses Innovation & Technology Management, R&D Management and Open Innovation. He is also Faculty Coordinator for the learning track Technology & Innovation in the Commercial Engineering program. His research interests include the economics of science and education (productivity analysis, demand estimation) as well as innovation, mainly focusing on industry-science links. His research has been published in international journals like the Journal of Applied Econometrics, Journal of Public Economics and CESIfo Economic Studies. Dr Filip de Beule is Assistant Professor of International Business at the Lessius University College, Antwerp, Belgium. He holds a BA and MA in Economics, and an MBA from the University of Antwerp Management School (UAMS). He got his PhD from the University of Antwerp on Belgian subsidiary management in the Peopleâ&#x20AC;&#x2122;s Republic of China: Strategic evolution, host country impact and policy. Prof. De Beule has lectured as Visiting Professor at the University of Antwerp and the Catholic University of Leuven. Dr. De Beule is board member of the European International Business Academy, where he serves as national representative for Belgium. He is an affiliate researcher at the LICOS Centre for Institutions and Economic Performance at the Catholic University of Leuven, where he focuses his research on multinational companies and emerging economies. Filip is also affiliated with Thomas More Antwerpen, Antwerp, Belgium.

Keynote Speakers Prof. Dr. Ir. Koenraad Debackere obtained his Ph.D. in Management with an ICMfellowship at the University of Gent after stays as an ICM-fellow and an ICRMOT research assistant at MIT Sloan School of Management. He was a Fulbright-Hays postdoctoral fellow at MIT in 1991-1992. Since 1992, he was for two years an assistant professor at Erasmus University Rotterdam before becoming an NFWO-Post-Doctoral Researcher in 1993. In 1995, he became professor at KU Leuven where he teaches Technology and Innovation Management. In 1999, he became the managing director of KU Leuven Research & Development, the technology transfer office of KU Leuven. He has been a promotor and recipient of various research grants by IWT (Flanders), FWO (Belgium & Flanders), DWTC (Belgium), EC (European Commission) and OECD in the areas of innovation management and policy. He is promotercoordinatorspokesperson of the Interuniversity Centre for R&D Monitoring of the Flemish government based at KU Leuven. He is also actively engaged in technology transfer activities as managing director of KU Leuven Research & Development and Chairman of the Gemma Frisius Fonds (the venture fund) of the KU Leuven. He is the cofounder and chairman of Leuven.Inc, the innovation network of Leuven high-tech entrepreneurs. He is a board member of IWT-Vlaanderen, the Flemish government agency that supports science and technology development in Flemish industry. Since 2005, he is the general manager of KU Leuven.

Cornelis (Niels) Eldering is Technology Transfer Officer at the Technology Transfer Programme Office of the European Space Agency (ESA). His main responsibility is the ESA Business Incubation Centre (ESA BIC) programme. The primary aim of an ESA BIC is to provide support to entrepreneurs who wish to exploit space-based solutions into nonspace markets. ESA has Business Incubation Centers in the UK, the Netherlands, Belgium, Germany, and Italy. Niels holds a Master of Science in Business Administration from the Rotterdam School of Management, is living in the Netherlands and working at ESTEC, the European Space Research and Technology Centre in Noordwijk. Passionately engaged in the challenging process from exploration to exploitation of science & technology, he regularly provides presentations and international guest lectures such as to the CEMS international Master of Management. The main mission of the Technology Transfer Programme is to strengthen the competitiveness of European Industry and to demonstrate the benefit of the European Space Programme to European citizens via the transferring of space technologies to non-space applications. The Technology Transfer Programme Office is responsible for defining the overall approach and strategy for the transfer of space technologies applications and systems, including the incubation of start up companies and a related venture fund. Katrien Mondt After an academic career in the field of medicines, Katrien has been involved in the development of research policy in the field of Education for the Flemish Community. Since January 2013 she is Director-General at Innoviris, the Brussels Institute for Science and Innovation

Mini Track Chairs Dr Alina Badulescu is Professor of Economics and Economics of Tourism at the University of Oradea, Romania. She graduated from the Bucharest University of Economics and has a PhD in Economics from the Babes-Bolyai University in Cluj-Napoca. She has written numerous journal articles and books and supervised PhD theses in Economics. Her research interests include economics of entrepreneurship, sustainable entrepreneurship, and tourism policy and development. Dr Liang Guo is assistant professor of management and BNP-KPMG Research chair of "business model and entrepreneurial innovation". He has published several articles in international journals including one in the Journal of Product & Innovation Management. His research focuses on business model, innovation, entrepreneurship and venture capital. Dr Ella Henry is a Māori woman, one of the indigenous people of New Zealand, and a Senior Lecturer in Māori Development and Māori Media in Te Ara Poutama, the Faculty of Māori Development at Auckland University of Technology. She has an academic background in Sociology, Māori Studies and Management Studies. Her Masters' thesis focused on Māori women in management. In 2012 Ella completed a PhD which explored Māori entrepreneurship in screen production. Alongside her academic career Ella has been actively involved as a practitioner and activist in the development of the Māori screen industry in New Zealand. Dr Alexandros Kakouris is a part time lecturer in entrepreneurship and innovation at the University of Athens. He holds a Ph.D. in Physics and a M.Sc. in Adult Education. He has been involved in entrepreneurship research since 2006, involved mainly with educational issues. His special interest concerns fostering of entrepreneurship and innovation to science graduates and support of youth entrepreneurship through counselling. He also specialises in nascent entrepreneurship and virtual business planning. Dr Jun Li is a senior lecturer in Entrepreneurship at University of Essex. His research interests on entrepreneurship and innovation in emerging economies. Dr. Li has published in leading entrepreneurship journals, e.g. Entrepreneurship and Regional Development, and edited several special issues on entrepreneurship in emerging economies. Dr. Li is co-editor of Journal of Chinese Entrepreneurship.

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Dr Yipeng Liu is a lecturer in Entrepreneurship at University of Kent. His research interests centre on entrepreneurship and institutions, global talent management and business sustainability with a focus on emerging economies. Dr. Liu has published in Thunderbird International Business Review, Promethus: Critical Studies in Innovation, among others. Dr Ke Rong is a lecturer in strategy at the business School of Bournemouth University. Ke got the PhD degree from University of Cambridge and obtained Bachelor degree in Tsinghua University. His research interests include business ecosystems, frugal innovation, and emerging industries and economies.

Ann-Charlotte Teglborg is a research professor at Novancia, Paris Business School. She is an early and active member of the European Employee driven innovation Research Network: EDI-Europe. She is also administrator of the French professional association Innovacteurs dedicated to employee driven innovation in French private and public sector. Milan Todorovic is a Professor of Entrepreneurship and Innovation, Corporate Entrepreneurship and Organisational Changes at Union Nikola Tesla University in Belgrade, Serbia. He holds a MBA from Melbourne Business School and has extensive international experience across diverse industries and government enterprises encompassing lecturing, management consulting, business development, directorships and successful management of global, mission critical business systems for leading international companies. During his career he has combined his significant professional experience and leadership skills with excellent knowledge of business strategy to conduct consulting assignments and deliver strategic projects worldwide. Currently, he is involved in several research projects including how public policies impact on innovation and entrepreneurship. Doan Winkel is an Assistant Professor of Entrepreneurship at Illinois State University and Associate Director of Programs at The George R. and Martha Means Center for Entrepreneurial Studies. His research has been published in the New England Journal of Entrepreneurship, the Journal of Entrepreneurship Education, the Journal of Occupational and Organizational Psychology, Human Resource Management, and the Journal of Business Ethics. He is co-founder of SproutEcon, LLC and One Virtual Business Coach, Inc

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Biographies of Presenting Authors Dr. Hadia H. Abdel Aziz is an Assistant Professor of Entrepreneurship and Innovation Management at the German University in Cairo. She has vast practical experience in the areas of SME financing, financial innovation and entrepreneurship which also constitute her main research interests. Dr. Tuomo Alasoini coordinates workplace innovation and development activities in Tekes (the Finnish Funding Agency for Technology and Innovation). He is Adjunct Professor of Sociology at the University of Helsinki and director of Tekes programme “Liideri – Business, Productivity and Joy at Work”. He is an active member of the European Workplace Innovation Network EUWIN. Versavia Ancusa received her PhD degree in 2009 from POLITEHNICA University of Timisoara, in Computer Science. She is currently a Senior Lecturer at the Department of Computers, Faculty of Automation and Computers, POLITEHNICA University of Timisoara, Romania. Dr. Ancusa’s main research interests are affective computing, fault tolerance and reliability, complex networks. Robert B. Anderson is a Professor of entrepreneurship with the University of Regina. He has authored or coauthored more than 150 peer-reviewed articles (more than 40 of these refereed journal articles) on economic development and entrepreneurship, two books on the subject and co-authored of a third, and co-edited of a handbook research on indigenous entrepreneurship. Petra Andries (petra.andries@kuleuven.be) is a senior researcher at the Centre for R&D Monitoring (KU Leuven). Her research interests are in innovation management and entrepreneurship in general, with a particular interest in new venture development, collaborative innovation and knowledge management. Paula Anzola Román, BA, MBA is a Researcher/contributor at the Department of Business Administration at Public University of Navarra. Her research has been focused in Open Innovation and Business Models. María Teresa Areitio, PhD is University Professor at Department of Industrial Economics at the University of Basque Country, Spain. She has managed some research projects and she has contributed to scholar area with articles and books. Her current work focuses on knowledge management, TICs and innovation in the EHEA and international economy. Manuel Luís Au-Yong Oliveira earned a distinction for his PhD degree in Industrial Engineering and Management from the University of Porto and is currently a part-time lecturer both at the University of Aveiro and at the University of Porto. Manuel is affiliated to INESC TEC. Alina Badulescu is Professor of Economics and PhD coordinator at the Faculty of Economics and Doctoral School in Social Sciences of the University of Oradea, Romania. She graduated Bucharest University of Economics and since she has authored and co-authored numerous journal articles and books. Her interests include economics, but promoting young researchers’ activity as well. Daniel Badulescu graduated Bucharest University of Economic Studies and has a PhD in Economics. He is Associate Professor in Business Economics and Business Financing at the Department of Economics, University of Oradea, Romania. His current research interests include economics, business economics and business finance. Olimpia-Iuliana Ban Ph.D. in Marketing, West University of Timisoara, Romania, 2005. Now is associate professor and Head of Economy Departament at University of Oradea. Fernando Barbosa is an invited lecturer in the Department of Production and Systems Engineering at the Engineering School of the University of Minho. He holds a B.Sc. in Management from Portucalense University, and an M.Sc. in Industrial Engineering from the University of Minho. He is a Business Consultant and Trainer in several organizations. Bartłomiej J.Gabryś is Assistant Professor at Chair in Entrepreneurship at the University of Economics in Katowice, Poland. He received his Ph.D. in corporate entrepreneurship. His present research focuses in the area

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of corporate entrepreneurship and growth. His research were presented at EURAM, BAM, AOM, ISBE, RENT conferences or published by Wolters/Kluver and Routledge. Muamer Bezdrob is a cofounder and director of the PING ltd. Sarajevo. He graduated at the Faculty of Electrical Engineering in Sarajevo, where he was an assistant professor. He earned his MSc and his PhD at the School of Economics and Business in Sarajevo. Muamer lives in Sarajevo with his wife and their son. Razvan Bogdan received his PhD degree in 2009 from POLITEHNICA University of Timisoara, in Computer Science. He is currently Senior Lecturer at the Department of Computers, Faculty of Automation and Computers, POLITEHNICA University of Timisoara, Romania. Dr. Bogdan’s main research interests are in dependability of computer systems, human-machine interfaces, embedded systems, complex networks. Katarzyna Bratnicka, is Ph.D. student at the University of Economics in Katowice, Poland. She received her Master degree in human resources management. Her present research focuses in the area of corporate entrepreneurship and creativity. Her research was presented at EURAM, BAM, AOM and ISBE conferences. Mariusz Bratnicki, is a Professor in management and holds the position of head of Chair in Entrepreneurship at the University of Economics in Katowice, Poland. His present research focuses on the area of corporate entrepreneurship, creativity and organizational performance. His research were presented at EURAM, BAM, AOM, ISBE, RENT conferences or published by Routledge. Dorotéa Bueno da Silva is Ph.D. Student in Industrial and Systems Engineering at the Production and Systems Department, School of Engineering, University of Minho, Portugal. She obtained a Master degree in Industrial Engineering at the Production Engineering Pos-Graduate Department, Paraíba Federal University, Brazil after graduating in Psychology at the Paulistana University, Brazil. The theme of her doctoral research is evaluation of innovation programs for SME, with a special focus on the evaluation of their indirect effects. Cagri Bulut is Associate Professor of Management, Ambassador of ENT-Division, of Academy of Management to Turkey, and Chair of Department of Business Administration, Faculty of EAS, Yasar University, Turkey. Alex Lôbo Carlos is a Brazilian Navy Officer, born in Rio de Janeiro in 1974. He graduates in Nautical Sciences and postgraduates in economics. Currently he is completing a Master in Management at the University of Minho, Portugal. Luísa Carvalho: Professor of Economics, Entrepreneurship and Innovation. Department of Economics and Management, Business School – Setúbal Polytechnic Institute – Portugal since 1999. Researcher in CEFAGE – University of Évora- Portugal. PhD in management, McS in economics. Author of several publications in national and international journals and book chapters. Pr. Annick Castiaux holds a PhD in Physics from the University of Namur and teaches innovation and technology management. Her research considers a systemic approach of innovation, trying to detect paradoxes that can lead to emergent technologies or business models. She focuses on agent-based simulations, to realise in silico experiments helping to understand innovation strategies. Paula Castro is a Undergraduate Student, University of Sao Paulo, Brazil. Develop a international internship in Business School – Setúbal Polytechnic Institute during 1st semester of 2013. Gulnara Chernobaeva is an Associate Professor and Post-doctoral Fellow at the Department of Innovation and Project Management, Omsk State University, Russia. She teaches several marketing courses. Her main research interest is marketing communications. Currently, she investigates marketing project support. Gulnara additionally has extensive experience of working as Head of Marketing at leading Omsk companies. Dr Anneline Chetty completed a Masters in Town & Regional Planning and a PH.D with a focus on Public and Private sector approaches towards the provision of Business Development services for SMMEs in the eThekwini Municipality. Authored the book: Promoting entrepreneurship in South Africa. Excellent understanding of Economic development issues globally.

Piotr Chwastyk is a researcher and lecturer at The Opole University of Technology. His field of research are innovation processes especially cost estimation in processes planning of innovation. He received PhD title in 2006. He is a member of the Polish Society of Production Management, and since 2006 a member of the board. Brian Cleland is a PhD candidate with the Ulster Business School, University of Ulster, where he is researching "Open Innovation Practices in the European Public Sector". He has over 20 years experience of working in the IT sector, and has recently been working as a researcher in the area of e-participation. He also acts as an advisor to SMEs, specialising in innovation and internet technologies. Dorin Cristian Coita Ph.D in Marketing at Academy of Economic Sciences, Bucharest, Romania. Currently is associate professor and Head of Management and Marketing Department at University of Oradea. (Foto) Jan Coppens obtained his Ph.D. in computer science engineering from Ghent University. He continued his research in network technology at Alcatel-Lucent Bell Labs. End 2007, he left Bell Labs to Join the Business Technology Office of McKinsey & Company. Currently, Jan is responsible for marketing and business development at the iMinds Incubation & Entrepreneurship program. Eliza Laura Coraş field of work is credit risk management but during her eight year experience in the banking industry she has accumulated extensive knowledge on all banking processes and risks. She is currently advancing her business risk knowledge and intrapreneuring experience by attending a PhD programme at the Academy of Economic Studies in Bucharest. Her research is focused in risks in the innovation process and her practical studies are aimed to open innovation practices. Teresa Costa Professor of Management, Innovation and Entrepreneurship, Department of Economics and Management, Business School – Setúbal Polytechnic Institute – Portugal s since 2001. Researcher in CITIS – University of Lusíada- Portugal. Phd in Management. McS in Management. Author of several publications in international and national journals and book chapters. Renata Paola Dameri is professor in Accounting and in Information Systems at Faculty of Economics, University of Genova, Italy. She is visiting professor in IT governance at the University of Paris-Dauphine. She is also member of the research Unit “Information Systems” at Bocconi School of Management. Sven H. De Cleyn is Incubation Programs manager at iMinds, where he supports new start-ups. He received a PhD in Applied Economics at University of Antwerp on the early development of academic spin-offs. He’s also lecturer in entrepreneurship at Karel de Grote University College and post-doc researcher on high-tech entrepreneurship at University of Antwerp. Ann De Keersmaecker is PhD student with a background in product development and industrial engineering. She is affiliated with the University of Antwerp, Belgium, and the Delft University of Technology, the Netherlands. Her research interest lays in innovating in developing countries and inclusive design. Moreover, she coaches students and combines this job with consulting activities. Stan De Spiegelaere is a researcher at the HIVA – KULeuven (Research Institute for Work and Society). In this function he studies topics in innovative employee behavior, employee-driven innovation, labour regulation and industrial relations. He is also linked to the VIGOR innovation research group and is currently preparing a phd thesis on labour regulation and innovative behaviour of employees. Edward Debelka - Educated at University of Oradea Faculty of Electrical Engineering and Computer Science in 1997.graduated from 3 courses. Worked in S.C. Unicert International Group, Oradea in 2005 as General Manager. Jaroslava Dědková, Ph.D is a lecturer at the Faculty of Economics, Technical University of Liberec. She gives lectures in Marketing, Consumer behaviour and Strategic marketing. She supervises baccalaureate and diploma works and acts as an opposer of diploma and baccalaureate works. In her scientific work, she deals with the competitiveness of companies located in the Euroregion Nisa.

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Nikolay A. Dentchev is an Assistant Professor of Entrepreneurship and Corporate Social Responsibility at the University of Brussels (VUB) and at HUBrussels. Currently, his research interests are related to sustainable business models, sustainable innovations, instrumental stakeholder management theory and the implementation of CSR strategies. Biagio Di Franco is a Phd Student, Politehnica University, Faculty of Management in Production and Transportation, Romania. Master Degree in Management of Innovations Polytechnics of Mons, Belgium . Master Degree in Management of Transports University of Brussels, Belgium. Master Degree in International Trade University of Brussels, Belgium. Degree in Sciences of Management - Catholic University of Mons, Belgium. Maier Dorin PhD student at The Bucharest University of Economic Studies, Bucharest, Romania. Maier hastwo BSc on engineering, an MSc degree in management and a PhD in Civil Engineering. Maier researches are oriented towards innovation and integrated management systems. Frédéric Dufays is a PhD-student at the Centre for Social Economy of HEC-ULg Management School in Liege (Belgium). His research interests are social entrepreneurship and collective entrepreneurship, which he analyses through social network and institutional theory lenses. Dan Constantin Dumitrescu 1969- “Politehnica” University of Timisoara. 1999 – PhD. Internships in universities: 1991- Koln, 1992 - Siegen, 1997 - Tennessee . Own field of specialization: Quality Manufacturing Systems. Smile Dzisi (PhD) is a Senior Lecturer in the School of Business and Management Studies at Koforidua Polytechnic. She is also the Managing Editor of the International Journal of Technology and Management Research. Her research and teaching interests are in Entrepreneurship, Innovation and Organizational Management. Dr. Kalle Elfvengren is an associate professor in the School of Industrial Engineering and Management at Lappeenranta University of Technology, Finland. His research topics include technology management, decision support systems (e.g. group support systems), decision analysis and creative group work methods. Vítor Figueiredo is a Full PhD Student of Management at the University of Beira Interior, Department of Management and Economics, Portugal. He studied Tourism Management and received his MSc in Tourism Management and Development, from the Aveiro University in 2010. He is an enterprise Consultant and President of the Moledo Community Council, Portugal. Luis Rafael Figueroa is an economist and a PhD student in Entrepreneurship and Innovation of the University of Essex, United Kingdom. His research interests and working experience are focused on business clusters and innovation in the case of SMEs in the agribusiness, tourism and textile-apparel activities in Latin America. Rebecca Fill Giordano studied Psychology at the University of Vienna. As expert for occupational aptitude assessments she advises universities and business organisations on psychological assessment. Her team developes online tools for analyses and feedback for different target groups. Her doctoral thesis (in progress) concerns self regulated learning in adults. Mário Franco is an Assistant Professor of Entrepreneurship and SME Administration at the Department of Management and Economics, Beira Interior University, Portugal. He received his PhD in Management from Beira Interior University in 2002. His research focuses on strategic alliances, business networks and entrepreneurship. He is a member of the NECE-Research Unit in Business Sciences of the Beira Interior University. Brendan Galbraith is a member of the European Network of Living Labs, University of Ulster Business and Management Research Institute, Connected Health Ulster and is Book Reviews Editor at Technology Analysis and Strategic Management Journal. Brendan has led several large-scale EC funded innovation and technology transfer projects and is a consultant to a number of SMEs. Olaf Gaus a Research Associate in Entrepreneurship at the Faculty of Economics and Management, Otto-vonGuericke-University, Magdeburg, Germany, I am interested in the transferability of business models on public

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institutions. I am working on this subject as a member of a research project entitled "Universities as Enterprises", funded by the German Federal Ministry of Education and Research. Frank Gielen is Director Incubation & Entrepreneurship at iMinds, where he is responsible for all Incubation & Entrepreneurship activities. He holds a PhD in computer science from the Free University of Brussels. He is Professor at Ghent University, where he is teaching courses on software and technology entrepreneurship, and has entrepreneurial experience through several ventures. Patrick Gilbert is a professor at the Sorbonne Graduate Business School. He holds a PhD in Management and is an accredited research supervisor in management and psychology. He also serves as a scientific advisor to national and international organizations. Oleg Golichenko has a degree of Doctor of Economic Sciences. He is a chief research associate at the Central Economics and Mathematics Institute of the RAS. He is also a professor at the National Research University Higher School of Economics and the Moscow Physics and Technique Institute in Moscow, Russia. His research interests are related to investigation of innovation development processes on micro-macro economic levels and design of social economic and innovation policy. He is an author of more than 200 scientific publications. Tea Golja, PhD Juraj Dobrila University of Pula, Department of Economics and Tourism “Dr,Mijo Mirković” . Tea Golja is holding a position of the Assistant Lecturer at Juraj Dobrila University of Pula. Major field of interest: management, corporate social responsibility, quality management, tourism and sustainable development. In 2012 she successfully finished an IRCA course for total quality management - Lead auditor for ISO 9001:2008 by the Bureau Veritas in Croatia. Dr. Gourova is Associate Professor at Sofia University and New Bulgarian University. She has professional experience at Ministry of Transport and Communications, DG JRC –IPTS, and in expert groups at European Commission, EUTELSAT, Council of Europe. Her research is cross-disciplinary focused on Knowledge management and open innovation, as well as on e-skills, e-Learning, mobility and career of researchers. Roxana Hatos is a Ph.D. student at the Faculty of Economics Sciences, University of Oradea, working as junior researcher within the Center of Adult Education. She has BA in Sociology and Economics and MA in Regional Development and she has been involved in several research projects. Bart Henssen received his PhD in Applied Economics from Hasselt University, Belgium, and a PhD in Economics and Business Administration from Jyväskylä University, Finland. He is Research Manager at the University College Brussels and affiliated with the KIZOK Center for Entrepreneurship and Innovation of Hasselt University. His research interests include entrepreneurial processes in family businesses. Julie Hermans holds a Degree in Management Engineering from the University of Namur where she also pursued her Ph.D. Her research interests are in University-industry collaborations, Innovation networks and ambitious entrepreneurship. She recently became a postdoctoral researcher for the Belgian Science Policy Office in collaboration with the University of Antwerp, Tilburg University and the Eindhoven University of Technology. Heyin Hou is an associate professor at the School of Economics and Management, Southeast University, China. Heyin got the Ph. D from Antai College of Economics & Management, Shanghai Jiao Tong University, China at 2004. And main research interests at present include: Venture Capital, Entrepreneurship, Technology Business Incubator(TBI), Technovation. Danut Iorga is PhD student at Doctoral School of Entrepreneurship, Business Engineering and Management, UPB, Romania. He earned a bachelor’s degree in Avionics, Aeronautics Faculty, UPB, Romania. ASQ senior member, Danut Iorga is certified as Six Sigma Black Belt, with more than 200 Improvement and Design Projects in companies such as NCH Group and Accenture. Mark James, Ph.D. is an assistant professor of management a United International College in Zhuhai, China. He received his Ph.D. in organizational behavior from the University of Wisconsin – Milwaukee. His research focuses on issues relating to diversity and fairness in the workplace, and global perspectives on entrepreneurship.

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Chandana Jayawardena - BSc (Hons), MBA. is presently a doctoral researcher attached to the Department of Management and Marketing, Faculty of Management and Economics, Tomas Bata University in Zlin, Czech Republic. His research interests focus on Career Development, Managerial Competencies, and Employees Behaviour at work. He is an academic staff member of the University of Peradeniya, Sri Lanka Jan Jonker is a Professor of Corporate Sustainability at the Nijmegen School of Management of the Radboud University Nijmegen (The Netherlands). His research interest are in sustainable strategy development, (new) business models and transition thinking. Magdalena Jurczyk-Bunkowska studied production management at Warsaw University of Technology, where she received a PhD title in 2004. Currently, she works at Opole University of Technology as a researcher and lecturer. She was a member of Polish Academy of Science. Now, her fields of research and interest are innovation management especially operational approach covering innovation process planning. Ravinder Singh Kahlon is a PhD student at Ulster University. His research interest surrounds KM Strategies and Systems, especially in performance measurement metrics and critical success factors implementing KM within organisations. He works with IT consultancies that specialises in top-quality innovative IT Solutions, to enable KM within organisations. Tomasz Kijek, PhD in Economics conducts teaching and research activities in the Department of Economics and Management at the University of Life Sciences in Lublin, Poland. His research interests focus on innovation, innovation capital, knowledge and a firmâ&#x20AC;&#x2122;s competitiveness. He is the author and co-author of several scientific publications, including chapters of monographs and articles. Beti Kostadinovska Dimitrovska, a Ph.D. student at the Faculty of Economics-Skopje, works as a Project officer in the European Information and Innovation Centre in Macedonia within the Ss. Cyril and Methodius University in Skopje. Beti is responsible for the research and innovative component providing innovative, R&D and IPR services to SMEs and academia sector. Eric Michael Laviolette Associate Professor of Strategy and Entrepreneurship at Novancia Business School, Paris with a doctoral degree in Management at University of Lyon. His research builds on organizational and management theories to analyse entrepreneurial processes within innovation systems. He has published several papers on spin-offs, incubators, entrepreneurial skills & leadership development and international entrepreneurship. Regina Leite is an Assistant Professor in organizational behaviour and HRM in the School of Economics and Management at the University of Minho. She received the PhD degree in management from de University of Minho. Her current research interests include work and non-work spheres, organizational commitment, privacy issues, sexual harassment, change and innovation. Bart Leten is Assistant Professor in Innovation Management at the Vlerick Business School and the KU Leuven (MSI department). His research focuses on corporate innovation and international business strategies, and deals with various topics such as open innovation, IP strategies, industry-science links, R&D internationalization and organizing for innovation. Sophie LiĂŠnart is a 4th year PhD student in Management Science from the University of Namur, Belgium. Under the supervision of Pr. Dr. Annick Castiaux, she is researching the integration of energy efficiency requirements into the innovation process of information technology products and services, and its impact on business strategy. Raimonda LiepiĹ&#x2020;a, Mg.oec., Lecturer of Riga Technical University, Faculty of Engineering Economics and Management, Department of Quality Technologies. Almost 10 year experience as Head of Conformity Assessment Coordination Division in the Internal Market Department of the Ministry of Economics of the Republic of Latvia. Area of research interests: conformity assessment, among them standardization, accreditation, metrology.

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Eric Liguori is an assistant professor in the department of management at California State University – Fresno. He received his Ph.D. in entrepreneurship from Louisiana State University. His primary teaching interests are entrepreneurship and taking an experiential approach to his classroom. His research focuses on small business, family business, and entrepreneurship Dr Jun Li is Senior Lecturer at the Essex Business School of University of Essex, UK. He was President of Chinese Economic Association (UK/Europe) during 2011-2012 and is Co-Editor of Journal of Chinese Entrepreneurship. His recent publication includes China’s Economic Dynamics (Routledge, 2013). María Jesus Luengo PhD is Associate Professor at Department of Management Evaluation and Business Innovation, at the University Of País Vasco Spain. She has managed some research projects and she has contributed to scholar area with articles and books. Her current work focuses on knowledge management, intellectual capital and innovation in the regional areas and political quality in the EHEA. And organizational behaviour. Sabrina Luthfa Karim is a doctoral candidate in University of Halmstad, Sweden. Her research interest is to investigate how multinational firms manage business relationships with their partners. She has completed her MSc. in International Business from Gothenburg University, Sweden and BSc. in Industrial Marketing from University of Skövde, Sweden. Andreea Maier is PhD student in the Research Center for Engineering and Management of Innovation (RESIN), Department of Engineering Design and Robotics, Faculty of Mechanical Engineering, Technical University of Cluj Napoca. She has two BSc, engineering and economics, and a MSc degree in management. As member of RESIN, her researches are oriented towards innovation management systems. Anna Matras-Bolibok holds PhD in Economics and she conducts teaching and research activities in the Department of Economics and Management at the University of Life Sciences in Lublin, Poland. Her research interests focus on innovations, determinants of innovativeness of enterprises and economies and the role of innovation in regional development Céline Maximin-Tieu is awarded with a PhD in Economics (University Paris 1 Panthéon-Sorbonne), Céline Marie Maximin-Tieu is currently an academic teacher at ISTEC Paris business school, in charge of research linking sustainable development and industrial organization. Author of several chapters in books on this subject, she studies the feasibility of these features through her teaching and research. Patrick McHugh is Director of the IE Brown EMBA program and lecturer in entrepreneurship at Brown University. He has 25 years of industry experience and degrees in engineering from Columbia University, an M.B.A. from Harvard, and a Ph.D. from Bentley University. His research interests are in the areas of innovation, entrepreneurship, and social networks. Petra Merenheimo is doctoral student at the University of Lapland, Finland. Her doctoral thesis is about entrepreneurship at the Finnish social services sector. She has done research about and development work with female entrepreneurs both in Finland and Germany. Ioana Teodora Meşter is Ph.D. in Economics - Cybernetics, Statistics and Economic Informatics. Member of the Department of Economics, Faculty of Economic Sciences, University of Oradea, Romania. Specialist in Statistics, Econometrics and Economic modelling. Interest domains: quantitative methods applied in business administration. José M. Monteiro-Barata is an Assistant Professor of Economics, R&D Management and Industrial Organization at the School of Economics and Management of the Technical University of Lisbon, (ISEG/UTL). PhD in Economics (1996) from the UTL. Former Vice-President of ISEG/UTL. Coordinator of Graduate and PostGraduate courses at the Portuguese School of Bank Management (APB). Peter W. Moroz, Ph.D., MPA, B.A. Primarily teaches entrepreneurship and economics related courses. Research interests include process theory in entrepreneurship, regional and economic development, technology transfer and social enterprise creation. Peter currently holds a SSHRC grant that focuses on strategic alliances

among corporations and Indigenous communities and how they may be used to facilitate the creation of joint and wholly owned new ventures by Indigenous peoples. Eda Evla Mutlu is a PhD Candidate and Research Assistant in Faculty of EAS of Yasar University, İzmir, Turkey. Murat Nazlı is a PhD Candidate and Part-time Lecturer in Faculty of EAS of Yasar University, Turkey. Daniel Neicu is currently a doctoral student in Business Economics at KU Leuven and HU Brussels. His general research interests are behavioural economics, game theory, and innovation economics, while focusing on more specific issues such as clustering of young innovative companies and the competitive behaviour of innovative firms. Sandra Nunes: President of Department of Economics and Management, Business School of Setúbal Polytechnic Institute, Portugal. Professor of Analysis of Statistical Data; Statistic; Quantitative Methods and Mathematics. Professor in Setúbal Polytechnic Institute since 1995. Researcher in CMA – Faculty of Sciences and Technology, New University of Lisbon, Portugal. PhD in Mathematics - Statistics, McS in Actuarial Sciences. Author of several publications in national and international journals. María Obeso, PhD, is Assistant Professor at Department of Business Administration at the University of Cantabria, Spain. She has been Visiting Scholar in Business School at the University of Bedfordshire, UK. Her current work focuses on knowledge management Handan Odaman, M.A. graduated from Boğaziçi University, Department of Psychology with a High Honor degree and specialized in Cognitive Psychology. She attended national and international meetings with various research projects. She works as academic executive assistant in Baltaş Group and she is responsible from academic studies. Odaman is a member of Turkish Psychological Association. Iuliana Olimpia. Ph.D. in Marketing, West University of Timisoara, Romania, 2005. Now is associate professor and Head of Economy Departament at University of Oradea. Morena Paulišić is a senior assistant at the University of Pula. She holds a PhD degree in organization and management. Her research interests include organization and management especially factors as structural components, business processes and strategies that have influence on organizational behavior. She is also a member of IMSS - research network of business schools. Ruslan Pavlov is a senior researcher at the Central Economics and Mathematics Institute, and post graduated from the same institution. His research interests include the diversification of business within a context of the long waves theory; institutions of social entrepreneurship as factors of social innovations. Steen Høyrup Pedersen is Associate Professor and member of the Research Programme ‘Organisation and Learning’ in the Department of Education, Aarhus University, Campus Copenhagen, Denmark. He is engaged in the management of the EDI-network: The European network of Employee-Driven Innovation and workplace learning. Research interests include employee-driven innovation, competence development and reflection and learning. Andreas Pinkwart was a Member of the German Bundestag (2002 - 2005) and Minister for Innovation, Science, Research and Technology as well as Deputy Prime Minister of the state of North Rhine-Westphalia (2005 - 2010). Since 2011 Professor Pinkwart is the Dean at HHL Leipzig Graduate School of Management and holds the Stiftungsfonds Deutsche Bank Chair for Innovation Management and Entrepreneurship. Dr. Sebastian Pfotenhauer is a researcher at the MIT Technology Policy Program, the MIT Portugal Program, and the Program Science, Technology and Society at the Harvard Kennedy School. His research focuses on strategies for capacity building in science, innovation, and higher education; international university collaborations and start-up universities, and the governance of complex socio-technical systems. Karla Phlypo- Walden University-President of PK & Associates Inc.expertise is social innovation. Integrating a background in knowledge management, her research has led to models for Open Communities of Practice

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(OCoP) and for-profit ‘bridging organizations’. As Global Knowledge Manager for GM Engineering, she contributed to a culture of sharing and innovation through collaboration. Karla is active in the international KM professional community. Adalberto Rangone in 2010, he graduated with a Master's degree from the University of Oradea (Romania) at the Faculty of Economics Science in International Economic Relations and now he is a PhD Student in Economics at the University “G.D'Annunzio” of Chieti-Pescara (Italy) and at the University of Oradea (Romania). Pia Mulvad Reksten, Union Advisor, industrial, innovation & research policy, LO (Danish Confederation of Trade Unions). Elaborates innovation policy recommendations ensuring that national og regional innovation policies take into account the role of non-academic employees (employee-driven innovation) and a more practical form of innovation, where companies draw one inputs from the markets, customers, users – and employees. Andreas Pinkwart was a Member of the German Bundestag (2002 - 2005) and Minister for Innovation, Science, Research and Technology as well as Deputy Prime Minister of the state of North Rhine-Westphalia (2005 - 2010). Since 2011 Professor Pinkwart is the Dean at HHL Leipzig Graduate School of Management and holds the Stiftungsfonds Deutsche Bank Chair for Innovation Management and Entrepreneurship. Dr. Angela Poulakidas is an Assistant Professor of international business development and entrepreneurship at Novancia Business School Paris. Dr. Poulakidas’ professional publications include articles related to marketing, international business and entrepreneurship. Her research interests include corporate reputation, international shipping, entrepreneurship and strategies for effective teaching. Dorian Proksch has joined HHL Leipzig Graduate School of Management as a research associate at the Chair of Innovation Management and Entrepreneurship in 2011, where he is currently writing his doctoral thesis in the area of early stage venture capital funds. His research interests include Internationalization of startup companies and risk management in new venture financing. Aneta Ptak-Chmielewska is Associate Professor at the Institute of Statistics and Demography at Warsaw School of Economy. Her main research fields include applied statistics, event history methods and models, multivariate statistics and advanced statistics application in economy and life sciences. She has been a member of the Network of Excellence RECWOWE project. She has published in high-quality national journals. Nathalie Raulet-Croset is Associate Professor in organizational theory at the IAE, University Paris 1-Sorbonne. She is also researcher at the PREG-CRG of the Ecole Polytechnique. Her research interests are on interorganizational collective work, on the emergence of actor's practices, on territories and spaces considering their impact on collective work and organizations. Carla Riverola is a PhD candidate at La Salle Innova Institute – Ramon Llull University. She holds a Computer Science Degree and Master of Science in IT Management from La Salle – Ramon Llull University in Barcelona. Her research interests are mainly focused on studying the role that ICT may play on Innovation and Entrepreneurship. Augusto Rocha "Master in Entrepreneurship and Business Creation at the University of Beira Interior, Portugal. Graduated in Business Processes from the University of Uberaba (Brazil) and in Computer Science from the Federal University of Uberlandia (Brazil). My research focuses on business innovation, entrepreneurship education and corporate entrepreneurship in technology-based companies." Cristina Rodrigues holds a Ph.D. in Industrial and Systems Engineering. Assistant Professor in the Department of Production and Systems, School of Engineering at the University of Minho and is responsible for disciplines of applied statistics in undergraduate and master engineering courses. She is also a researcher fellow at Algoritmi R&D Centre. Fernando Romero holds a Ph.D. in Science and Technology Studies from the University of Manchester. He is at the Production and Systems Engineering Department, and at the Centre for Research in Industrial and Tech-

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nology Management, in the University of Minho. He publishes regularly in the area of Industrial Innovation, Innovation Systems and innovation management. Tarek Sadek, MASc. is the Enterprise Development Manager at Xerox Centre for Engineering Entrepreneurship & Innovation (XCEEi) at McMaster University. His job responsibilities include supporting the students in their new venture creation and establishing XCEEi as an entrepreneurship hub in the region. Josune Sáenz is PhD in Economics and Business Administration and Vice Dean of Research at Deusto Business School (DBS). Her publications mainly focus on measurement of intangibles, intellectual capital, knowledge management and innovation. She has also carried out research into the link between emotions, expectations and behaviour in change processes. Svetlana Samovoleva graduated from the Economics Faculty of Moscow State University and received PhD in the Central Economics and Mathematics Institute of the RAS where she is a senior research associate. During the last 10 years her research is organized around a set of issues associated with frameworks of national innovation system, risks of innovation activities, innovation policy at state and enterprise levels. Mijalce Santa is a Teaching Assistant at the Ss. Cyril and Methodius University, Faculty of Economics-Skopje and a PhD student at University Paris 1 - Pantheon – Sorbonne. His research interest is in the area of ebusiness, transformation, learning organizations, innovation and change. Amitrajit Sarkar is a lecturer of Software Engineering and Information Systems at Christchurch Polytechnic Institute of Technology, New Zealand. Beside IS resilience, his research interests include Innovation and Entrepreneurship in IS, E-Commerce implementation in SMEs, E-Commerce trust, Big Data, and ERP implementation. Ted Sarmiento is Senior Lecturer at the Business School of Leeds Metropolitan University, Leeds, England and is currently researching small business performance management as part of a DBA programme. As keen amateur cyclist taking part in Cyclo-Cross, Time Trial and Sportive events Ted also has a small business interest in a holiday let in Northumberland. NicoletaTrandafir Scurt, phd-s of Faculty of Management in Production and Transportation. Research areas: industrial engineering. Diplomas: Engineer of “Politehnica” University of Timişoara, (1986) and Economist University of Craiova (1994). Books written: 3,Articles published: 32, Research contracts, including grants: 4. Janet L Sernack After 30 years of consulting experience to the manufacturing, retailing, finance and telecommunications businesses to Australia’s and Israel’s top 100 companies as Compass Learning Pty Ltd, Janet relocated to Israel, where she joined the Start-Up revolution, and founded ImagineNation, an imaginative, generative and provocative global learning company that develops innovative and entrepreneurial leaders. Denisa Skrbková is a student student at the Technical University of Liberec – Economical Faculty - Business Economics. Last year, she finished the Bachelor degree at the University of Huddersfield in the frame of oneyear exchange programme and than she retain the title at the Technical University of Liberec - Economical Faculty - Management of international Trade. Aziz Šunje, PhD. in Business is Full Professor at School of Economics and Business, University of Sarajevo and Chair of Department of Management and Organization, lecturing different courses in the country and abroad. Dr. Šunje has published as author and co-author five books, and a lot of scientific papers in academic journals and conference proceedings. Dr Anna Sacio Szymanska A senior research scientist at Innovation Strategies Department of the Institute for Sustainable Technologies – NRI, Radom, Poland. Interested in long-term strategic thinking; analysing the relationships between innovation, strategy and foresight; designing foresight methodologies; evaluating and putting foresight results into practice. Ann-Charlotte Teglborg is research professor at Novancia, Paris Business School. She is an early and active member of the European Employee driven innovation Research Network: EDI-Europe. She is also administrator

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of the French professional association Innovacteurs dedicated to employee driven innovation in French private and public sector. Ioana Teodora Meşter is Ph.D. in Economics - Cybernetics, Statistics and Economic Informatics. Member of the Department of Economics, Faculty of Economic Sciences, University of Oradea, Romania. Specialist in Statistics, Econometrics and Economic modelling. Interest domains: quantitative methods applied in business administration. Man-Chie Tse is a PhD student. Her research focus surrounds engineering methods for analysis of intangible modelling properties in personal KM, strategic organisational design and development. Besides her research work, she is involved with exploring the practical application of new processes, methods, tools and techniques in organisations to achieve innovation and transformational change. Nazlihan Ugur enrolled University of Leuven, Managerial Economics, Strategy and Innovation (MSI) in 2011 as a full time PhD student and she is writing her PhD thesis on ‘Ambidextrous Organizations: Temporal and structural balances between exploitation and exploration’ under the supervision of Prof. Rene Belderbos and Prof Bart Leten. Barbara Unković, joined the University team after working for international companies such as Deloitte, covering Human Capital Advisory Services; also with experience as Branch Manager at Adecco employment agency; Won a master’s degree in international trade and the field of her research interest considers human resources, services, visual learning tools and international research projects. Jiro Usugami is a Professor of Management at Aoyama Gakuin University, Japan. He received his Ph.D from the George Washington University, USA. He teaches international business and management at Aoyama Gakuin University. Florea Nicoleta Valentina is a PhD Lecturer at Management-Marketing Department, Valahia University of Targoviste, Romania, with an experience over 15 years in HR. She obtained her PhD title in HRM, she published over 30 articles and two books in the same domain. She is a member of Management-Marketing Research Center from VUT. Dirk Van Lindt (PhD in Business Statistics) is professor at the University College in Brussels and coordinator Quality Management in the faculty Business Administration. His main research expertise is in learning and teaching entrepreneurial skills, learning in social networks and gaming as educational tool. Jeff Vanevenhoven, Ph.D, is an Assistant Professor in Management and the coordinator of the entrepreneurship major at the University of Wisconsin-Whitewater. He received his Ph.D (Strategy), a M.S. (eBusiness), and B.S. (Archaeology) from the University of Wisconsin - Milwaukee. His work has appeared or is forthcoming in journals such as: Strategic Management Journal, Journal of Small Business Management. Karen Venturini is an Assistant Professor at the Department of Economics and Technology of the San Marino University. She is teaching at the undergraduate degree course in Industrial Design. She has a PhD in Engineering Management and her research area of interest is diffusion of technologies into various settings, innovation management and R&D management. Filipa D. Vieira holds a Ph.D. in Industrial and Systems Engineering. Assistant Professor at the Production and Systems Department, School of Engineering, University of Minho, since 2007. Lecturing activities on Innovation and Economics Engineering, at undergraduate and post-graduate courses. Researcher fellow at CGIT (Production and Systems Department Research Centre). Author of several research papers on innovation and entrepreneurship. Vessela Warren is a Doctoral Candidate and Research Associate at the University of Gloucestershire, UK. She holds a BSc in Economics from the University of Bologna, Italy and MBA from UWE, UK. She has several years’ experience in business start up, strategy and internationalization. Her main research focus is in innovation, SMEs and knowledge transfer.

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Christopher Whipple is a robotics engineer with a B.S. Robotics Engineering, minor in Computer Engineering, from Worcester Polytechnic Institute and an M.S. PRIME, Brown University. Interests include industrial robotics, mobile robotics, and automation with a focus in digital electronics. Projects include robots for fire-fighting, excavation, and unmanned aerial vehicles for rural search and rescue. Doan Winkel received his Ph.D. in Management from the University of Wisconsin â&#x20AC;&#x201C; Milwaukee. He currently teaches entrepreneurship at Illinois State University, where he is also the Associate Director of Programs at The George R. and Martha Means Center for Entrepreneurial Studies. His research focuses on improving entrepreneurial education. Urszula Wnuk - a young researcher at the Institute for Sustainable Technologies â&#x20AC;&#x201C; National Research Institute in Radom, Poland working for the Innovative Strategies Department. Participated in the realisation of the sectoral foresight project and the strategic programme in the field of mechanisms and structures supporting innovation commercialisation. Author and co-author of several reports and articles. Dr. Danielle Wood is a researcher and systems engineer in Johns Hopkins University. Dr. Woodâ&#x20AC;&#x2122;s research combines tools from technology, management and policy. She extensively studies the management of satellite programs in developing countries. Dr. Wood holds graduate degrees in Engineering Systems, Aerospace Engineering and Technology Policy from the Massachusetts Institute of Technology. Tomas Xavier is an engineering professor in the National University of East Timor. He is currently at University of Minho, Portugal, completing a master in Industrial Engineering. His research interests are engineering and entrepreneurship.

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Failing to Succeed: A Network Theoretic Comparison of Global Accelerators Patrick McHugh, Chris Whipple and Xiaoyang Yang Brown University, Providence RI, USA pmchugh@brown.edu christopher_whipple@brown.eu xiaoyang_yang@brown.edu Abstract: Accelerators are firms that invest small amounts of capital in early‐stage companies, typically for a 4% to 10% equity stake, and provide mentoring for limited time periods, typically 3 to 4 months, to help build the business case to support these firm’s future funding needs. During the mentoring periods accelerator management is actively involved with the portfolio firms and provides extensive networking support. The 2012 publication U.S. Seed Accelerator Rankings identified 71 U.S. accelerators and noted that their numbers are growing rapidly. In the U.S. alone it is estimated that more than 1,400 start‐up companies are mentored annually by such firms. Accelerators are also growing rapidly and have become critical nodes in the entrepreneurial ecosystem. Understanding relative accelerator performance and the characteristics driving superior performance can have a multiplier effect on overall start‐up success. To that end, we consider two research questions in this paper: Do top‐ranked accelerator portfolio firms display similar survival rates? And, what accelerator characteristics correlate with variations in portfolio firm survival? Network theory informs the hypotheses investigated in this study. In this study we compare the survival performance of accelerator portfolio firms in Silicon Valley and Ireland to those of other leading geographically dispersed accelerators. An analysis of the node characteristics in these ecosystems suggests that Silicon Valley portfolio firms will experience higher failure rates and Irish accelerator portfolio firms will experience lower failure rates then other regions. In contrast, network theory also suggests that hubs, such as accelerators, can help embed nodes, such as start‐ups, in preferred networks and that such networking can enhance firm outcomes, such as survival. Network theory also suggests that establishing network ties comes at a cost, and that accelerator and start‐up resources must be adequate to enable useful network connections. Smaller cohort sizes and larger capital investments are evaluated to determine if the additional resources resulting from these practices benefit firm survival. The resulting hypotheses are evaluated via t‐tests and regression analyses on data from the portfolio firms of 18 top‐ranked accelerators. Our results suggest that Irish accelerator portfolio firms experience lower failure rates than portfolio firms from other regions. Interestingly these results demonstrated only modest absolute differences in regional outcomes despite significant differences in the outcome objectives of the regional funding sources in Silicon Valley and Ireland which were considered in detail. Variation in accelerator practice on funding levels and cohort size were not found to significantly impact firm outcomes although accelerator experience was found to be significant to portfolio firm survival. Keywords: accelerators, start‐up networks, entrepreneurship, firm survival

1. Introduction The first seed accelerator was the “Summer Founders Program” which aimed to combine seed‐stage investing with mentorship for young entrepreneurs. The program became the well‐known accelerator Y Combinator. This success started a global movement of institutions that combined funding and education services for entrepreneurs. Accelerators have become an increasingly important part of the tech start‐up scene. These programs provide new entrepreneurs with mentorship, advice and practical training on technical, business and fundraising topics to help them get from idea to product to launch and beyond. The accelerator typically takes an equity stake in the firm in exchange for a small amount of cash and entry into the program. Understanding relative accelerator performance and the characteristics driving superior performance can have a multiplier effect on overall start‐up success. To that end, we consider two research questions in this paper: Do top‐ranked accelerator portfolio firms display similar survival rates? And, what accelerator characteristics correlate with variations in portfolio firm survival?

2. Literature review Accelerators and their portfolio firms operate in geographic regions that vary significantly in the level of support available to start‐up firms. While all the accelerators considered in this study are “leaders” they represent significant geographic dispersion, including several from the regionally rich entrepreneurial ecosystems of Silicon Valley and Ireland. Silicon Valley and Ireland were the regions with the largest number of top ranked accelerators in this study. To inform our understanding of regional differences and their potential

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Patrick McHugh, Chris Whipple and Xiaoyang Yang impact of firm survival these two regions were compared to the others in our data. We also consider the impact of networks and accelerator practice on firm performance.

2.1 Geographic context Varieties of capitalism theory suggests that varying national institutional frameworks, such as financial markets or labor, creates divergence in business practice between localities (Hall and Soskice 2001, Hollingsworth 1997). The active role of government in shaping technology policies makes them an important player to consider in these comparative studies (Casper, 2007). As an example of such variation, Rosenberg (2002) notes difficulties, outside the U.S, for venture firms to syndicate deals (limiting available capital) and to identify experienced managers to staff their portfolio firms. These regional ecosystem differences can impact relative firm performance. We next specifically consider the Silicon Valley and Irish entrepreneurial ecosystems, the two regions with the largest number of top ranked accelerators in our study. 2.1.1 Silicon Valley’s networked ecosystem Many regions try to emulate Silicon Valley, such as the Silicon Plateau in Bangalore, India and the Silicon Bog in Dublin, Ireland (Munford 2013). Lee et al (2000) suggest a number of features of Silicon Valley’s environment critical to its success including a high‐quality/mobile work force, results‐oriented meritocracy, risk‐taking norm, tolerance of failure, and an open business environment. As noted by Bahrami and Evans (1995) Silicon Valley technology firms have a very high failure rate, yet the region continues to thrive. They credit this success to an ecosystem of flexible recycling of failures supported by swift action and continuous inter‐firm mobility of staff. This extensive mobility creates dense personal networks throughout the region (Lee 2000). New companies are constantly being formed in the Valley with 1,749 seed funding rounds reported in 2012 (Kramer and Patrick 2013). At a personal level, Silicon Valley entrepreneurs are perceived as being motivated to “change the world”, going beyond the strong success motivator observed in entrepreneurs more broadly (Lee, 2000). This tolerance of failure, speed of response and richness of alternatives suggest that the stakeholders in a Silicon Valley early stage venture will be motivated to quickly evaluate opportunities and cull lower potential investments quickly. This rapid re‐direction suggests the following hypothesis: H1: Silicon Valley accelerator portfolio firms will see lower survival rates than accelerator portfolio firms in other regions. 2.1.2 Ireland’s entrepreneurial ecosystem Ireland has seen much success developing its technology driven economy. The country has been rated as a top destination for foreign direct investment and second in Europe for its rate of entrepreneurial activity. There are 14 venture firms active in the country with complementary seed and development capital provided by Enterprise Ireland, a public sector organization. In 2011 63 start‐ups received seed funding creating a total pipeline of 200 early stage high growth potential firms in the country (IVCA 2012). Enterprise Ireland defines High Potential Start‐Up (HPSU) firms as businesses with the potential to develop an innovative product or service for sale in international markets with the potential to create 10 jobs and €1m in sales within 3 to 4 years. The key strategic mission of Enterprise Ireland is growth of wealth and employment creation (Enterprise Ireland 2013). Historically financial failure in Ireland has been viewed harshly in the Irish legal system with severe penalties for bankruptcy (although these laws are currently being reconsidered). The Irish early stage investment ecosystem has much fewer nodes then that in Silicon Valley. Its seed capital funding is also provided by an enterprise with a success metric of both modest financial performance and job creation. With fewer alternative opportunities in the network stakeholders are posited to be more likely to work to sustain and build an existing opportunity as opposed to shifting their investment of time and capital rapidly, suggesting the following hypothesis: H2 Irish accelerator portfolio firms will see higher survival rates than accelerator portfolio firms in other regions.

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2.2 Network theory Accelerators help start‐ups build their networks. Network nodes are the actors or agents between whom relationships form in a network (Scott 2000). Complex network theory (CNT) provides a useful theoretical framework for analysis where there are heterogeneous self‐organized nodes, such as we see in start‐up networks (Ferrary and Granovetter 2009). CNT acknowledges that networks are not randomly structured (Newman 2003; Newman, Barabasi and Watts 2006) and that their structure results from the behaviour of the networking nodes (Granovetter 1973). The complex network approach suggests a need to holistically analyze networks (Gulati, Nohria and Zaheer 2000, Zaheer, Gozubuyuk and Milanov 2010) highlighting the importance of heterogeneity and completeness to explain the weakness or the robustness of a network. Nodes can serve as hubs that, without hierarchical authority, orchestrate network activities to ensure the creation and extraction of value (Dhanaraj and Parkhe 2006). Ferrary and Granovetter (2009) suggest that hubs, such as seed accelerators, can perform signalling and embedding roles on behalf of the start‐up firm. Node fitness is defined as a node’s ability, competence or aptitude (Bianconi and Barabasi 2001; Barabasi 2002) and CNT suggests that nodes with higher fitness should be linked to more frequently. Most complex networks display a fit‐get‐rich behaviour with the fittest node eventually gaining the most connections (Barabasi, Newman et al. 2006). Since seed accelerators help embed start‐ups in their networks, better connected accelerators should lead to better connected portfolio firms. Better network connections should improve the start‐ups fitness leading to enhanced firm success and accelerators with more experience are posited to have had the time to build these network connections, suggesting the following hypothesis: H3 Portfolio start‐up firms will see higher survival rates if their accelerator has been operational for a longer period of time. Expanding and maintaining network connections for a new start‐up comes at a cost. Burt (1992) and Hansen (1999) note that time and energy are limited and that there is an upper bound to the benefits provided by network connections set by the time and resources available to an agent. These observations suggest that having more resources, such as improved assistance from accelerator staff due to smaller cohort sizes or increased capital investment, can lead to enhanced benefits to an accelerator portfolio firm. These observations suggest our final two hypotheses: H4 Portfolio start‐up firms will see higher survival rates if their accelerator has smaller cohort sizes. H5 Portfolio start‐up firms will see higher survival rates if their accelerator provides larger capital investments.

3. Methodology and results To analyze these hypotheses data was collected on the portfolio firms of leading global accelerators. The dependent variable used as a success measure was firm survival. Firm survival was measured by firm status postings on the accelerator’s website (Y combinator and Tech Stars) or by the existence and currency of the firm’s website. Web site status data was collected via web searches for firms started in 2011 or earlier to assure a minimum of 1+ years between the firm’s entry into the accelerator and its’ web presence . This was done to control for delays in website removal due to prepayment of hosting services. Firm survival is a common metric of entrepreurial firm performance (SBA 2013).

3.1 Data An online query for the “Best Accelerators in America” identified 4 industry rankings which were then compiled into a master list. 20 unique accelerators were thus identified. A few accelerators were featured in all 4 lists. For the analysis we focused on accelerators that showed up in more than 1 list, narrowing our research to 10 U.S. accelerators. A similar query for “Best International Accelerators” identified a ranking of 8 additional unique global accelerators for analysis. To calculate portfolio company failure rates, we identified the list of sponsored companies from each accelerator. This information was available from the accelerator websites. If the accelerator advertised whether the companies were active, out of business or acquired, we simply took those figures as fact. Otherwise, we went through and checked each company to see if they were still active. Our definition of active was having an active website updated within the last year (2012). A Google search on the company names was conducted to look for their website. If this yielded nothing, we next looked into their

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Patrick McHugh, Chris Whipple and Xiaoyang Yang Crunchbase profile, looking for either a more up to date link to their website, or information about acquisitions or business failures. If this still did not give us an answer, we Google searched for the company name and the word “acquired”, looking to find an article about an acquisition. If all these paths yielded no information we considered the company out of business. A language barrier existed for some of global companies, even if they attended an accelerator in the U.S. complicating the data collection. Also complicating the search was that most of the foreign accelerators did not have their companies use Crunchbase, as none of the companies from the global accelerators had a Crunchbase profile. This process was followed for each accelerator, with the exception of Y Combinator and Tech Stars. Both Tech Stars and Y Combinator published lists of their portfolio companies with current statistics about their state as a company, falling under the 3 categories of active, out of business, or acquired. For all companies, where the data was available, we recorded the name of the company, the year the company was sponsored, the current link to the website, and where the company was sponsored (if an accelerator had multiple locations, like Dream It Ventures), and recorded its status with a 1 if it was active or acquired, or a 0 if it was out of business. Survival data on 1,105 firms were included in the analysis.

3.2 Methods T‐tests were conducted for an initial analysis of hypotheses. The entire data set of 1,104 firms were included in the analysis. This analysis was then complemented with a logistic regression to provide a more nuanced understanding of the hypotheses. A dummy variable, coded as 1 if the accelerator was located in Silicon Valley, was created to analyze hypotheses 1. A dummy variable, coded as 1 if the accelerator was located in Ireland, was created to analyze hypothesis 2. The accelerator’s experience, measured by the length of time the accelerator had been in business prior to working with the portfolio firm, was used as a proxy for the accelerator’s network connectivity for the analysis of hypothesis 3. Since survival has a temporal dimension (it is harder to survive for 3 years than for 1) a control was added for the “age” of the portfolio firm. Variables for the average cohort size and capital invested were also included to evaluate our final hypotheses. The logistic regression model used in the analysis follows: DV (firm web site survival) = β0 + β1(Silicon Valley location) + β2(Ireland location) + β3(2012 – year company graduated from the accelerator) + β4(accelerator experience) + β5(cohort size) + β6(capital invested). For the regression analysis firm level data from seven accelerators could not be included in the final analysis. Tetuan Valley in Spain includes an incubator as well as an accelerator so the data from this site was dropped from both analyses. Springboard in the U.K. is a new accelerator with no performance data available yet for their portfolio firms. For Tech Stars, Y Combinator, 500 Start‐ups, NDRC LaunchPad and Open Network Lab we do not have sponsored years for the portfolio firms precluding the use of our control variable. A sample size of 253 firms remained for the regression.

3.3 Descriptive observations Table one and two provide descriptive information about the accelerators analyzed in this study Table 1: U.S. accelerators ranked by failure rates

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Patrick McHugh, Chris Whipple and Xiaoyang Yang Table 2: Global accelerators ranked by failure rate

The average 1 or more year survival rate for Silicon Valley accelerator portfolio firms (578 firms from 4 accelerators) was 89.5%. The average 1 or more year survival rate for Irish accelerator portfolio firms (70 firms from 3 accelerators) was 95.8%. Finally, the average 1 or more year survival rate for all other top ranked global accelerators (456 firms from 9 accelerators) was 89.5%. At a descriptive level the Irish portfolio firms appear to have a higher survival rate then those of other leading global accelerators. In general, the survival rate of the accelerator’s portfolio firms is significantly higher than that for general U.S. start‐ups. The U.S. Small Business Administration notes that 70% of employer firms survive at least two years (SBA 2013) while the two year survival rate for the firms in this analysis was 79.4%. Accelerators with more than 1 year experience at the point where a firm entered their service were observed to have portolio firm survival rates of 89% compared to 83% for accelerators with less experience suggesting support for hypothesis 3. Figure 1 provides a breakdown of accelerator expereince at the point when the various portfolio firms engaged.

Figure 1: Accelerator experience at time of portfolio firm engagement Cohort size was evaluated for intakes with less than or equal to 20 firms. Little variation in firm survival rates were observed (85.8% and 85.5% respectively) suggesting no support for hypothesis 4. Average cohort size varies significantly among accelerators; however within a very small range as noted in Figure 2.

Figure 2: Accelerator cohort size

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Patrick McHugh, Chris Whipple and Xiaoyang Yang Finally, investment levels were considered where portfolio firms with investments of > $25,000/firm having survival rates of 88.4% and those with ≤ $25,000 of investment having survival rates of 81.9% suggesting support for hypothesis 5 from these descriptive statistics.

Figure 3: Accelerator investment capital In the next section, we consider whether these descriptive observations are statistically significant.

3.4 Results 3.4.1 t‐test results To evaluate hypotheses t‐tests and logistic regression were conducted. The t‐test for the survival of Silicon Valley accelerator portfolio firms versus all other portfolio firms was found to not be significant. The mean failure rate for the Silicon Valley firms was 11% versus a 10% rate for the alternative locations. The t‐test comparing the Irish accelerator portfolio firms versus all other portfolio firms was found to be significant at a 90% confidence level. The t = ‐1.695, df = 86.254, Sig = 0.094 and the mean difference in failure rate is ‐ 5% with a standard error of +/‐ 3%. The t‐tests are not supportive of hypothesis 1 that Silicon Valley portfolio firms will have higher failure rates than those in other locations; however, at a 90% confidence level, the t‐test results are supportive that Irish accelerator portfolio firms do have lower failure rates that those in other locations. The t‐tests for the accelerator characteristics of experience, cohort size and investment levels were all found to not be significant providing no support for hypotheses 3 through 5. 3.4.2 Logistic regression analysis Logistic regressions require that observations be independent requiring tests for bivariate and multicollinearity among the predictor variables. Table 3 presents the results of the bivariate correlation analysis indicating numerous correlations among the predictor variables. A tolerance test indicated multicollinearity concerns as well. Based on these results the variables in the logistic regression model needed ot be adjusted. The new model was run incorporating only two variables, SV and Completion date – accelerator start date, our expereince measure (note “Ireland” was dropped as a variable since only 6 of the original 70 firms remained in the dataset providing too small a sample for analysis). The logistic regression overall model was found to be significant with a Chi‐square of 7.493 and a Sig = 0.024. 2 2 The Cox and Snell R was equal to 0.29 and the Nagelkerke R was equal to 0.052. the classification table indicates the models predictive efficacy at 85.8% however this was achieved by assuming all firms in the database survive. Figure 4 shows that the “accelerator experience” variable is significant. The odds ratio (Exp(B)) suggests that the odds of survival increase by 1.459 for each year increase in the accelerator’s experience.

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Patrick McHugh, Chris Whipple and Xiaoyang Yang Table 3: Bivariate correlations among logistic regression predictor variables

Table 4: Variables in the logistic regression equation

4. Discussion In summary our empirical results provide support for hypotheses 2, that Irish accelerator portfolio firms will experience superior survival rates and hypothesis 3 that portfolio firms of more experienced accelerators will experience superior survival rates. Hypotheses 1,4 and 5 were not supported by our analyses. In this study we took a network theoretic view. As CNT suggests, we evaluated both the nature of the nodes, such as variation in the ojectives of regional capital providers and entrepreneurs, and the characteristics of the ties, with more ties anticipated in rich entrepreneurial ecosystems such as Silicon Valley. In Silicon Valley the nature of the nodes suggested a potentially reduced survival rate for portfolio firms while the rich ecosystem, and its radily available ties, could be expected to drive superior survival, creating counter pressures on this outcome. In Ireland the nature of the nodes and the locally rich eco‐system both suggest superior portfolio firm survival. This variation in pressure from the regional nodes and ties is visualized in Figure 5.

Table 5: Varying directional network pressures on portfolio firm survival outcomes These varying pressures and outcomes do raise the question of what is the “best” measure of success. Is firm survival even an appropriate measure? If Silicon Valley accelerator portfolio firms had experienced lower survival rates, as we anticipated, would this have been a “bad” thing? We suspect not. For example, failing to succeed is a well known mechanism in Silicon Valley as noted in our literature review. We suggest that the

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Patrick McHugh, Chris Whipple and Xiaoyang Yang critical question is are the outcomes supportive of the objectives of the key stakeholders, such as the local investors and entrepreneurs in the region? An interesting observation from this study is not just that Irish accelerator portfolio firms have superior survival rates but that these rates are only modestly different from those of the other accelerators observed in this study. These accelerators operate in 12 different regions with quite different ecosystems; however, outcomes, at least as measured by firm survival, are quite similar. Another interesting observation from this study is the similarity in processes between the various accelerators. Investment levels varied within a $50,000 range and cohort size varied between 5 and 20 firms. This tight bandwidth of variation may explain our inability to detect statistically significant differences in performance between the accelerators on these variables; the variation may be occurring in such a tight band that it is not statistically material to outcome, as we observed. Our logistic regression analysis did suggest that accelerator experience matters to firm survival. Accelerators, when new (< 1 year old), have reduced survival rates for their portfolio firms. This observation that experience matters is theorized in the context of network deveopment; however, alternative explations, such as operational improvements or superior selectivity with experience are equally possible. Finally, the newness of the accelerators was also quite startling. In this study we analyzed the top accelerators in the world and none of them had portfolio firms that “graduated” from their programs more than 4 years ago. This is a new and evolving industry worthy of continued analysis as we suggest in the next sections.

4.1 Implications for practice This study has important implications for practice. It suggests that location does matter; however, its’ impact is quite modest, once one is working with well rated accelerators such as the ones analyzed in this study. It suggests that at the early stages of firm development working with respected accelerators outside Silicon Valley will not negatively impact a new firms ability to survive. Finally, when selecting an accelerator to work with, the benefit of acclerator experience was noted.

4.2 Future work This study is exploratory in nature. We focused on the leading global accelerators, the majority of whom operate in developed regions, many of which are extremely rich entrepreneurial ecosystems such as Silicon Valley and Dublin, Ireland. The results of this work needs to be compared to accelerators operating in less well established regions and regions with greater diversity in terms of the local objectives of critical stakeholders, such as early funding providers. Qualitative studies are also needed to understand why accelerator experience, which is developed quite rapidly, is so beneficial to the accelerator portfolio firm survival outcome. Finally firm survival is a basic measure of outcome. It would be informative to focus on additional outcome measures such as capital raised or venture relationships established as better measures of the scalability of the accelerator portfolio firms.

References Barrami, Homa and Evans, Stuart. (1995) “Flexible Recycling & High‐Technology Entrepreneurship”, California Management Review, Vol 37, No. 3. Barabasi, A. (2002) Linked: the new science of networks, Perseus, Cambridge, MA. Baxter, W. (2010) “Why Reform of Ireland’s Bankruptcy Legislation is Urgent”, Accountancy Ireland, Vol 42, No 5, pp 7‐8. Bianconi, G. and Barabasi, A. (2001) "Competition and multiscaling in evolving networks", Europhysics Letters, Vol 54, pp 436‐442. Burt, R. (1992) Structural Holes: The Social Structures of Competition, Harvard University Press, Cambridge, MA. Chong‐Moon, L., Miller, W., Hancock, M., Rowen, H. (2000) The Silicon Valley Edge, Stanford University Press, Stanford, CA. Casper, S. (2007) Creating Silicon Valley in Europe, Oxford University Press, Oxford. Dhanaraj, C. and Parkhe, A. (2006) "Orchestrating Innovation Networks", Academy of Management Review, Vol 31, No. 3, pp 659‐669. Enterprise Ireland. (2013) https://www.enterprise‐ireland.com/en/funding‐supports/Company/HPSU‐Funding/ Ferrary, M. and Granovetter, M. (2009) "The role of venture capital firms in Silicon Valley's complex innovation network", Economy and Society, Vol 38, No 2, pp 326‐359. Granovetter, M. (1973) “The Strength of Weak Ties”, The American Journal of Sociology, Vol 78, No 6, pp 1360‐1380.

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Patrick McHugh, Chris Whipple and Xiaoyang Yang Gulati, R, Nohria, N, and Zaheer, A. (2000) “Strategic Networks”, Strategic Management Journal, Vol 21, pp 203‐215. Hall, J. and Hofer, C. (1993) "Venture capitalists' decision criteria in new venture evaluation", Journal of Business Venturing, Vol 8, pp 25‐42. Hall, P. and Soskice, D. (2001) Varities of Capitalism, Oxford University Press, Oxford, U.K. Hansen, M. (1999) “The search transfer problem: the role of weak ties in sharing knowledge across orgainzation subunits”, Administrative Science Quarterly, Vol 44, No 1, pp 82‐111. Hochberg, Y. and Kamath, K. (2012) U.S. Seed Accelerator Rankings: http://www.kellogg.northwestern.edu/faculty/hochberg/htm/Accelerator%20Companion%20FINAL.pdf Hollingsworth, R. and Boyer, R. (1997) Contemporary Capitalism: the Embeddedness of Institutions, Cambridge University Press, New York, N.Y. IVCA. (2012) http://www.ivca.ie/wp‐content/uploads/2012/04/IVCA‐Ire‐The‐vestment‐Opp‐.pdf Kaplan, S., Sensoy, B. and, Stromberg, P. (2009) "Should Investors Bet on the Jockey or the Horse? Evidence from the Evolution of Firms from Early Business Plans to Public Companies", The Journal of Finance, Vol 64, No. 1, pp 75‐115. Kramer, B and Patrick, M. (2013) “Silicon Valley Venture Capital Survey – Fouth Quarter 2012” http://www.fenwick.com/publications/pages/silicon‐valley‐venture‐survey‐fourth‐quarter‐2012.aspx Munford, M. (2013) “Silicon Plateau, Silicon Gulf and Silicon Bog: who can match the Valley” The Telegraph, http://www.telegraph.co.uk/technology/news/9918665/Silicon‐Plateau‐Silicon‐Gulf‐and‐Silicon‐Bog‐who‐can‐match‐ the‐Valley.html Newman, M. (2003) “The Structure and Function of Complex Networks”, SIAM Review, Vol 45, No 2, pp 167‐256. Newman, M., Barabasi, A., and Watts, D. (2006) The structure and dynamics of networks, Princeton University Press, Princeton, NJ. Rosenberg, D. (2002) Cloning Silicon Valley, Pearson Education, London. SBA (2013) http://web.sba.gov/faqs/faqindex.cfm?areaID=24 Scott, J. (2000) Social Network Analysis, SAGE Publications, Thousand Oaks, CA. Zaheer A, Gozubuyuk R, and Milanov H (2010) “It’s the connections: The network perspective in interorganizational research”, Academy of Management Perspectives, Vol 24, No 1, pp 62‐77.

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Sustainability Among Tourism and Hospitality Industry’s Ventures: From Awareness to Specific Practices Ioana Mester and Daniel Badulescu University of Oradea, Romania imester@uoradea.ro daniel.badulescu@gmail.com Abstract: Sustainable entrepreneurship as environmentally friendly entrepreneurship focused on responsibilities to future generations has special meaning in tourism and hospitality industry. Indeed, tourism relies on clean, un‐altered natural environment. Hence, firms involved in these fields are supposed to be more aware of the importance of sustainability issues and also more informed about and to possess more elaborate knowledge about these concerns. Furthermore, customers in tourism and hospitality are assumed to be more interested in supplier attitudes and practice regarding sustainability. As already stated in literature, implementation of sustainable business practices generates gains and benefices, even if much of them are unfortunately defined as losses avoided (in terms of image, reputation, potential customers etc.). Moreover, life‐style entrepreneurs and the principle of ‘acting locally’ are of particular importance in tourism and hospitality industry. Consequently, a lot of instruments and techniques have emerged to promote sustainable business, i.e. codes, labels, audits etc. Our paper investigates the question of sustainability‐oriented attitudes and practices among ventures operating in the tourism and hospitality industry. Using a survey‐based research, we address particular issues such as: Are ventures operating in tourism and hospitality really concerned about sustainability and the impact of their activities on the environment?, Which are the factors driving venture concern about sustainability and environmental impact?, What is their perception on the benefices and gains associated with sustainability practices? What do firm managers/representatives think about sustainability as a competitive advantage in attracting visitors/customers? Do they have adequate related knowledge? Have they actually undertaken specific measures to make their business more environmentally friendly, e.g. energy saving, use of renewable energy, water management, waste management, use of eco products, alternative fuels, promoting local products/attractions etc.? Keywords: sustainability attitudes and practices, tourism and hospitality industry, survey

1. Introduction Environmental related concerns have preoccupied the public policy agenda and business initiatives for more than three decades, fuelled by the fear of the scarcity of the natural resources, the rapid pace of human development and its implications for future generations. The issue of sustainable development has been explicitly conceptualized in Brundlandt Report (WCED), that defines it as ”the development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987, p. 43). The tourism sector was among the first to be aware of the importance of this vision, even if the first initiatives were rather declarative or isolated. The explanation of the adherence to the above mentioned principles consists probably in understanding of the fact that the viability and prospects of the industry are inseparably linked to the quality of the natural environment and of the human relations, and the ambiance of specific destinations. However, the transition from awareness to practical application, from moral imperative to business practice was not easy, often leading to confusion, difficulty and errors. The various forms of tourism within time and space, the various sizes of tourism ventures, the composite nature of the tourism product, where the level of environmental impact is hard to monitor and regulate, make it difficult to implement a single policy, especially when business interests, performance and profitability requirements are threatened (Hobson and Essex 2001, p. 134). In this paper we aim at examining how tourism ventures understand and practice sustainability actions, how aware they are of the actual and perceived benefits and barriers associated with sustainability practices. The research is based on a survey conducted among representatives of ventures operating in tourism and hospitality industry and will enable us to draw some conclusions and identify implications and suggestions for policies to foster implementation of sustainable practices within tourism.

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2. The literature on sustainable tourism and sustainable business practice 2.1 Sustainable tourism The concept of sustainable tourism emerged mainly during the last decades, following the popularization of the concept of sustainable development and the growing awareness regarding the potential negative environmental impact of tourism (Bramwell and Lane 1993 or Horobin and Long 1996), and also the dependence of the sector on the features, quality and viability of the environment. The impact of tourism on the environment is complex and difficult to detect in a single statement. This impact refers to both environmental degradation as a result of the increasing number of visitors, and the effects of business activity in tourism, e.g. transportation, water consumption above normal standards, waste of heating and electricity, massive investments in environmental, social or cultural fragile areas, global procurement strategies etc. Hence, we can conclude that sustainable tourism induces responsibilities for both consumers and tourism companies. Unfortunately, the highly heterogeneous nature of the tourism product often acts as a deterrent factor, restricting the adoption of homogenous rules, which are generally accepted for tourism sector sustainability. The fact that sustainable tourism takes various conceptual shapes and has practical reasons, which combine business practices with moral and social responsibility, determines some researchers to doubt the realistic and sincere involvement in these actions. Thus, Berry and Ladkin (1997) consider the use of sustainable tourism rather as a simple trick, a marketing approach to attract new customer segments and to reassure those consumers who are concerned about certain moral implications of tourism. Other researchers argue that waving the threat of resource degradation motivates some tour operators to promote new destinations, instead of contributing to environmental conservation (Wheeller 1992) and (Hobson and Essex 2001, p.135). Pearce (1986) or Bartelmus (1989) are sceptical about the materialization and precision of environmental actions in general and about the sustainability of tourism in particular. Moreover, they find it impossible to coerce an entire sector to contribute to a better "green" world, without endangering the existence of various sub‐sectors such as transportation or construction, as those last sectors are not only consumers of non‐ renewable resources but also important polluters. However, sustainable tourism shares several features which are generally accepted. Firstly, sustainable tourism supports and respects the social, economic and environmental concerns of host communities, taking into account in their development strategies the local particularities and requirements. Secondly, it involves rational consumption allowing a natural, unmediated regeneration of resources. It also aims at promoting sustainable tourism actions which mitigate the depletion of natural resources and combat pollution of any kind. Finally, tourism as an economic activity which respects the above mentioned principles is able to provide consumers with comprehensive, satisfying and meaningful experiences (Hobson and Essex, 2001, Angelkova et al. 2012, UNWTO 2005). The way in which these goals can be implemented seems to be optimistic and quite confusing at the same time, taking various forms: from encouraging energy savings (lighting and heating) to waste collection or supporting the local economy by local purchasing. Moreover, some actions consider re‐dimensioning tourist flows in order to prevent degradation of natural and cultural sites due to congestions or excessive consumption. It is important that the outcome of these actions should not be regarded only in terms of environmental gains. There are also other benefits: monetary benefits (due to savings reported after reducing operating costs), increasing reputation, providing pleasant experiences for visitors, attracting influential customers and investors, improving job satisfaction for staff and a positive and encouraging response from local community (Swarbrooke 1994, Hobson and Essex 2001, Notarstefano 2007).

2.2 Examples of sustainable practices in tourism The literature on how sustainable tourism goals are effectively implemented reports a variety of situations, depending on sector, type and size of the ventures, segments of tourists, form of tourism etc. Investigating sustainability practices among hotels, Kirk (1996) finds that major hotel chains have assimilated relatively quickly and on a large scale sustainability issues and environmental rationality, raising awareness and sustainability responsibility among employees, suppliers and business partners. The resources, organization and expertise of major hotel chains have allowed them to make effective decisions enabling them to improve

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Ioana Mester and Daniel Badulescu their public image and thus to increase tourist interest in those brands. On the other hand, among small tourism companies, the results were much less visible and the actions proved to be more difficult to implement. Small tourism ventures face obstacles and restrictions due to both economic reasons (e.g. cost of clean or energy saving equipment), and poor experience and knowledge, or family and personal reasons. Investigating the hospitality sector in the UK, Stabler and Goodall (1997) indicate a real affinity of hoteliers for sustainable tourism, but also a limited or even a lack of understanding of tourism‐environment interaction. Sustainable practices were dominated by conventional and low efficiency actions, i.e. recycling (33%), low energy consumption devices (28%), lead free vehicles (27%) or double glazing (24%). They identify as reason for inaction “a high degree of complacency amongst the businesses, with satisfactory current environmental performance, low priority to environmental matters within their business and potential increased costs” (Stabler and Goodall 1997, pp. 19‐33). Another survey on managers within large and medium sized hotel groups in the UK (Brown 1994) indicated that main incentives for environmental initiatives are cost savings, followed by the environmental protections. Sometimes, the promotion of various local initiatives was delayed or excessively formalized by the decisions, procedures and controls of head‐office management. In some cases, representatives of major luxury hotels express reluctance to engage in sustainability policies, considering that this could affect the image of luxury consumption, and even “the enjoyment of a guest’s stay”. Analysing the attitudes towards tourism sustainability and environment protection of owner managers of small tourism companies in the Yorkshire Dales National Park (UK), Horobin and Long (1996) suggested that, although there is a lot of affinity for the general principles of sustainability, there is general confusion around the concept of sustainability and even the environmental concern. Although 76% of the respondents are prepared to accept the link between the environment and their business, however, many of them say they didn’t find the occasion, incentive or time to put these beliefs into practice. An important share of small companies owners (i.e. 65%) do not see the chance to turn ” their own business practices “green” as an "opportunity" and between 59% and 80% are not aware of any information sources (programs, publications) or they didn’t take time to seek and obtain such information. Most respondents (i.e. 66%) indicate they have undertaken actions for promoting sustainable tourism, particularly by recycling, using green products, reusable energy‐saving equipment etc. However, a significant part declare not to be satisfied with the excessive time spent carrying out these actions, the quality (or lack) of information and support, and they even plan to return to some classic products, which are non‐environmentally friendly but more efficient and probably cheaper. Briefly, ”they see environmentally concerned activities on the same level as any householder might. The most common reasons for taking action were a combination of a sense of responsibility, a distaste for the throwaway society and practical common sense” (Horobin and Long 1996). Hobson and Essex confirm that awareness and involvement of operators in sustainable tourism is limited on the short term, and the impact is perceived only in terms of operating costs and tourist turnover. Generally, the benefits of such policies are felt more in the large hotels, while “small businesses do not have the interest, resources or time required to introduce environmental management practices” (Hobson and Essex 2001, p. 144). Another aspect of the implementation of sustainable tourism practices is given by the customer requirements and behaviour. Trying to find a typology of environmental interest among consumers in Denmark, Hjalager (2000) indicates that rural locations tend to host vacationers with a high focus on environmental issues, while hotels or youth hostels, predominantly in urbanised areas, host vacationers less interested in these issues. As stated, “44% of the visitors to the metropolitan area claim that the environment has no importance for their choice of destination” and if the visit is associated with business and study reasons, only 18% of them show an interest in environmental matters. According to a European Commission survey (1998), although some segments of the population are more interested in sustainable tourism, less than 9% of the respondents actually experienced any problems with the state of the environment in their touristic destinations, and even a smaller proportion changed their original choice of holiday destination when they learned about environmental deficiencies. While some tourists are willing to pay more for environmentally less damaging products, around 71% of them prefer lodging in hotels that show concern for the environment, but they are not willing to pay more for them (Kirk 1996). Hjalager (2000), citing Björk’s researches on Finnish tourist

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Ioana Mester and Daniel Badulescu choices, shows that tourists will choose an eco‐resort, if it has the same price as a normal hotel. If an ordinary, non‐eco destination offers a reduction on a certain value, the cheaper alternative will be chosen. The efforts of tourism operators to ensure quality in the hotel sector focus on tangible achievements (e.g. comfort, number, size and equipment of premises, cleaning) that directly determine the number of stars of the unit. On the other hand, recognition of quality standards is made through certificates such as ISO 9001 and ISO 14001, which actually communicate to potential customers that the hotel respects and promotes international quality standards. Unfortunately, these certificates do not say anything about the elements of sustainable tourism, which are particularly important for exceptional natural resource based tourism. Even though the efforts of international technical committees to promote an ISO specifically addressed to sustainable tourism have little chance of success, there are numerous proposals for adequate standards of sustainable tourism (European Commission 2012, pp.11‐14). One of them is CST (Certificate for Sustainable Tourism), which is able to facilitate ”the achievement of a better image and reputation on the part of the hotels and contributed to modify the behaviour and attitude of employees in what concerns the respect for the environment and the care shown to natural resources” (Vasconselos‐Vasquez et al. 2011, p.554). Another solution could be to adopt Eco‐labels (such as Eco‐Flower) in order to make more visible the tourism operator’ efforts to protect the environment, to economize private and governmental promoting resources, but also to capitalize on all the advantages offered by a truly Europe‐wide well‐known brand (Lebe and Zupan 2012).

3. Research methodology The objective of our research is to investigate the question of sustainability‐oriented attitudes and practices among tourism and hospitality ventures. Using a survey‐based research, we address particular issues such as: Are ventures operating in tourism and hospitality really concerned about sustainability and the impact of their activities on the environment? Which are the factors driving venture concern on sustainability and environmental impact? What is their perception on the benefices and gains associated with sustainability practices? What do firm managers/representatives consider about sustainability as a competitive advantage for attracting visitors/customers? Do they have adequate related knowledge? Have they actually undertaken specific measures to make their business more environmentally friendly? The research hypotheses analysed are the following: H1. The managers' perception regarding the impact of hospitality industry on the environment is correlated with the number and type of their actions taken to protect the environment; H2. The level of the market targeted by the ventures is positively correlated with the existence and the number of environmental standard certification they own; H3. The managers' perception regarding the impact of hospitality industry on the environment is correlated with the existence of an environmental certificate, with the existence of certain actions to protect the environment or at least with some interest showed to protect it. The survey was conducted in March 2013, among 83 ventures operating in tourism and hospitality industry in Bihor County, Romania. The sample was selected by using the random stratified proportional sampling procedure. The questionnaire consisted of 23 both closed and open‐ended questions. They were divided in two sections: general questions related to the profile of the respondents and specific questions regarding awareness, attitudes and behaviours related to the environmental impact of the businesses in tourism and hospitality industry. We used Cronbach's Alpha method for the analysis and confirmation of the survey’s reliability and of the measurement scale. We grouped the questions referring to their perception about environment protection, getting α = 0.804 coefficient, which indicates a reliable scale. The elimination of any item leads to a lower Alpha.

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4. Description of the sample Almost a third of the ventures in our sample are guest houses, 42% are clubs and restaurants while 19% of them are hotels. The size of the companies was evaluated using both the number of employees and the annual turnover. The majority of our sample consists of small sized companies, with less than 49 employees (86%), only 2% of them with more than 250 employees. Meanwhile, most of the ventures have an annual turnover under 35,000 EUR (60.5% of them), and 32.6% having an annual turnover between 35,000 and 7,300,000 EUR. The actions reported by firm representatives as already undertaken in order to protect the environment are as follows: the use of energy saving light bulbs (100% of the firms), water saving devices (90.69%), the use of environmental friendly products (74.4%), recycling glass (69.76%), recycling plastic recipients (53.48%), the use of movement light sensors (7%), towel policy (4.65%), renewable energy source (i.e. solar panels: 2.3%). Most of the respondents consider that the most important advantage associated with their sustainability practices has been the lowering of the electricity and water consumption costs (see Figure 1).

Source: authors' calculations based on dataset Figure 1: Benefices and gains associated with the sustainability practices of the firms Thus, 81.6% of the representatives consider that their business gained some advantages or benefits by protecting the environment. When asked about the reasons why they have not taken any or more actions to protect the environment, most of the respondents could not indicate any reason, and only 16.27% of them explained this situation as being the result of high prices.

5. Results and discussions Research Hypothesis H1. The managers' perception regarding the impact of hospitality industry on the environment is correlated with the number and type of their actions taken to protect the environment. The questions based on which we are going to test the validity of this research hypothesis are: Q11. How significant is, in your opinion, the impact of the hospitality industry on the environment? Q18. Have you undertaken any actions within your company which could lead to the protection of the environment? Q19. If yes, which exactly are these? We have determined the number of actions taken to protect the environment and we have constructed the cross tabulation between the answers of the respondents in our sample, as presented in Table 1. A majority of 62.79% of the respondents from our sample consider that ventures operating in tourism and hospitality have a medium impact on the environment, whilst only 18.6% believe its impact is significant.

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Ioana Mester and Daniel Badulescu To validate research hypothesis H1 we use χ2 – Chi‐squared method. As χ2 = 38.76, i.e. much higher than 0, there is a strong correlation between the above mentioned variables. As the calculated value is much higher than the critical one (23.6 for 16 degrees of freedom and a 5% significance level), the null hypothesis is rejected, therefore there is a strong correlation between the two variables not only in the sample but also for the total population. Table 1: Distribution of responses to questions related to research hypothesis H1 The number of the actions undertaken to protect the environment The environmental impact of the hospitality industry Insignificant Medium Significant Total

1 3

8 9 10 Total

0 0

0 4

0 2 22

2 2

2 0

0 0

2 2 26 12 19 15 2 6

Source: authors' calculations based on dataset Therefore, research hypothesis H1: The managers' perception regarding the impact of hospitality industry on the environment is correlated with the number and type of their actions taken to protect the environment is validated at the sample level and the total population level. Research hypothesis H2. The level of the market targeted by the ventures is positively correlated with the existence and the number of environmental standard certifications they own. The questions used to test the validity of H2 research hypothesis are: Q7. What is the target market of your company? and Q14. Does your company possess an environmental certificate? Table 2: Distribution of responses to questions related to research hypothesis H2 Target market ‐ average score Number of environment certificates 0

1 1.5

Total

2.5 3 Total

Source: authors' calculations based on dataset After investigating the existence and the number of environmental certificates the companies possess, we associated scores ranging from 1 to 3 to each target market (i.e. 3 for the luxury consumers, 2 for average consumers, 1 for economy class) and determined the average score. The cross tabulation between the answers of the respondents is presented in Table 2. A significant proportion of the companies in the sample (i.e. 70.76%) target the average consumer; at the same time, more than a half of the ventures do not own any environmental certificate (i.e. 51.16%). The distribution of the frequencies shows a weak correlation between the two variables at a sample level. As the calculated value of the Chi squared test, i.e. 28.29 is higher than the critical one (i.e. 15.51), for 8 degrees of freedom and a probability of 95%, we can conclude on the existence of a correlation between the two variables not only in our sample but also at the total population level.

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Ioana Mester and Daniel Badulescu Consequently, research hypothesis H2: The level of the market targeted by the ventures is positively correlated with the existence and the number of environmental standard certifications they own is validated. Research hypothesis H3. The managers' perception regarding the environmental impact of hospitality industry is correlated with the possession of an environmental certificate, with the accomplishment of certain actions to protect the environment or the evidence of some interest to protect it. The questions used to test the validity of this research hypothesis are: Q11. How significant is, in your opinion, the impact of the hospitality industry on the environment?, Q12. Did you employ any actions in order to protect the environment?, Q13. Can you give examples of national or international entities that protect the environment? and Q14. Does your company have an environmental certificate? We assume it should be a positive correlation between the awareness of the environmental impact of the tourism and hospitality industry, and the actions accomplished to actually protect it. We assign a score, ranged from 0 to 5, showing the extent and to which the ventures in our sample involve themselves in protecting the environment. We have assigned 0 points to those respondents who gave negative answers to questions 12, 13 and 14, and 1 point for each positive answer; the company score is determined by summing up the three scores mentioned above. The cross tabulation between the responses and the assigned scores is presented in Table 3. Table 3: Distribution of responses to questions related to research hypothesis H3 Scores at Q12, 13 and 14 The 0 environmental impact of the hospitality industry on the environment Insignificant 0 Medium Significant Total

5 Total

8 14 22

8 22 40 14 2

Source: authors' calculations based on dataset The distribution of the frequencies shows a medium intensity and a direct correlation between the two variables. Since calculated χ2 (i.e. 16.36) is higher than the critical value for 8 degrees of freedom and a 5% significance level (i.e. 15.51), the null hypothesis is rejected, and therefore there is a weak correlation between the two variables at the level of total population. Among the reasons why the company does not have a certificate: 30.2% of the respondents consider that having an environment certificate is not a priority for the venture, or it has not been a matter of interest and 9,3% of them believe that having one would not bring any advantages to the company. Therefore, research hypothesis H3. The managers' perception regarding the environmental impact of hospitality industry is correlated with the possession of an environmental certificate, with the accomplishment of certain actions to protect the environment or the evidence of some interest to protect it is validated.

6. Conclusion While investigating attitudes and behaviours related to promoting sustainability‐oriented business practices, we have conducted a survey‐based research among managers and company representatives operating in tourism and hospitality industry in Bihor County, Romania. The research revealed a consistent interest for an effective sustainable tourism but also some barriers and limits in understanding the problems of sustainability, a short term focusing and a prevalence of conventional and low efficiency actions. After testing the research hypotheses we found out that managers/representatives understand that hospitality industry has a significant environmental impact and they undertake a series of actions in order to protect the environment. However, these actions are scaled, limited and reduced in efficiency. They consider that achieving and maintaining a

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Ioana Mester and Daniel Badulescu target market is fostered by possessing quality certificates which cover also environmental issues, even if those certificates do not say much on the concern of the operators in the industry to practice an effective sustainable tourism. However, an important share of them are actually interested in environmental issues, they are aware of the importance of practicing sustainable tourism, they try to obtain those certificates and meet their requirements, and act accordingly. As far as the company has other medium term goals on, and obtaining such a certificate appears as a waste of time and money with no tangible advantages, their interest and actions for environmental protection and promoting sustainability in tourism and hospitality will be reduced. However, our findings are limited, mainly due to limited the sample that was available, but research has to be pursued in order to deepen the analysis and find out different issues related to sustainability concern among the companies operating in tourism and hospitality industry.

References Angelkova, T., Koteski, C., Jakovlev, Z. and Mitrevska, E. (2012) “Sustainability and Competitiveness of Tourism”, Procedia ‐ Social and Behavioral Sciences, Vol 44, pp 221‐227. Bartelmus, P. (1989) Environment and Development. London: Allen and Unwin. Berry, S. and Ladkin, A. (1997) “Sustainable Tourism: A Regional Perspective”, Tourism Management, 18(7), pp 433‐440. Bramwell, B. and Lane, B. (1993) “Sustainable tourism: an evolving global approach”, Journal of Sustainable Tourism, 1(1), pp 1‐5. Brown, M. (1994) “Environmental Auditing and the Hotel Industry: An Accountant's View”. In: A.V. Seaton et al., ed. Tourism: The State of the Art. Chichester: Wiley, pp 675‐681. European Commission (1998) Facts and Figures on the Europeans on holidays 1997‐1998, Directorate General XXIII. European Commission (2012) Summary Report of the Consultation on the European Charter for Sustainable and Responsible Tourism, Enterprise and Industry Directorate‐General, Service Industries, Tourism Policy, Brussels. Hjalager, A.‐M. (2000) “Consumerism and Sustainable Tourism”, Journal of Travel & Tourism Marketing, 8(3), pp 1‐20. Hobson, K. and Essex, S. (2001) “Sustainable Tourism: A View from Accommodation Businesses”, The Service Industries Journal, 21(4), pp 133‐146. Horobin, H. and Long, J. (1996) “Sustainable Tourism: the Role of the Small Firm”, International Journal of Contemporary Hospitality Management, 8(5), pp 15‐19. Kirk, D. (1996) Environmental Management for Hotels. Oxford: Butterworth‐Heinemann. Lebe, S. S. and Zupan, S. (2012) “From Eco‐ignorance to Eco‐certificate: Environmental Management in Slovene Hotels”. In: D. Leslie, ed. Tourism Enterprises and the Sustainability Agenda Across Europe. Ashgate Publishing Limited, pp 135‐ 150. Notarstefano, C. (2007) “European Sustainable Tourism. Context, concepts and guidelines for action”, Global Jean Monet th th Conference, The European Union and World Sustainable Development, Brussels,5 – 7 November 2007. Pearce, D. (1986) Blueprint for a Green Economy. London: Kogan Page. Stabler, M. and Goodall, B. (1997) “Environmental Awareness. Action and Performance in the Guernsey Hospitality Sector”, Tourism Management, 18(1), pp 19‐33. Swarbrooke, J. (1994) “Greening and Competitive Advantage”, Insights, Vol 5, pp 43‐50. UNWTO (2005) Sustainable Development of Tourism. [online], http://sdt.unwto.org/en/content/about‐us‐5, [Accessed 12 March 2013]. Vasconselos‐Vasquez, K., Balbastre‐Benavent, F. and Redondo‐Cano, A. M. (2011) “Is Certification for Sustainable Tourism Complementary to ISO 9000 Certification? The Case of the Parque del Lago Hotel in Costa Rica”, Revista de Turismo y Patrimonio Cultural, 9(4), pp 543‐557. Wheeller, B. (1992) “Alternative Tourism: A Deceptive Ploy”. In: C. Cooper, ed. Progress in Tourism. Recreation and Hospitality Management, Vol 4. London: Belhaven pp. 140‐145. World Commission on Environment and Development (1987) Our Common Future, Oxford: Oxford University Press.

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Innovation, Design and Competitiveness: Results From a Portuguese Online Questionnaire José Monteiro‐Barata Economics Department, Instituto Superior de Economia e Gestão‐Technical University of Lisbon (ISEG‐UTL), Lisbon, Portugal jmbarata@iseg.utl.pt Abstract: This paper is an output of a Portuguese public research project (FCT): DeSID ‐ “Design as a Company’s Strategic Resource: a Study of the Impacts of Design” (2007‐2011). The DeSID research project was created with the main purpose to make a diagnosis of the use of design inside the Portuguese manufacturing industry, since that characterization was never done. “DeSID survey” allowed us to understand in broaden terms the way business field evaluates the role of design and designers. The main drivers for the use of design in the companies are the “image/reputation” followed by the “innovation ability”. The relationship between design and innovation is relevant for the majority of firms. From a brief analysis of the survey results it is also possible to acknowledge that Portuguese firms in general still underestimate the potential of design as a strategic resource. This paper, firstly, includes an exploratory empirical analysis on determinants of design in the Portuguese manufacturing industry, using factor analysis. Secondly, we will try to discover the explanations behind the "level of maturity" of design in Portuguese industrial structure ("the design ladder") through discriminant analysis. Keywords: design, design strategy, innovation, Portuguese industry

1. Introduction The DeSID research project ‐ a Portuguese public research project (FCT): DeSID ‐ “Design as a Company’s Strategic Resource: a Study of the Impacts of Design” (2007‐2011) ‐ was created with the main purpose to make a diagnosis of the use of design inside the Portuguese manufacturing Industry. The project arose from the necessity to gather data about the design situation inside Portuguese companies since that characterization was never done. The Portuguese Foundation for the Science and Technology (FCT) funded the project that started on the 3rd of September from 2007 and finished in January 2011. This paper refers to one of the activities of the research project: the National Survey on Design within the Portuguese Manufacturing Industry. Design is one of the most important 'nonprice' factors in competition and business performance (Potter et al., 1991, p. 3). The term design includes disciplines ranging from engineering, product and industrial design to fashion and textiles, graphics and communications, interiors, exhibitions and architecture. Design involves creating concepts, plans and instructions, usually in response to a brief provided by a firm or client that enable a two or three dimensional object that did not exist previously to be made. For a company, creativity is the generation of ideas, design is the “formatting” of ideas and innovation is placing those forms in new and/or different contexts. Design can create value at different levels of the value chain (Mozota, 2002, p. 94). We must see design as a facilitator, differentiator, integrator and communicator (Hayes, 1990). After this brief introduction, a general explanation on the inquiring process will be added (second chapter). Thirdly, we will present the definition of “level of maturity” of design. Following this presentation, the paper will include an exploratory empirical analysis on determinants of design in the Portuguese manufacturing industry, using factor analysis; after this essay, we will try to discover the explanations behind the “level of maturity” of design in Portuguese industrial structure (“the design ladder”) through discriminant analysis (fourth chapter). The paper finalises with some conclusives notes.

2. The DeSID questionnaire: sampling process and demography of the respondent companies An online survey, addressed to a sample of Portuguese manufacturing companies, was developed and launched by the DeSID research project.

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José Monteiro‐Barata The questionnaire that was created had six sections: I) General Characterization of the Company; II) Perception of the Importance of the Use of Design; III) Identification of the Drivers and Enablers of Design Exploited by the Company; IV) Attitude and Action of the Company’s Top Management towards Design Use; V) Company’s Evaluation of Design Results; VI) Barriers to the Use of Design. The questionnaire requested information concerning the activities of design and its role in the company business. The responses are circumscribed to the activity in the years 2005 to 2007. The best estimates were also accepted in the absence of precise figures for those years. In the current context favourable to spreading of new information technologies and communication the choice of an online survey was supported mainly by the possibility of automating the entire cycle of gathering and processing of information ensuring data integrity. After the pilot test result, the inquiry process was implemented. About the methodological process see: Romão et al., 2007. The universe was formed by the Continental manufacturing industry, 2005. The total number of companies was 44,626. The sample size was 1.505 companies. The sample was stratified by categories of size and sector of activity. Technically, the confidence interval was 95,5% and the sampling error was 3%. The final number of respondent companies was 99, which gives a response rate of 6,6%. This online survey was preceded by an online pilot survey (conducted among a sample of 60 firms). Concerning the basic demography of the respondent companies we acknowledge that the majority is located in the North of Portugal being more than 1/3 installed in regions that have an industrial tradition, from Águeda to Guimarães. The large majority of the companies has Portuguese capital. An expressive percentage of the companies (40,8%) has started its activity in the period after 1974 (Portuguese Revolution) and until the end of the eighties decade. The sectors of Non Metallic Minerals, Metallic Products, Furniture and Food and Beverages account for about half of the respondent companies (49,5%). About 80% of the companies have less than 250 employees at service. The most relevant class is the one that has “50 to 99 employees” (25,8%). The turnover level slightly more expressive is the one of “1 to 5 million Euros” (25%). About 21% of the companies present sales over 25 million Euros. It can be considered that the set of respondent companies have an export orientation, with about 27% among them that export more than 75% of its production. However, 21% of the companies do not export. The main drivers for the use of design in the companies are the “image/reputation” followed by the “innovation ability”. The relationship between design and innovation is relevant for the majority of firms (see Teece, 1986; Brown, 2009; Verganti, 2009). The intensity in design in the Portuguese manufacturing industry (total value spent on design activities as a percentage of net sales) was 0.69% (2007). This analysis was tested through a dozen of "case studies" carried out by the project. All the main results of this project were presented in DeSID (2011).

3. “Levels of maturity in the use of design” in companies In order to deepen the understanding the typologies of use of design in companies, two questions were raised that expressed different “levels of maturity in the use of design”. This level of maturity is a notion developed by the Danish Design Centre (DDC) in 2003 and is presented in Figure 1 under the designation of ‘Design Ladder’. According to DDC (2003), the design ladder is a useful 4‐step model for grouping companies' design maturity on the basis of their approaches towards design (design management). The higher a company is up the ladder, the greater strategic importance design has for the company. First step: Non‐design ‐ design is a negligible part of product development, etc. and any design activity fall in professional groups other than designers. Second step: Design as styling ‐ design is seen solely as relating to the final physical form of a product. This can be the work of a designer, but is usually created by other employees. Third step: Design as process ‐ design is not a result but a method that is integrated early on in the development process. The production outcome requires contributions from a range of specialists. Fourth step: Design as innovation ‐ the designer works closely alongside the company's owners/top management on a complete or major renewal of its business concept.” (DDC, 2003)

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Source: DDC, 2003 Figure 1: The design ladder The two questions were related with the design activity firms developed in the past (2005‐2007) and the one they predict for the future (2008‐2010). Data obtained in these two questions assumed a decisive weight in the work of determining the position in the design ladder firms have. In this paper, we will focus only on data for 2005‐07.The results are presented in Figure 2. The options of the questions (see graphic 1) are not stated the same way the Design Ladder displays it. The correspondence between the two was defined as follows:

Non‐existent activity Æ Non Design;

Occasional activity/activity of modeling/shaping the product Æ Design as styling;

Design as a competitive factor of business/core competence integrating each of the firm’s decision Æ Design as a process;

Design as a catalyses of permanent innovation Æ Design as innovation.

15,2

Catalyzer of permanent Innovation Core Competence integrating each of the firm's decision

4,0 38,4

Competitive factor of the business

12,1

Activity of modeling and shaping of the product

16,2

Occasional Activity

14,1

Non Existent Activity ,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

50,0

Source: DeSID Project (2011) Figure 2: Characterization of design activity (2005 to 2007) Figure 2 shows us that 42,4% of the firms indicate to be on Step 3 of the Design Ladder; 28,3% state to be on Step 2 and 15,2% indicates being on Step 4 of the Ladder. However, evidence after data analysis shows that, in general, firms indicate a level of maturity that is higher than what exists in reality. The most evident result is the great centrality given to design as a “competitive factor of the firm’s business” (38,4%), as well as the evident relationship between design and innovation dynamics (Monteiro‐Barata, J., 1995; Roy and Riedel, 1997; Kyffin and Gardien, 2009).

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4. Design and innovation in the Portuguese manufacturing industry: An exploratory empirical analysis Among the various multivariate statistical methods for the analysis of data from the main survey, the paper includes an exploratory factorial analysis on determinants of design in the Portuguese manufacturing industry (perceptions and determinants of design) (Topic 4.1). Afterwards, we continued the analysis, using discriminant analysis, with two main objectives: firstly, to identify the main reasons that can explain, largely, the “execution” of design activities versus "non‐execution" of design activities; secondly, after the exclusion of companies that do not perform design activities (i.e., the first level of design "ladder"), we will determine the underlying reasons behind the positioning of the companies in the other three levels of design "ladder” (i.e., reasons that discriminate the different positioning) (Topic 4.2).

4.1 Perceptions and determinants of design The first dimension of the model for “perceptions” (first principal component) shows the strong opposition between the brand building process (and marketing) and an important but “ordinary” design task: functionality. Levels of differentiation and innovation did not get any relevance within this first component. They are the main reference for the second component, in strong opposition to cost reduction, setting the supremacy of differentiation as a generic strategy, removing the undesirabe positioning of "stuck in the middle" (Porter, 1980) (Table 1). For more detailed analysis see Annex 1. Table 1: Perceptions of the importance of design use – descriptive statistics and rotated component matrix

Mean

Std. Deviation

2,026 1,930 1,490 0,757 1,242 1,958 2,050 2,061 0,794 1,484 1,233 2,120

94 94 94 94 94 94 71 94 94 94 94 94

C1 (16,4%)

Brand building* Marketing* Trends* Process* Levels of differentiation** Innovation* Aesthetics* Quality* Sustainability* Cost reduction* Research* Functionality*

1,64 1,32 0,73 0,17 1,24 2,40 1,54 1,89 0,16 0,77 0,49 1,90

0,649 0,632 0,144 0,077 0,045 0,003 ‐0,036 ‐0,065 ‐0,115 ‐0,172 ‐0,205 ‐0,784

Components C2 C3 (12,6%) (11,8%) 0,282 0,170 ‐0,228 0,320 0,054 0,158 ‐0,194 ‐0,786 0,728 0,021 0,680 0,018 ‐0,002 0,416 0,210 0,171 0,076 0,002 ‐0,479 0,116 0,184 ‐0,652 ‐0,090 0,263

Source: Author computation based on DeSID (2011) * 1=minimum; 5=maximum; ** Only on product development versus using, additionally, industrial property instruments: licensing, trademarks and patents. Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. In this analysis on general determinants of design, the variables “intensity in design”, “design people”, “graduated and post‐graduated in design” were added. These variables would be, in a standard causal analysis, considered as independent or dependent variables. All other ones (competitive variables) would be explanatory variables. The variable “top management involvement” in design activities and the “turnover” and “exports” (economic variables) were further added. Firstly, within first component, it should be noted the opposition (no association) between the main economic variables defined (“turnover”, which reflects the size of the companies, and “exports”, which defines the degree of internationalization) and the most direct indicators of the importance of design in companies: the intensity in design (financial resources) and, mainly, design people (human resources). However, we discover another variable, within human resources management, that shows different behavior: “graduated and post‐ graduated in overall design people” (%). Rather, this indicator is moderately associated with turnover (size) and exports level (see, in general, Bhattacharya and Bloch, 2004). This last indicator can be considered more

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José Monteiro‐Barata demanding and sophisticated in the context of human resources indicators in design activities and is related to immaterial vectors of business (image/reputation) (2nd component). We can also say that the variables “intensity in design” and “design people” are associated with “top management involvement” in design activities (same signal) (Table 2). Table 2: General determinants of design – descriptive statistics and rotated component matrix

Mean

Std. Deviation

4,618 25,719 34,880

49 49 49

Components C2 C3 (23,1%) (13,9%) (12,8%) ‐0,644 0,030 0,421 ‐0,812 ‐0,053 ‐0,144 0,231 0,416 0,262

0,504 0,504 0,497 0,487 0,487 0,504 0,497 0,777 1,699 1,881

49 49 49 49 49 49 49 49 49 49

0,037 0,047 ‐0,015 0,497 ‐0,181 ‐0,036 0,134 ‐0,472 0,805 0,780

Intensity in design (2005/07) (%) 2,06 Design people/employees (%) 15,49 Graduated/Post‐graduated in design in total 30,47 design people (%) Firm: image/ reputation* 0,47 Firm: product* 0,53 Industry: market power of clients* 0,41 Clients: customer sophistication* 0,37 Competition: innovation capability* 0,63 Strategy: differentiation* 0,53 Strategy: market niches* 0,41 Top management involvement (4 levels) 3,02 Turnover (average 2005/2007) (ln) (€) 15,42 Exports/Turnover (5 levels), 2007 2,59

0,765 ‐0,808 ‐0,015 ‐0,064 0,015 0,011 0,078 ‐0,281 0,218 ‐0,158

‐0,230 ‐0,288 ‐0,070 0,415 0,656 0,051 0,715 ‐0,077 ‐0,089 ‐0,046

Source: Author computation based on DeSID (2011) * Selected from a list of items. Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. The new variables in the last exploration on determinants of design are selected from items for “investments”, “external entities” and other “information sources” for design. We add also a variable on the existence or not of an in‐house department of design (Table 3). Table 3: Specific determinants of design – descriptive statistics and rotated component matrix

Investments: Acquisition of tools, other equipment and software Investments: External knowledge acquisition Investments: Supporting marketing Investments: Vocational training External entities: Technological Centres External entities: Research Centres External entities: Clients External entities: Suppliers External entities: Universities Information sources: analysis of competitor's products. Information sources: consumer’s research Information sources: specific market research Information sources: sales force information Information sources: international fair’s visits Information sources: national fair’s visits In‐house department of design (Y/N)

Mean

Std. N Deviation

Components C2 (22,4%) (10,8%)

(9,7%)

0,51 0,36 0,39 0,32 0,29 0,19 0,47 0,37 0,25

0,503 0,483 0,490 0,470 0,458 0,392 0,502 0,487 0,438

75 75 75 75 75 75 75 75 75

0,479 0,716 0,422 0,637 0,274 0,216 0,073 ‐0,023 0,051

0,163 0,048 0,289 0,164 0,741 0,803 0,154 ‐0,088 0,669

0,621 0,234 0,196 0,318 0,016 0,013 0,815 0,587 0,396

3,53 2,89 3,07 3,81 3,61 2,33 0,53

1,298 1,530 1,464 1,074 1,335 1,359 0,502

75 75 75 75 75 75 75

‐0,226 0,017 ‐0,074 0,230 0,195 ‐0,297 0,664

0,495 ‐0,046 0,060 0,074 0,130 ‐0,090 0,178

0,033 ‐0,144 0,116 ‐0,046 ‐0,025 ‐0,072 ‐0,151

Source: Author computation based on DeSID (2011) Investments: (0‐1); External entities: (0‐1); Information sources: (1‐5) Extraction Method: Principal Component Analysis.

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José Monteiro‐Barata Rotation Method: Varimax with Kaiser Normalization. The first dimension shows the importance of investments, mostly immaterial. The existence of an in‐house department of design seems to be important for the achievement of such investments. The second dimension displays the ability of companies to establish relationships with the scientific and technological context (system of design): technological centers, research centers and universities. Finally, it is possible to realize a strong inter‐relationship in the value chain (suppliers and customers). These contacts appear associated with physical investments (“acquisition of tools, other equipment and software”).

4.2 The design "ladder” The next and final step is the discovery of the explanatory variables that lead firms to different levels of the design ladder. Firstly, we will try to advance the basic explanatory factors for the "non‐design" (status mentioned by the companies in the survey) versus the performance of design activities. Should be noted that firms "non‐design" answered a very limited number of questions. This greatly reduced the number of variables available for analysis. This will be an important reason for the failure of discriminant analysis essayed (statistical tests not significant). See Annex II.A. The explanatory variables essayed were: year of activity start (longevity), employees (2005/07 average, natural logarithm ‐ ln), foreign capital (Yes/No), company's exports in % of turnover (2007) and barriers to design (Yes/No). 93 valid cases were utilized. Wilks' Lambda=0,981; Sig.=0,890. The second analysis ‐ most promising ‐ focused on the most significant levels of design ladder (levels 2, 3 and 4). The variables were the following: employees (2005/07 average ‐ ln), foreign capital (Yes/No), graduated and post‐graduated in design in total design people (%), intensity in design (2005/07) (%) (insourced) and levels of differentiation. 48 valid cases were utilized. (For the first function: Wilks' Lambda=0,435; Sig.=0,000). 70,6% of original grouped cases were correctly classified. See Annex II.B. Very significantly, the differentiation strategy, preferably supported by industrial property instruments, was the highlighted variable in the discrimination of different levels of design ladder. Secondly, is the presence of foreign capital in companies, adversely affecting the advancement in ladder design. The expenditure in design (internal) and the presence of human resources with advanced training in design are also important, but did not reach statistical relevance. Table 4: Design ladder (by variables) ‐ tests of equality of group means and classification function coefficients (Fisher's linear discriminant functions)

Employees (2005/07) (ln) Foreign capital (Y/N) Graduated/Post‐graduated in design in total design people (%) Intensity in design (2005/07) (%) (insourced) Levels of differentiation (Industrial Property) (Constant)

Design_Ladder Design as Design Design styling as as (2) process innovation (3) (4) 2,968 3,164 3,491 1,935 ‐0,745 ‐1,609

Wilks' Lambda

0,949 0,876

1,28 3,40

2 2

48 48

0,287 0,042

0,948

1,32

0,276

0,008

‐0,005

0,005

0,931

1,79

0,178

0,628

0,618

0,882

0,551

19,53

0,000

‐0,254 ‐7,758

1,681 ‐10,151

2,507 ‐14,631

df1 df2

Sig.

Source: Author computation based on DeSID (2011)

Finally, taking into account the above factor analysis, we used the first components of each analysis as explanatory variables of the levels of design ladder: perceptions factor, general determinants factor and specific determinants factor. 48 valid cases were utilized. For the first function: Wilks' Lambda=0,665; Sig.=0,006. 62,5% of original grouped cases were correctly classified. See Annex II.C.

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José Monteiro‐Barata The sole statistically significant factor was the one related to “specific determinants”. This factor, as mentioned, is associated to investments (equipment and software, external knowledge, marketing, vocational training) and to in‐house department of design. Table 8: Design ladder (by factors) ‐ tests of equality of group means and classification function coefficients (Fisher's linear discriminant functions)

Tests of Equality of Group Means

Design_Ladder

Perceptions factor General determinants factor Specific determinants factor (Constant)

Wilks' Lambda F df1 df2 Sig. 0,899 2,52 2 45 0,092 0,973 0,64 2 45 0,535 0,747 7,61 2 45 0,001

Design as styling (2) ‐0,401 0,041 ‐0,805 ‐1,464

Design as Design as innovation process (3) (4) 0,114 ‐0,551 0,086 ‐0,639 0,165 1,526 ‐1,127 ‐1,775

Source: Author computation based on DeSID (2011)

5. Conclusive notes DeSID survey allowed us to understand in broaden terms the way business field evaluates the role of design. It is important to underline that the use of design in more than about 66% of the respondent firms has a history of less than 19 years. This survey is also helpful in the way it sheds light to firm’s perception of design in general and and the way it can be measured. The relationship of design and innovation is also relevant since for the majority of firms the first mental association with design is precisely ‘innovation’. An upgrade in employees’ qualifications could be an important step to boost design inside firms as a more valuable resource similarly to what happens in the North European countries (DDC, 2003; and Designium, 2005 studies). Indeed, an important result of this study was the detection of significant and positive relationships between the more qualified human resources (graduates and postgraduates in design) and business performance, namely dynamic factors of competitiveness. It is confirmed in general terms – see factor analysis carried out ‐ the complex and interactive character of the design that, to be successful, calls for considerable levels of organization, training, capture and circulation of information inside the firm (organization/value chain – investments, differentiation strategies) (Mozota, 2003) and in its relationship with the technical business environment (inter‐organizational relationships/value system – clients, suppliers, technological centres). Design is a fundamental driver of the innovation dynamics. The Portuguese design development sooner or later will claim a notion and development of a “National System of Design” (Raulik‐Murphy, 2008), setting new challenges to the public policies and to the business practices.

6. Annexe 1 Source: Author computation based on DeSID (2011) A. Perceptions of the Importance of Design Use. KMO and Bartlett's Test Kaiser‐Meyer‐Olkin Measure of Sampling Adequacy. Approx. Chi‐Square Bartlett's Test of Sphericity

Component

1 2 3

0,533 103,338

66 df Sig. 0,002 Total Variance Explained

Initial Eigenvalues

Extraction Sums of Squared Loadings Total % of Cumulative Total % of Cumulative Variance % Variance % 1,97 16,407 16,407 1,97 16,407 16,407 1,51 12,605 29,012 1,51 12,605 29,012 1,42 11,803 40,815 1,42 11,803 40,815

Rotation Sums of Squared Loadings Total % of Cumulative Variance % 1,55 12,949 12,949 1,49 12,379 25,329 1,49 12,371 37,700

Extraction Method: Principal Component Analysis.

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José Monteiro‐Barata B. General Determinants of Design KMO and Bartlett's Test Kaiser‐Meyer‐Olkin Measure of Sampling Adequacy. Approx. Chi‐Square Bartlett's Test of Sphericity df Sig.

0,539 155,806 78 0,000

Total Variance Explained Extraction Sums of Squared Rotation Sums of Squared Initial Eigenvalues Loadings Loadings % of Cumulative % of Cumulative % of Cumulative Component Total Variance % Total Variance % Total Variance % 1 3,008 23,137 23,137 3,008 23,137 23,137 2,909 22,377 22,377 2 1,803 13,869 37,006 1,803 13,869 37,006 1,578 12,141 34,518 3 1,668 12,830 49,835 1,668 12,830 49,835 1,539 11,840 46,358 Extraction Method: Principal Component Analysis.

C. Specific Determinants of Design KMO and Bartlett's Test Kaiser‐Meyer‐Olkin Measure of Sampling Adequacy. Approx. Chi‐Square Bartlett's Test of Sphericity df Sig.

0,635 271,251 120 0,000

Total Variance Explained

Component 1 2 3

Extraction Sums of Squared Rotation Sums of Squared Initial Eigenvalues Loadings Loadings % of Cumulative % of Cumulative % of Cumulative Total Variance % Total Variance % Total Variance % 3,583 22,395 22,395 3,583 22,395 22,395 2,131 13,321 13,321 1,720 10,751 33,146 1,720 10,751 33,146 2,127 13,293 26,614 1,554 9,710 42,856 1,554 9,710 42,856 1,812 11,324 37,938 Extraction Method: Principal Component Analysis.

7. Annexe 2 Source: Author computation based on DeSID (2011)

A. Discriminant Analysis: Non‐Design versus Design Group Statistics Design 0 Non‐ Design 1 Design

Total

Year of activity start Employees (2005_07) (ln)

Mean

Std. Deviation

1974,078 4,125 0,077

13,943 1,561 0,277

Foreign capital (Y/N) 2,692 Company's exports in % of turnover, 2007 Barriers to Design (Y/N) 0,385 1971,075 Year of activity start Employees (2005_07) (ln) 4,365 0,125 Foreign capital (Y/N)

2,323 0,506 32,530 1,385 0,333

2,625 Company's exports in % of turnover, 2007 Barriers to Design (Y/N) 0,280 1971,450 Year of activity start Employees (2005_07) (ln) 4,331 0,118 Foreign capital (Y/N)

1,858 0,449 30,580 1,405 0,325

2,634 Company's exports in % of turnover, 2007 Barriers to Design (Y/N) 0,290

1,916 0,456

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José Monteiro‐Barata Eigenvalues % of Cumulative Canonical Function Eigenvalue Variance % Correlation 1 ,019a 100,000 100,000 0,138 a. First 1 canonical discriminant functions were used in the analysis. Wilks' Lambda Test of Function(s) 1

Wilks' Chi‐ Lambda square 0,981 1,692

df 5

Sig. 0,890 Tests of Equality of Group Means

Year of activity start Employees (2005_07) (ln) Foreign capital (Y/N) Company's exports in % of turnover, 2007 Barriers to Design (Y/N)

Wilks' Lambda 0,999 0,996 0,997 1,000 0,993

F df1 0,107 1 0,323 1 0,243 1

df2 91 91 91

Sig. 0,745 0,571 0,623

0,014 0,643

91 91

0,907 0,425

1 1

Standardized Canonical Discriminant Function Coefficients Function 1 0,129 ‐0,818 ‐0,364 0,602 0,710

Year of activity start Employees (2005_07) (ln) Foreign capital (Y/N) Company's exports in % of turnover, 2007 Barriers to Design (Y/N) Structure Matrix

Function 1 0,605 ‐0,429 ‐0,372 0,246 0,088

Barriers to Design (Y/N) Employees (2005_07) (ln) Foreign capital (Y/N) Year of activity start Company's exports in % of turnover, 2007 Classification Function Coefficients Barriers to Design (Y/N) Employees (2005_07) (ln) Foreign capital (Y/N) Year of activity start Company's exports in % of turnover, 2007 (Constant) Fisher's linear discriminant functions

Non‐ Design 2,794 35,996 ‐38,034 ‐10,461 17,999 ‐2820,859

Design 2,793 36,226 ‐37,592 ‐10,584 17,384 ‐2818,071

B. Discriminant Analysis: Design as styling, design as process and design as innovation (by selected variables) Eigenvalues % of Cumulative Canonical Function Eigenvalue Variance % Correlation 1 1,078a 91,033 91,033 0,720 2 0,106a 8,967 100,000 0,310 a. First 2 canonical discriminant functions were used in the analysis.

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José Monteiro‐Barata Wilks' Lambda Test of Function(s) 1 through 2 2

Wilks' Lambda 0,435 0,904

Chi‐ square 38,278 4,641

df 10 4

Sig. 0,000 0,326 Group Statistics

Design as styling

Design as process

Design as innovation

Design_Ladder Employees (2005_07) (ln) Foreign capital (Y/N) Graduated/Post‐graduated in design in total design people (%) Intensity in design (2005/07) (%) (insourced) Levels of differentiation (Industrial Property) Employees (2005_07) (ln) Foreign capital (Y/N) Graduated/Post‐graduated in design in total design people (%) Intensity in design (2005/07) (%) (insourced) Levels of differentiation (Industrial Property) Employees (2005_07) (ln) Foreign capital (Y/N) Graduated/Post‐graduated in design in total design people (%) Intensity in design (2005/07) (%) (insourced) Levels of differentiation (Industrial Property)

Mean 3,955 0,313

Std. Deviation 1,339 0,479

25,848

37,107

1,467 0,563 4,558 0,074

3,284 0,964 1,415 0,267

29,145

34,700

0,958 1,963 4,727 0,000

1,937 0,898 1,137 0,000

49,792

34,852

3,867 2,750

7,965 0,707

Standardized Canonical Discriminant Function Coefficients Employees (2005_07) (ln) Foreign capital (Y/N) Graduated/Post‐graduated in design in total design people (%) Intensity in design (2005/07) (%) (insourced) Levels of differentiation (Industrial Property)

Function 1 2 0,212 0,268 ‐0,447 0,196 ‐0,117 0,574 0,206 0,945 0,909 ‐0,217

Structure Matrix Function 1 2 Levels of differentiation (Industrial Property) 0,869* ‐0,002 Foreign capital (Y/N) ‐0,359* 0,166 Employees (2005_07) (ln) 0,220* ‐0,115 Intensity in design (2005/07) (%) (insourced) 0,110 0,762* Graduated/Post‐graduated in design in total design people (%) 0,168 0,483* *Largest absolute correlation between each variable and any discriminant function Classification Resultsa

Original

Predicted Group Membership Design as Design as Design as Design_Ladder_4 styling process innovation Count Design as styling 13 3 0 Design as process 5 17 5 Design as innovation 0 2 6 Design as styling 81,3 18,8 0,0 % Design as process 18,5 63,0 18,5 Design as innovation 0,0 25,0 75,0 a. 70,6% of original grouped cases correctly classified.

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Total 16 27 8 100,0 100,0 100,0

José Monteiro‐Barata C. Discriminant Analysis: Design ladder by design dimensions (by “Factors” – 1st component) Group Statistics

Design as styling

Design as process

Design as innovation

Design_Ladder_4 Perceptions factor General determinants factor Specific determinants factor Perceptions factor General determinants factor Specific determinants factor Perceptions factor General determinants factor Specific determinants factor

Mean ‐0,575 ‐0,201 ‐0,633 0,148 0,137 0,166 ‐0,204 ‐0,175 0,740

Std. Deviation 0,718 1,188 0,608 1,085 0,954 0,929 1,156 0,788 0,864

Eigenvalues % of Canonical Function Eigenvalue Variance Cumulative % Correlation 1 0,365a 78,390 78,390 0,517 2 0,101a 21,610 100,000 0,303 a. First 2 canonical discriminant functions were used in the analysis. Wilks' Lambda Test of Function(s) 1 through 2 2

Wilks' Lambda 0,665 0,908

Chi‐square 17,930 4,224

df 6 2

Sig. 0,006 0,121

Standardized Canonical Discriminant Function Coefficients Perceptions factor General determinants factor Specific determinants factor

Function 1 2 ,095 ,903 ‐,266 ,654 1,034 ‐,426

Structure Matrix Specific determinants factor Perceptions factor

Function 1 2 0,962* 0,052 *

0,372 0,781

*Largest absolute correlation between each variable and any discriminant function

Original

Predicted Group Membership Design as Design as Design as Design_Ladder_4 styling process innovation Count Design as styling 10 2 3 Design as process 8 14 4 Design as innovation 1 0 6 Design as styling 66,7 13,3 20,0 % Design as process 30,8 53,8 15,4 Design as innovation 14,3 0,0 85,7 a. 62,5% of original grouped cases correctly classified.

Total 15 26 7 100,0 100,0 100,0

References Bhattacharya, M. and H. Bloch (2004). Determinants of innovation. Small Business Economics, Vol. 22, No. 2, 155‐162. Brown, T. (2009). Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation. HarperCollins, New York. DDC (Danish Design Centre) (2003). The Economic Effects of Design. NAEH, Copenhagen. DeSID (2011). Design as a Company’s Strategic Resource: a Study of the Impacts of Design. Project FCT no. PTDC/AUR/70607/2006, FCT, Lisbon. Designium (2005). Modelling the Strategic Impacts of Design in Businesses. Final Report, Helsinki. Hayes, R. (1990). Design: Putting Class into ‘World Class. Design Management Journal, Vol. 1, No. 2, pp. 8‐14.

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José Monteiro‐Barata Kyffin, S. and Gardien, P. (2009). Navigating the innovation matrix: An approach to design‐led innovation. International Journal of Design, Vol 3, No. 1, pp.57‐69. Monteiro‐Barata, J. (1995). Inovação, Captura de Valor e Vantagem Competitiva: a Formulação de Estratégias Tecnológicas, Mestrado em Desenvolvimento e Cooperação Internacional, ISEG/UTL, Texto de Apoio n.º 13. Mozota, B. (2002). Design and competitive edge: A model for design management excellence in European SMEs. Design Management Journal Academic Review, Vol. 2, pp. 88‐103. Mozota, B. (2003). Design management: using design to build brand value and corporate innovation. Allworth Press, New York. Porter, M. (1980). Competitive Strategy. Techniques for Analysing Industries and Competitors. The Free Press, New York, Potter, S., Roy, R., Capon, C., Bruce, M., Walsh, V. and Lewis, J. (1991). The Benefits and Costs of Investment in Design, The Open University/UMIST, Report Dig‐03, Design Innovation Group, September. Raulik‐Murphy, G. (2008). An International Perspective, Paper Dylunium Cyrum, Design, Wales, Marseille, 26‐27, June 2008. Romão, L., Almendra, R., Dias, E., Monteiro‐Barata, J., Nevado, P., Urbano, P., Marcelino, J. Dias, J. and Gomes, F. (2007). An online survey’s design to capture Portuguese companies’ perspective of Design, Proceedings of the 2007 Conference of Defsa International Design Education, 3‐5 October, Cape Town. Roy, R. and Riedel, J.C. (1997). Design and Innovation in Successful Product Competition. Technovation, Vol 17, No. 10, pp. 537‐548. Teece, D. J. (1986). Profiting from technological innovation–implications for integration, collaboration, licensing and public‐ policy. Research Policy, Vol. 15 No. 6, 285–305. Verganti, R. (2009). Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean. Harvard Business Press, Boston.

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Using Strategic Alliances to Facilitate Community Based new Venture Creation Peter Moroz1, Bob Kayseas2 and Robert Anderson1 1 Hill/Levene Schools of Business, University of Regina, Regina, Canada 2 School of Business and Public Administration, First Nations University of Canada, Regina, Canada peter.moroz@uregina.ca bkayseas@fnuniv.ca Robert.Anderson@uregina.ca Abstract: In this essay we explore how strategic alliances (SA) between organizations and communities can be used to develop opportunities that are advantageous for both the corporation and the community venturer. In particular, Indigenous communities have access to significant amounts of natural resources and corporations need access to these. Thus, there is an urgent need to discover the factors that drive the creation of successful corporate/community alliances and how these may be used to create sustainable new ventures that serve both economic and social value creation. To do this we review theory through the lens of three distinct but interrelated perspectives: strategic alliances, entrepreneurship and community. We argue that a sufficient framework for informing corporate/community based ventures has not yet been devised. The article concludes with discussion concerning the potential for the weaving of factors/issues identified in the reviewed literature into a framework that will guide future research. Keywords: strategic alliances, partnerships, aboriginal entrepreneurship, community development, natural resources

1. Introduction How may strategic alliances (SA) between organizations and indigenous communities be used to develop the entrepreneurial capacity necessary for creating and exploiting economic opportunities for growth around the world? This is an interesting and relevant question considering the failure of market and government based actions to foster development in some of the world’s poorest communities (Stiglitz, 2012). It is also a question of great importance to key economic actors due to the observation that even as the global economies of nations become increasingly integrated, actors within the capitalist market system that drive growth are highly dependent upon localized processes and community structures when considering both supply and demand equations (Anderson, 1997 Beamish, 1997). Strategic alliances amongst firms, governments, NGO’s, supranational organizations and communities are identified as a vital means for addressing problems and/or challenges standing in the way of sustainable development (Anderson, 1997). Moreover, strategic alliances are one of the key preferred methods of community owned Aboriginal development corporations to gain access to human and material resources, expertise and specialized knowledge. A 2011 survey of Canadian community‐owned development corporations by the Canadian Council of Aboriginal Business found eighty‐ percent had at least one joint venture (CCAB, no date). There is an urgent need to discover the factors that drive the creation of successful corporate/community alliances and how these alliances may be used in the creation of sustainable new ventures that create both economic and social value. Entrepreneurship and the creation of sustainable new businesses are argued to be a great force for the creation of wealth and social justice. But this has not proven to be so among the poor of the world where market paradigms, theories and policies have failed resulting in a widening gap between the rich and the poor, not only between first world and third world nations, but also within the core of both (Stiglitz, 2012). The world faces new challenges that include, first and foremost, the need to find sustainable growth models that are effective for first world economies while improving the development vector of the majority of the human populations that dwell in depressed populations, regions and countries. Entrepreneurship that works for both is required. Second, as part of this transition from a Fordist paradigm to new forms of contingency based versions of capitalism, corporations are ascendant in filling the void previously left to other stakeholders. In order to successfully solve economic problems while sustaining growth, corporations (both profit and not for profit)

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Peter Moroz, Bob Kayseas and Robert Anderson must place new emphasis on the recognition of bridging and bonding capital amongst economic stakeholders at the community level. This requirement offers new opportunities for communities to engage in development activities that align with their particular needs through emerging market mechanisms. Alliances between communities and corporations show potential as vehicles for sharing the resources and experience through networks that are critical to developing the capacity necessary for facilitating entrepreneurship. But corporations must be aware of the nature and cohesiveness of existing community social capital to do so effectively. Understanding how to best exploit opportunity is an important issue to resolve especially as it relates to Indigenous communities with access or ownership of natural resources. The “reality today is that indigenous peoples still live upon some of the world’s most resource intensive lands” (Davis, 2012). The Assembly of First Nations (AFN) estimates that there is approximately $400 billion of “resource‐based economic activity across territorial lands in the coming years” and argues that building partnerships between First Nations, industry and government with tangible social and economic benefits flowing to First Nations communities will assist in eliminating the gap between First Nations people and other Canadians (2013). Outside of Canada, Sawyer and Gomez, (2012) and Langton and Longbottom (2012) have compiled detailed examples of cases that illustrate that resource extraction across the globe through multinational corporations is moving forward at a similar pace and scale. And the World is increasing recognizing the Indigenous right to participate meaningfully in the development of resources in traditional territories (Anderson and Barnet, 2006). Indigenous communities stand on the periphery of billions of dollars in investment with growing access to opportunities flowing from this massive expenditure. Our approach to answering the question how may strategic alliances (SA) between organizations and indigenous communities be used to develop the entrepreneurial capacity necessary for creating and exploiting economic opportunities is to explore it using three distinct but interrelated perspectives: strategic alliances, entrepreneurship and community. In this article we use a definition of strategic alliances put forth by Keasler and Denning (2009). Strategic alliances are “contractual business arrangements to pool resources and engage in a new business venture with or without equity investment”. Also, two other research paradigms that have been developed for understanding and guiding community based venture development are reviewed and critiqued. We argue that a sufficient framework for informing corporate/community‐based ventures has not yet been devised – specifically within the context of the indigenous community. Through review and analysis of these three perspectives we propose a framework for future research.

2. Understanding strategic alliances 2.1 Overview of strategic alliances Strategic alliances among firms pursuing a variety of global economic objectives have produced a growing interest in the phenomenon (Beamish and Delios 1997; Hagedoorn and Schakenraad 1993, 1994). At its most general theoretical level, research on SA may be summarized as the investigation of how firms gain competitive advantages through collaborations with external organizations. Scholars argue that SAs are characterized by the paradoxical situation in which a firm hold a particular resource the development of which dependent upon external cooperation. The scholarly work on SA’s extends the resource based view of the firm from an internally focused organizational perspective to one that regards strategy and decision making behaviour as embedded within a wider social structure developed gradually over time: a process that provides a barrier to imitation (Barney, 1996). Central to this stream is the concept of social networks and the inter‐ organizational relationships that they represent. The literature is diffuse covering a wide range of areas inclusive of but not limited to international business, technology/innovation and foreign market entry. Due to the distinct nature of alliances (and their diverse set of objectives), evaluation of performance is not easily undertaken (Anderson, 1990). Issues such as control, cost reduction, bargaining power, knowledge absorption/leadership/exploitation, instability and exit are prominent areas of inquiry. Typically, SAs have been analyzed from either an economic or organizational perspective, but as noted above, ontology’s that involve the study of social network ties have arisen as a dominant theoretical viewpoint. Despite the growing interest in development and the significance of

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Peter Moroz, Bob Kayseas and Robert Anderson entrepreneurship to growth and renewal, the relationship between it and strategic alliances has received little research attention. While inter‐organizational studies involving firms are by far the most prevalent, there is a small but growing set of scholarly works that does look at the impact of SA, partnerships and joint/new ventures arising from interactions between corporations and communities. To date, much of the work on community/corporate interactions has focused on corporate social responsibility and environmental sustainability. For communities, alliances with corporations can be a means for acquiring necessary resources, capacity building, ensuring environmental protection, jobs and new venture creation. Partner selection, power structures/control, governance structures, institutional development and learning/knowledge transfer/knowledge protection have been staked out as significant requiring further study (Peredo and Chrisman, 2006). For corporations, alliances with communities may provide access to rare resources, new markets (sustainable business), supply chains/labour and critical licenses to operate through corporate responsibility measures and local investment (Walters et al. 1994; Newman & Chaharbaghi 1996; Varadarajan & Cunningham, 1995; Anderson, 1997). Issues identified as significant to the establishment and operation of strategic alliances from the corporate side include but are not limited to, cultural boundary spanning, establishment of trust, CSR, community investment, capacity building, social capital generation and corporate motivation (Kapelas, 2002; Loza, 2004; Seitanidi & Ryan, 2007). Definitions of strategic alliances are abundant and varied (Tsang, 1998; Takec and Singh, 1992). Gulati (1998: 293) provides one of the most cited definitions stating that SA are “voluntary arrangements [amongst two or more organizations] involving the exchange of products, technologies or services.” He goes on to state that SAs “can occur as a result of a wide range of motives and goals, take a variety of forms and occur across vertical and horizontal boundaries.”

2.2 Types of strategic alliances Barney (1996) groups strategic alliances into three categories: non‐equity alliances, equity alliances and joint ventures. A non–equity alliance develops a cooperative arrangement between organizations through contracts not the creation of independent organizations or cross‐equity positions. Equity agreements involve an equity investment made by one organization in the other organization, in addition to on‐going activity involving shared risks and rewards. Finally, a joint venture is developed when two or more organizations invest individually to create an independent organization. The investing partners are compensated by the profits of the independent organization. Lorange and Roos (1992) group alliances into five categories: informal agreements, contractual agreements, equity agreements, joint ownership and mergers and acquisitions. Informal agreements allow each organization to control its own activities without shared control, ownership or risk. Contractual agreements are legally documented alliances of shared risk and return with stated conditions and expectations. Mergers and acquisitions occur when one organization buys another.

3. Entrepreneurship: Process and context 3.1 Does entrepreneurship theory inform corporate/community alliances? Entrepreneurship researchers tend to focus on certain areas of the entrepreneurship phenomenon, for example, the characteristics of the entrepreneur, opportunities they respond to, the strategies they form, or their resource acquisition and organizing processes (Busenitz, et al., 2003). While research in these areas has contributed to the knowledge base on the entrepreneurship phenomenon (Bull and Willard, 1993; Low and MacMillan, 1988; Low, 2001), the rather narrow focus has resulted in a lack of a widely accepted general theoretical framework for entrepreneurship (Hindle, 2010). Moreover, an important aspect of choosing one theoretical framework from another involves the level of analysis under scrutiny. Two points made by Davidsson and Wiklund (2001) concerning entrepreneurship research are critical to the discussion within this paper. First, entrepreneurship research is dominated by micro‐level of analysis, predominantly using the firm or the individual as the level of analysis. Secondly, Low and McMillan (1988) suggest that approaches to researching the entrepreneurship phenomenon should incorporate both the micro and macro levels of analyses because of the complexity of the entrepreneurship phenomenon – it takes place and has effects on different levels of societal levels simultaneously. However, their recommendation “seems to have received limited following” (Davidsson and Wiklund, 2001). The inability of scholars to better marry the individual and

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Peter Moroz, Bob Kayseas and Robert Anderson environmental approaches to entrepreneurship is particularly relevant to research focussed on the intersection of community/corporate alliances and entrepreneurship. In a book edited by Schoonhoven and Romanelli two questions were posed. The first was, ‘what are the conditions, including economic, cultural, and even personal situations and proclivities that prompt the founding of new organizations?’ The second was, ‘what are the real and important outcomes of entrepreneurial activity?’ (Schoonhoven and Romanelli, 2001). These questions lie at the heart of our paper. Greater understanding of the conditions that are conducive to the birth of new ventures is vital to understanding what factors within communities affect any entrepreneurial process no matter the progenitor. The context under observation should not be limited to reductionist tendencies to focus specifically upon a narrow level of analysis, but as informed as possible by including individuals, groups within communities and entire communities acting through their governing bodies and the social, market and political environments in which they exist. Additionally, in a study outlining the ‘issues and processes’ involved in the creation of an infrastructure that facilitates and constrains entrepreneurship, Van de Ven pointed out deficiencies in entrepreneurship research exist when its study only focuses on the characteristics or behaviors of an individual entrepreneur and it treats the ‘social, economic, and political infrastructure for entrepreneurship as externalities’ (Van de Ven, 1993). Steyaert and Katz (2004) offered their insights into the implications of conceiving entrepreneurship as a social rather than economic phenomenon. Three key points raised by the authors are pertinent to this discussion. First, to fully appreciate entrepreneurship as practiced in our societies and communities, entrepreneurship researchers need to think more broadly and sample more diversely among people and organizations. Studies such as the Global Entrepreneurship Monitor (GEM 2001) capture only one type or situation of entrepreneurship. Second, entrepreneurship as a process or interaction is far more widespread and ubiquitous than current approaches to research suggest. Current measures of entrepreneurship are too coarse grained, looking only at business creation or even just high growth business creation, and missing the myriad fine‐ grained forms of entrepreneurial interaction taking place in society (Steyaert and Katz, 2004). The fundamental issue of locality, that is that entrepreneurship has a spatial characteristic has not yet been fully appreciated (Steyaert, 2007). Third, entrepreneurs do not operate in a vacuum (Gartner, 1985) they are in constant ‘dialogic’ ‘within an ongoing process and within an environment that has specific characteristics’ (Bruyat & Julien, 2000). The phenomenon of entrepreneurial behaviors cannot be ‘meaningfully separated from the social and economic context in which those behaviors occurred’…a new venture in the United States involves a very different set of dynamics than does the creation of a new venture in China or in Kenya’ (Bloodgood, Sapienza, Carsrud, 1995). It seems reasonable to assume that in order to understand the factors that drive the creation of successful corporate/community alliances and the potential for new enterprise creation, we need modes of analysis that conceptualize, articulate and operationalize different levels of analysis, i.e. the individual and the firm. These broader units of analysis must be understood within a range of contextual factors that are, in effect, structurally intertwined with the overarching environments in which social communities exist. We argue no such framework exists, which is adequate for exploring entrepreneurial opportunities and activities borne from community/corporate partnerships.

4. Communities 4.1 The concept of community The core conceptual idea of community is intuitive. Communities consist of people within a delimited boundary (not necessarily spatial), who share common beliefs and values. Community members adhere to commonly agreed to behavioral constraints, have direct and many‐sided relations (not mediated by institutions), and have an obligation of loyalty and reciprocity (Taylor in Lorenz, 1992). Another important aspect of ‘community’ is related to its literal meaning – and is expressed well by Plant (1974) using the German language: Gemeinde and Gemeinschaft. Gemeinde refers explicitly to the local community – a place or locality. The other term, gemeinschaft has a much broader meaning – it refers to the ‘quality of the relationship of people in a particular place or locality or belonging to a particular group’.

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Peter Moroz, Bob Kayseas and Robert Anderson Therefore, residence community = Gemeinde, and moral community = Gemeinschaft (Plant, 38). Understanding community in the first sense recognizes the spaces in which people interact, as in community school, community centre, and community church. While the conception of these facilities does denote a locality, they also convey a sense of the moral character of the concept of community. This moral aspect of community is integral to understanding the identity of communities around the world, especially those of Indigenous people. Indigenous writers have expressed the ‘multiple identities’ of Indigenous people that are formed around the concept of community – both residence and moral. For example, Smith (1999) described the manner in which the Maori create identities by naming ‘the mountain, the river, the tribal ancestor, the tribe, and the family’. In this manner the Maori locate themselves geographically, politically, and genealogically. Gerald Taiaiake Alfred, a Mohawk from Kahnawake, Quebec, characterized the Mohawk identity as, ‘localised Kahnawake, national Mohawk, broader Iroquois, and pan‐ Native’. He elaborated by stating, ‘Thus people of Mohawk descent who live in Kahnawake have a multi‐ layered identity which incorporates each one of the ‘communities’ he or she has inherited, and which also includes the broader Native – or the more common ‘Indian’ – identity flowing from their racial affiliation and identification as the indigenous peoples of North America’ (Alfred in Smith, 1999, 126). The identities that Indigenous people assume incorporate all aspects of both the ‘residence’ and ‘moral’ characterizations of the concept of ‘community’. These are important issues – not only because of the collective nature of Indigenous communities – but also because of its delimiting and boundary defining nature. As strategic alliances by their very nature seek to implement processes or activities pursued by individuals or groups that bridge, link, or potentially even blur the nature of two or more separate boundaries (Aldrich and Herker 1977), the concept of community ‐ shared sets of mental models that represent a group of peoples’ culture, goals, language and interests and that localizes the way that problems are defined ‐ is highly significant to how novelty is processed and entrepreneurial opportunities viewed and seized (Tushman 1977; Weick 1995; Carlile 2002).

5. A framework for corporate / community entrepreneurship 5.1 Approaches to community based entrepreneurship The development of a theoretical model focused on the community as a unit of analysis has been performed by a variety of scholars for a variety of purposes (Hindle, 2010; Johannisson & Nilsson, 1989; Johnstone & Lionais, 2004; Peredo & Chrisman, 2006) and has been pointed to as an area of important future research (Steyaert & Katz, 2004). Two key ‘models’ are presented in this section as a means of emphasizing 1) the importance of studying the community’s potential as a centre for entrepreneurial activity, and 2) identifying the processes best suited to the context of corporate/community entrepreneurship through exploration of the extant conceptual domain(s). Through analysis of these models and the strategic alliance literature, propositions for advancing a framework for alliance based community entrepreneurship are advanced.

5.2 Macro perspectives of community entrepreneurship Regulation theory has been specifically linked to indigenous community context and the pursuit of entrepreneurial ventures within the works of Anderson (1995, 97). Regulation theory, a contingency perspective, was propagated in response to the failure of modernization and dependency theories to explain the ‘actual outcomes’ in real world situations. It emphasizes a growing recognition of contingency and human agency in theories of capitalist development that had before been unrecognized (Anderson, 1995, 97). The attractiveness of the contingency perspective of development is explicitly different than both the modernization and dependency perspectives in two ways. First, the outcome of development efforts depends on the circumstances and actions of the parties involved ‐ it is not preordained by some ‘fundamental’ law of capitalism (Anderson, 1997, 1488). Secondly, contingency approaches emphasize the existence of multiple and diverse pathways to development (Wiarda in Anderson, 1997). A people’s culture, values, history, and resources shape pathways to development that are not totally dependent on the ‘centre’ or on a unilinear path already trod by developed countries. Thus, regulation theory is a new approach to understanding development that is respectful of the notion that local development can integrate into the global economy while maintaining unique characteristics of particular regions (Anderson, Dana, Dana, 2006).

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Peter Moroz, Bob Kayseas and Robert Anderson Anderson, (1995) describes three central concepts of regulation theory – regime of accumulation (RA), modes of social regulation (MSR) and modes of development (MD). Quoting Peck and Tickell, Anderson defines RA as; The dominant mode of economic growth and distribution. Elements of the accumulation system include the conditions of production (such as the amount of capital invested, the distribution of capital among the various branches and the norms of production) and the conditions of consumption (Anderson, 1995, 4). Thus the RA describes how capital moves through various stages, from production, circulation, consumption and distribution. MSR emerge in the context of the RA, currently the merging flexible regime. Modes of social regulation provide the structure, laws, policies, institutions (with their own sets of rules and regulations), and norms that allow RA to grow and expand. MSR are made up of ‘a series of formal and informal structures of governance and stabilization ranging from the state through business and labor associations, to modes of socialization which create ingrained habits of behavior’ (Anderson, 1995). Community culture, values, practices and goals impact the nature of an MSR meaning that they can and do vary by community, so long as they are still responsive to (by accommodating, modifying or resisting) the overarching RA The third concept, modes of development, is essentially the ‘coupling’ of the regime of accumulation (RA) and a MSR. MD may differ from community to community within a dominant RA as they are dependent upon localized MSRs. The biggest challenge with adopting regulation theory as a theoretical framework is the lack of clear means of operationalizing a research program within the tenets of the paradigm. The framework is simply much too broadly focused and without specificity that allows for a finer grained examination of community and corporate contexts. The strength of Anderson’s model, one that is specifically germane to corporate/community entrepreneurship, is that boundary spanning is found to be an underlying theme. We believe that he implies that boundary spanning is a potential mechanism for operationalizing how social modes of regulation may interface with the dominant regimes of accumulation so that “economic value” is properly defined, articulated and understood amongst community and corporate stakeholders in order to better reach a socially acceptable market for exchange. This is an Indigenous community specific concern. A number of authors have contributed to understanding the range of factors that have resulted in indigenous community social modes of regulation that are in conflict with the dominant regime of accumulation in Canada (Boldt, 1993; Helin, 2006, RCAP, 1996). For example, Canadian government policy that led to legislation, like the 1876 Indian Act formally acknowledged the intent to remove the cultural identity of Indigenous people and communities. There was no room for traditional societies beliefs and values in the modern world. The means to achieve the removal of the “Indian” from indigenous peoples involved the institutionalization of laws and policies like residential schools, ban on practicing traditional ceremonies, and the banning of selling goods off‐ reserve (RCAP, 1996). Contemporary Indigenous communities now contend with low rates of human capital (primarily due to low education attainments and high unemployment) and very few entrepreneurs. In addition, after years of suppression under the passive welfare system, entrepreneurs represent a new phenomenon in many Indigenous communities. They have often no role models or older generation entrepreneurs to facilitate the generation of the entrepreneurial spirit (Cachon, 2000). Thus boundary spanning provides an opportunity for linkages to be created between indigenous communities and corporations, as well as supra‐national organizations, the state, and the civil sector.

5.3 Meso perspectives of community entrepreneurship In a recent article, Hindle (2010) suggests and implements a ‘diagnostic system for assessing the influence of community factors’ on the ‘conduct and outcome of any proposed entrepreneurial venture’ (599). It is designed to provide to a researcher a tool to conduct a general assessment of the entrepreneurial potential of the whole community in its current state. Hindle’s model contains six principal domains: three under the headings of “generic structural factors” and three under the heading “generic human factors.” These form the two pillars that hold up the bridge: a metaphorical pathway(s) for movement between understanding the specific factors that define the community context and the entrepreneurial process(es) emphasizing that success is contextually grounded to that community. The cross braces of the model strengthening the pillars of the structure are programs and facilitation exercises designed to strengthen human resources, and tools needed to augment required physical resources. Hindle specifies the nature of the entrepreneurial process being contemplated within the community and proceeds across 11 stages and then provides a highly structured method of analytical procedure (please see Hindle, 2010 for a full accounting).

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Peter Moroz, Bob Kayseas and Robert Anderson Although Hindle provides a means for conducting a dispassionate evaluation of the aspects of community context germane to new venture creation, there are theoretical, conceptual and structural issues that dismiss it as an adequate framework for viewing corporate/community entrepreneurship. First, Hindle foregoes the prescription of any ontological conditions or theoretical foundations but instead chooses to set general categorizations of his domains of evaluation with no real hierarchy, classification (distinctness) or statement of relations among concepts within a set of boundary assumptions and constraints (Bacharach, 1989). This results in a model that is only an approximation of theory, and not theory itself (Merton, 1967). Additionally, the specificity and focus of Hindle’s Bridge removes the marketplace from the examination of the community/corporate context. One cannot examine entrepreneurship within the context of strategic alliances made between corporations and communities without taking into account the multitude of marketplace factors that can impinge or facilitate successful alliance outcomes. Although ‘Hindle’s Bridge’ is thus found to be inappropriate for building a framework for the exploration of community/corporate entrepreneurship, it does provide a conceptual touchstone for aligning it with Anderson’s development framework: boundary spanning. Hindle goes so far in emphasizing the importance of boundary spanning that he states that it is the key analytical prescription of the entire diagnostic system being proposed” (Hindle, 2010). At its simplest, boundary spanning has ‘emerged as a tool by which to establish the identity of an organization, determine its interaction with the environment, and understand the way in which knowledge is acquired, transferred and utilized’ (Hindle, 2010). Aldrich and Herker (1977) defined two primary roles of boundary spanners, information processing and external representation (218). Information enters the organization from the external environment through boundary roles and the boundary roles than link the organization to ‘environmental elements’ (Aldrich and Herker, 218). Leifer and Delbeqc (1978) define a boundary as, ‘demarcation line or region between one system and another, that protects the members of the system from extra‐systemic influences and that regulates the flow of information, material and people into or out of the system.’ The concept of boundary spanning is an important one given the nature of relationships to ‘outsiders’ within Canadian Indigenous bands. However, it is a concept that has not been examined in the Indigenous context as yet. Also, there is little explicit reference to boundary spanning in the extant entrepreneurship literature. The scholarly treatment of the concept in entrepreneurship related articles often assume that entrepreneurs automatically engage in boundary spanning activities thus the term gets confused with ‘closely related but distinguishable concepts’ (Granovetter, 1979; Aldrich and Zimmer, 1986 – both in Hindle, 2010). While the extant entrepreneurship does not make explicit references to boundary spanning several authors describe processes that are closely linked (for example, Gartner, 1985; Steyaert, 2007). There is ‘growing tentacles’ from organizational research into the entrepreneurship discipline with direct reference to boundary spanning as a recognized and useful concept (Hindle, 2010). One manner organizations maintain legitimacy in the external environment is through the information provided by boundary spanners to important ‘client groups’ (Aldrich and Herker, 1977, 220). That concept in isolation of other boundary role functions is a valuable asset given the often‐conflicting nature of the relationship between Indigenous bands and corporations, the Canadian government and society. A boundary spanner that can achieve fruitful relationships with external stakeholders may lead to opportunities that otherwise may not exist. As boundary spanning is directly and indirectly prominent in both scholarly works, its eminence to the development of a framework for explaining corporate/community entrepreneurship is readily observed.

6. Discussion The review of the extant literature on strategic alliances, entrepreneurship and community form the basis of a research agenda focused on answering the question, “How may strategic alliances (SA) between organizations and indigenous communities be used to develop the entrepreneurial capacity necessary for creating and exploiting economic opportunities for growth around the world?” The search for existing theoretical frameworks that might offer insight into how best to pursue answers to this question – answers that can contribute to both the academy and the indigenous community – led the authors to review Regulation Theory (Anderson; 1997, 2006) and Hindle’s Bridge (Hindle, 2010). Both theoretical frameworks make valuable contributions to the knowledge base of regional development (regulation theory) and community entrepreneurship (Hindle’s Bridge). However, taken in isolation each does not facilitate the operationalization of a research program that is articulated within this article. However, the analysis within each, regulation theory and Hindle’s Bridge, has drawn forward a set of beginning conceptual points with which we can begin charting an informed research path. Paired with the findings from a high level review of literature of strategic alliances, entrepreneurship and community, the conceptual domain defined as boundary spanning stands as a

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Peter Moroz, Bob Kayseas and Robert Anderson potentially profitable means for distinguishing a critical component of the process of new venture creation from within a community/corporate alliance context. This is particularly apparent when examined within the specific and rather unique context of the Canadian indigenous community. Distinct from the conceptual domain of social networks, which focuses more so on the precise nature of personal relationships and the value/resources derived from them, boundary spanning appears to be a means for understanding community like processes of production and/or market processes of exchange (Levina and Vaast, 2006) while still retaining an interrelationship required for theory building.

7. Conclusion Busenitz et al., (2003) argue that moving entrepreneurship research into the study of interrelated dimensions represented by the individual, opportunity, modes of organizing and the environment will define the field and enhance its legitimacy. With respect to new venture creation derived from a community/corporate alliance context, the concept of boundary spanning is posited as a means for achieving this synthesis through the activities of boundary spanners, governed by the very core concepts relevant to both alliances and entrepreneurship: resource flows, information flows and the management of uncertainty through the establishment of trust amongst groups and organizations with well defined identities and diverse systems of beliefs and values. How individuals and teams within communities and corporations work to span boundaries across markets, suppliers, competitors and the environment in general to establish new ventures may provide a better understanding of the entrepreneurial process (Gartner 1985) and better frame its importance to developmental economics as a socially enacted and inherently human activity.

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Senior‐ & Juniorpreneurship: An Intergenerational Approach in Engineering and Entrepreneurship for Value Creation Bernd Neutschel1, Olaf Gaus2, Matthias Raith2 and Sándor Vajna1 1 Institute for Machine Design, Chair of Information Technologies in Mechanical Engineering, Otto‐von‐Guericke University of Magdeburg, Germany 2 Faculty of Economics and Management, Chair of Entrepreneurship, Otto‐von‐Guericke University of Magdeburg, Germany bernd.neutschel@ovgu.de gaus@ovgu.de raith@ovgu.de vajna@ovgu.de Abstract: This paper examines how the generation of entrepreneurs 50+ should be addressed in order to raise their interest for improving their skills, and how young entrepreneurs and students can profit from the seniorpreneurs’ expertise in production processes and market knowledge as well as from their networks. To promote the promising synergies arising from the collaboration of young and elderly entrepreneurs a project was initiated that combines an integrated product development with business plan design support. Prospective entrepreneurs with industrial experience (seniorpreneurs) and innovative product ideas are matched with multidisciplinary student teams to generate a going‐to‐market prototype as a basis for starting new businesses. From the standpoint of research and development the balance is excellent with several promising product innovations and business plans for entrepreneurial implementation. The perspective of science and technology transfer demands an urgent desideratum to bring the accumulated value potential into the market. Accordingly, one can identify initial trends that illustrate and underline the growing social as well as economic importance of seniorpreneurs. Already one third of the newly formed companies is currently built on the initiative of 50+ entrepreneurs, i.e., founders who are 50 years and older. If one tries to weight the start‐up‐relevant profile characteristics that have high relevance for successful entrepreneurial acting, it becomes evident that the level of individual education and training plays a crucial role. As a consequence, one can expect future academics to be not only of great importance for research and development, but that they will also play a crucial role later on in their career as high‐expectation entrepreneurs. These resources provide both general entrepreneurial know‐how as well as specific methods and tools to determine the prospective success of a strategically planned entrepreneurial start‐up. This aspect is crucial, as older entrepreneurs often tend to cancel the creation process, if the performance targets are in question (Werner et al, 2008). Moreover, they will wish to make this decision as early as possible before starting a business. Keywords: value creation, product development, entrepreneurship, process engineering

1. Parallelizing product development and business planning ‘SeJu’ (Senior‐ & Juniorpreneurship) is a university‐based project that facilitates technically oriented start‐ups of founders with a professional, yet non‐entrepreneurial background. Specifically, SeJu offers the possibility to develop product ideas technically while, at the same time, constructing a business plan for a firm to successfully implement a mature product on the market. The project extends the intensive collaboration since the year 2005 at the University of Magdeburg in Germany between the chair of Information Technologies in Mechanical Engineering of the Faculty of Mechanical Engineering and the chair of Entrepreneurship of the Faculty of Economics. Taking advantage of the synergies already mentioned, participants obtain the opportunity of learning how to create high‐growth start‐ups (Neutschel et al, 2013). The design of the ‘SeJu’ project is inspired by the so called ‘Clinic Program’, developed by the Harvey Mudd College in the U.S. It’s considered to be an “extraordinary program of collaboration between industry and Harvey Mudd College that has been a hallmark of this institution for close to 50 years, engages juniors and seniors in the solution of real‐world, technical problems for industrial clients.” Even the organizational teaching and learning process as well as research and transfer are designed quite similar although both initiatives were raised independently from each other (HMC, 2012). Also to mention in this context is the ‘Partnerships for Innovation Program’ which has been started and funded by the National Science Foundation. Although in the meanwhile the program has been discontinued it serves pretty well as another model for how to “stimulate the transformation of knowledge created by the research

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Bernd Neutschel et al. and education enterprise into innovations that create new wealth; build strong local, regional, and national economies; and improve the national well‐being” (NSF, 2011). To get the process started a seniorpreneur actively has to be determined by acquisition who offers a technical based product idea to SeJu that is going to be proved, as well as assessed by the project team concerning it’s implementation options. Once the test results confirmes a high level of technical and economic quality of the idea it comes to a procedural process that helps to consider whether one may expect an entrepreneurial opportunity in case of a product launch. In order to get an idea of how the development process proceeds at SeJu, it can be briefly described as follows (Figure 1):

A seniorpreneur is applying with a technical product idea.

The idea is evaluated with the knowledge of the participating science departments and checked for viability.

After having accepted the project an interdisciplinary team of students is put together and joined with a seniorpreneur.

Technical product development and business plan design are running in parallel.

The involved seniorpreneur monitors the progress of the project as an expert.

Product concept and business plan are developed.

Results are evaluated by members of the academic staff.

By working together on a development task that is meant to be technically and economically realized, participants grow as an entrepreneurial team despite the differences in knowledge and age.

In addition to business plans and product prototype a multi‐disciplinary entrepreneurial team has been built, ready to start a well planned and promising product‐to‐market strategy.

Figure 1: The SeJu project process in general at a glance The product creation process is based on the principles of Integrated Product Development (IPD), (Vajna and Naumann, 2001). IPD requires a consistent vision of the entire product life cycle, meaning that the interaction between product and process is paramount. As a consequence, the product developer is faced with the task to synchronize the creation of a product with the production process all in one. The derived goal is to create a consistent product, while ensuring a demand‐oriented production, use and disposal. These principals are based on different views on the product to be developed. This allows the creation of all the essential features of the product and its required forms. On the functional sector all key items are permanently controlled with a view to criteria like form, function, performance, manageability, reliability and security, value for money, manufacturing ability, maintainability and sustainability.

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Bernd Neutschel et al. This necessarily requires engineering design methods and tools as Blanchard (Blanchard et al, 2004) describes it with special reference to its integration in process simulation. The embedded process was generally described by Clark, Fujimoto (Clark and Fujimoto, 1991) by regarding four major stages of development: concept development, product planning, product engineering, and process engineering as well as the critical linkages within and across them. The special feature of SeJu is that the process just described is duplicated and connected in parallel in terms of running the product and business development at the same time taking into account the critical linkages. A prerequisite for being able to capture the high‐growth potential of promising start‐ups was a prior, completed R&D project with the title “High‐Expectation Entrepreneurship” (funded by the German Ministry for Education and Research from 2008‐2010). The exploration and simultaneous implementation in cooperation with actual start‐up projects and early stage companies was aimed at bringing the latter into a high‐growth phase right from the outset. One of the most important results of this project was to trim start‐up enterprises already in the phase of business planning to consequently exploit all analyzable entrepreneurial opportunities (Raith, 2011). Nevertheless, even if a start‐up company succeeds in bringing an innovative product to the market, there still remains the question regarding its profitability. On the one hand, “under modern conditions of competition, it is becoming increasingly hazardous not to innovate. The firm that does not maintain a program of managed innovation can quickly find itself behind competition” (Yoon and Lilien, 1985). On the other hand, the same authors point out that “a survey of 148 companies... indicates that only half of the companies have achieved successful performance in two thirds or more of their new industrial products. In a study of 122 industrial product innovations... of every 100 products that are fully developed, only 60 become a commercial success.” This describes a fundamental dilemma that “New Product Development speed is critical, because product life cycles are shrinking and because obsolescence is occuring more quickly than in the past, while competition also has intensified“ (Langerak and Hultink, 2006). This finding calls for clarification. What are the reasons that 40% of the already developed products do gain acceptance in the market? Initial findings from SeJu suggest that it often concerns an optimization problem on the side of product development. This problem can be handled when the described process of “different perspectives” are integrated into the product development. On the other hand, a product’s success not only depends on communicating the unique selling point to the right audience but also on expanding the market to increase the number of potential customers. These two aspects have to be regarded simultaneously in order not to enter a hard‐fought contest with a new product but a still untapped market. This argument follows the idea of a “Blue Ocean Strategy” (Kim and Mauborgne, 2005) to which we refer to in the following. Previously must be noted, that as a consequence, sales numbers are increasing including the return on sales when using the right pricing strategy. The increase of yield is a condition for the continued success of the company. Only in case of sufficiently large corporate profits investments research and development can be made for the successful development of new products. To achieve this goal an establishment of a parallel development of the product and the market is helpful (Figure 2). This advantage also applies to the investment protection because this process of creating a product makes the product‐to‐market process calculable.

Figure 2: Parallelizing the IPD and business plan design process

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Bernd Neutschel et al. However, turning a concept into a profitable product is a challenging issue for all involved “and requires people from multiple disciplines to work together. New Product Development is a complex, collaborative process that requires coordinating the innovation efforts of many to meet a common goal“ (Brown, 2005). In order to find a reliable approach to implementation in practice, Aberdeen’s Product Innovation Agenda stands out as particularly important by emphasizing that “companies that are best‐in‐class at new product development and introduction tend to have (...) a senior manager (who) is directly responsible for overseeing the full process of identifying innovation, opportunities, engineering them, developing them into products, and bringing them to market.“ As a head of team this “senior“ is a necessary “coxswain“, who steers a project through the technical as well as the entrepreneurial process, while realizing the strategic and tactical success criteria that have been earlier developed in the business plan with the participation of the entire team. This is where business‐plan design comes into play. The finding that both an innovative product as well as the targeted market must perfectly fit together is insufficient. A third and mission‐critical component is the strategic positioning of the company itself. For a start‐up company, this implies that market, competition, customer, price and product distribution concepts already have to be worked out before communication on the product begins between the company and the market. This is essential, because strategic errors that are made at this stage of development like in the earlier stages of the product development cannot be reversed without large losses. On the other hand, in the strategic development of the relationship between company, product, and market there lies a business opportunity to transform a product innovation into a high yield value. To achieve this, business planning has to be taken seriously: it is always in reference to a future reality. Just as the creation of a new and innovative product design benefits from a view what future demands will be, entrepreneurs also should create new needs of tomorrow’s consumers. These are crucial aspects for the design of the company. A central question is, therefore, if the economic success of a company that comes with a new product can be achieved by business planning and whether this success is scalable? As the practical and theoretical support for start‐up companies in the previously mentioned project “High‐Expectation Entrepreneurship” revealed, entrepreneurial success can be designed and does not necessarily occur accidentally.

2. Start‐Ups without entrepreneurs If one views the combination of Integrated Product Development (IPD) and growth‐oriented business planning as a “recipe” for the success of start‐up companies, the question arises why start‐ups are not continuously being initiated through this approach. By taking a look back at the cooperation between IPD and business planning at the University of Magdeburg, one recognizes that the successful implementation of the concept requires a crucial “ingredient”, which all to often is missing at universities: The entrepreneur. The reason for this is known and, therefore, not surprising. Universities are excellent breeding grounds for new product ideas and their transformation into innovative products as well as their profitable commercialization through start‐ ups. Yet, to deliver products to the market, one must also have entrepreneurs. The people at universities mainly involved in innovation through research are students, graduates, and professors. Students generally have the primary interest to successfully finish their studies. They also argue that they lack the professional experience to establish a firm. “Not yet“ is an often‐heard response to the question whether they can imagine starting a business with a promising product idea. Academic staff, which includes graduates and professors, often has the preference to do research on other or further going innovations, rather than bringing them to the market by establishing a company. Overall, the result is that there is a significant lack of suitable entrepreneurs at universities. This does not necessarily mean that scientists should always develop into entrepreneurs. However, it would be useful to the intensification of good research and development projects if scientists are sensitized and trained for the identification of opportunities for value creation in science. Leaving aside the programmatic approach to such training at the moment, it is understandable that it requires appropriate incentives to bring a scientist to think about the possible economic value of his or her own research. Of course, at this point is the university itself into play because a successful implementation of incentive structures is very much dependent on what resources are available. It turns out more and more that among many reasonable resources two are most important. On the one hand, an entrepreneurial unit is needed to offer opportunity analysis for knowing whether a product‐to‐market project is commercially promising. On the other hand there have to be reliable contracts between the university and the scientists to determine to what extent scientists are involved in the

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Bernd Neutschel et al. transfer process of their research. But that does still not solve the problem that the implementation of a knowledge‐based project always needs an entrepreneur, which mostly has to be found outside the university. This topic, which recommends the creation of a Transfer Unit for Universities, requires a description of the reasons why universities should be entrepreneurially active at all and what strategic role knowledge transfer has as a ‘third mission’ in addition to research and teaching.

3. Professionalizing science transfer – universities’ third mission Since the beginning of the new millennium knowledge institutions are increasingly focusing on the utilization of scientific knowledge as a third mission. Particularly in European countries transfer processes of science‐ based knowledge, which provide the economy with innovations and capitalize generated know‐how of verifiable excellence, are progressively seen as an entrepreneurial challenge, especially for technical universities and research institutions. Funding options for entrepreneurial start‐ups as well as entrepreneurial growth are currently hard to tap. Firstly, scientists generally lack the necessary entrepreneurial interest in starting an own knowledge‐based company. Secondly, the majority of European universities today typically do not offer standardized equity instruments for university start‐ups. This not only describes a knowledge‐based start‐up problem, but also a not yet captured opportunity for universities to refinance their primary missions of research and teaching, enabling them to achieve a higher level of excellence. Therefore, we see the need for a new design of a transfer strategy that better fits the recommendations of scientists, research institutions, and firms. Our objective is to develop a proactive science transfer process that interacts directly with established firms in the market. This variation of knowledge transfer requires a strategic screening process to identify both economically utilizable science based innovations and the appropriate partner companies, in order to jointly develop and commercialize the entrepreneurial outcome. Utilization as a form of proactive recovery through knowledge transfer is of particular interest to universities in regions characterized by a fragmented economic structure, e.g. in the new German states. We find evidence that firms situated in this region often do not execute the entire R&D in‐house value chain, because of missing financial and human resources. As a consequence, the regional universities and research institutions are faced with the task of performing basic as well as applied research, in order to successfully initiate R&D processes. Hence, there is apparently a strong need for intensifying the approach of proactive recovery. A concept that helps reap the entrepreneurial benefits in this context very much depends on the screening and identification of qualified firms, which are equipped with a knowledge interface to be R&D compatible, and which are situated in the regional environment of a university. The relevance as well as the empirical based proofs are taken from a research study that focuses on the economic region of Magdeburg, located in the State of Saxony‐Anhalt in Germany, as an example for a fragmented economic structure (Proto et al, 2012). The survey examines three regional key industries and is divided into two phases. Phase one consists of face to face interviews with 37 experts in total. The selection of experts results from a previous analysis of relevant key players due to their active role in knowledge transfer processes that are relevant for the addressed key industries. After completion of phase one, the 330 most relevant regional companies were selected to participate in an online questionnaire. Within the framework of an efficient knowledge transfer in small‐scale economic regions knowledge networks are able to optimize the quality of R&D processes, which means that interacting network firms have a stronger access to research based innovations. On the other hand, research driven firms or company networks are more open towards science‐based knowledge offered by universities and research institutions. Since these company networks are often „invisible“, especially for universities, it is of great importance to systematically open up the network structures. In a next step, universities have the opportunity not only to become a part of regional economic network structures but also to set up project‐driven networks themselves.

4. R&D drives the science&technology transfer process Against this background and the will to develop a kind of transfer‐unit, one of the fundamental motivations for the development of the SeJu project was to firstly implement a suitable science‐transfer‐process and then to find individuals who would actually implement an entrepreneurial idea and who also had the appropriate skills. Over the years, sophisticated design and business plans had been accumulated in the archives of the

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Bernd Neutschel et al. cooperating academic chairs at the University of Magdeburg, waiting for their implementation. Once the idea was born to look for entrepreneurs outside the university, it developed into an agenda to implement already developed products and create further business plans. After this intellectual step was taken, one could not only imagine a business founder outside the university, but the idea of addressing existing businesses also evolved. Specifically, this meant that existing companies could integrate a new project in collaboration with the SeJu project in the form of a profit center, in order to take it further – as in an incubator – to market. Given this interaction between research & development on the university’s side and profitable product selling on the business side, there remains the question of who should receive the return on investment at the end? How could the yield be divided fairly among the interacting partners? And how would the university handle its share internally? For private research institutions, the incentive for their transfer activities is given, because it usually involves contract research from industry. Actors in public research institutions, however, are committed to their research and teaching and do not have the task to exploit their work economically, neither for themselves nor for their academic institution. However, the situation in the increasingly knowledge‐based society has changed: because new knowledge has become an asset and must be used as a resource in the value‐creation process of economies. It is, therefore, not surprising that politicians and business leaders are recently speaking of the “entrepreneurial university”. This term primarily means that, in particular, universities and research institutions are asked to find efficient ways to make research results available for economic use. Since public science in Germany is publicly funded, additional benefits should make such a transfer attractive for appropriate scientific institutions. In practice, universities and, specifically, faculties and scientists, must be able to draw their own benefit from scientific transfer. Moreover, they must be allowed to use the gained benefits (e. g., money) according to their own preferences. To initialize this function, two important requirements must be met: It is a necessary condition for any research transfer of public scientific research institutions to examine and to assess the value of innovation. The resulting knowledge concerning the extent and quality of the determined transfer potential can be made available for different utilizations in a next step. Possible transfer partners can be start‐ups from universities and research institutions, start‐up managers from the outside of universities and already existing companies interested in intrapreneurial opportunities, or third parties engaged in buying and selling research with high economic value on the world‐wide market.

5. Initiating value innovation by integrated product development Any successful utilization depends on the communication with transfer partners. Innovative products or services are not taken up by companies without reason. Promising co‐operations have to be analyzed in advance, especially regarding the willingness and the ability of a product‐to‐market strategy. This is important because not only a product has to be innovative in order to be successful, but also the market. In other words, the customer wants to understand why a product innovation is a value innovation (is a buy worth the money?). Indeed, it is necessary to evaluate the degree of innovation of a new or established product. This task has to be executed by the management of a company in order to assess technical risks. In terms of market success by differentiating a product by its novelty, however, the customers’ perception is relevant. As a consequence, the company‐specific perception of the degree of innovation of a new product has to be separated strictly from the customer’s perception. This makes sense particularly in such cases when entrepreneurial opportunities results from using familiar technology in new products, brought to selected markets where this technology is still unknown (Pahl et al, 2005). This idea was a significantly important basis for the development of what we later on consider to be an entrepreneurial „Blue Ocean Strategy“ as a method for sustainable development of profitable business models from the field of strategic marketing. The basic idea of the methodology is that sustainable success can only be achieved by the development of innovative new markets that offer the broad masses of customers and non‐customers truly differentiating and relevant benefits (Kim and Mauborgne, 2005). If these conditions are fulfilled for the customer, a carefully selected transfer partner would be able to use his company’s resources, e. g., production, sales and marketing, to realize a value creation process in short time.

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Bernd Neutschel et al. Regardless of which form of transfer is chosen, an experienced entrepreneur or manager is always required to design and implement the described process of value‐adding support (Figure 3).

Figure 3: Various methods of utilization of technology transfer

6. Mastering complexity in entrepreneurial decision making Considering the conditions for a successful transfer of science and technology, the complexity of the issue becomes visible. One of the most significant barriers to change public research institutions into a concept of entrepreneurial science is the necessary inertia concerning decisions (Warren et al, 2008). In this context, it is perhaps easier to understand why even young, capable, and well‐qualified students and researchers can be overwhelmed by the role of the entrepreneur in a science‐based start‐up company. Nevertheless, these concerns should be taken seriously, since they point to an interesting constellation. The experience in the SeJu project at the University of Magdeburg shows that product developers, economists, engineers, designers, or even psychologists, who are part of an interdisciplinary team (Figure 4) like to put their work under the guidance of an experienced seniorpreneur. Looking at the history of cooperation between the two involved university chairs, the balance can be described as outstanding and frustrating at the same time. From the standpoint of research and development, the balance is excellent with over 20 product innovations and business plans for entrepreneurial implementation. From the perspective of science and technology transfer, the net result is an urgent request to implement the accumulated value creation potential into the market.

Figure 4: Interacting SeJu team chart Can this unsatisfactory state of a science and technology transfer be improved by the integration of experienced seniorpreneurs? Recent experience arising from the SeJu project supports this assumption. Having managed to inspire an active entrepreneur for a start‐up idea, he integrated himself as „Head of Team“ and the „Decision Maker“ into the process of product and start‐up design. Right from the start of this project, it became evident that all people involved experienced a boost of motivation for their work. A major reason for this was that all parties realized that their development work went into an actual business establishment. A significant side effect is that students and staff learned about entrepreneurial thinking and acting for practice.

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Bernd Neutschel et al. One must not underestimate this aspect, because these experiences trigger in all people involved an ongoing process of reflection about whether they themselves could be future entrepreneurs. A project such as SeJu invites young and intelligent people from nearly all scientific disciplines to study the stresses and rewards of entrepreneurs, to become familiar with risks and threats, but also with the strengths and opportunities of entrepreneurial ideas.

7. Conclusion To become an entrepreneur or not equally depends on environmental influences and individual decisions. To make decisions is the high art that an entrepreneur needs to dominate and to exercise. The resulting experiences of good decisons in practise, together with the necessary knowledge of the theoretical foundations characterize the type of entrepreneur that is able to establish a concept of an “entrepreneurial university.” The evaluation results proof that the combination of elementary properties of seniorpreneurs on the one hand, in the form of entrepreneurial drive and experience, as well as science‐based knowledge on the other hand, controlled by a value‐oriented process, finally is able to lead to innovative entrepreneurial potential that is appropriate to create marketable products and to sell them profitably, whether in the form of start‐ups, profit centers or value transfers.

Acknowledgements The project „Senior‐ & Juniorpreneurship“ (SeJu) is funded by the European Social Fonds (ESF) and the Ministry of Science and Economics of the State of Saxony‐Anhalt, Germany. Key considerations on the issue of a “Entrepreneurial University” are due to the cooperation with the project “Universities as Enterprises” (Uni:prise) funded by the Ministry for Education and Research of the Federal Republic of Germany.

References Blanchard, B.S. (2004) System Engineering Management, Wiley, Hoboken, 3rd Edition, pp. 201‐206. Brown, J. (2005) New Product Development: Profiting from Innovation, Aberdeen Group (Business Value Research Series), pp. 1‐15. Clark, K.B. and Fujimoto, T. (1991) Product Development Performance: Strategy, Organization, and Management in the World Auto Industry, Harvard Business, Cambridge, pp. 101‐104. HMC, Harvey Mudd College (2012), [online], http://www.hmc.edu/clinic. Kim, W.C. and Mauborgne, R. (2005) Blue Ocean Strategy, Harvard Business School Publishing Corporation, Boston. Langerak, F. and Hultink, J.E. (2006) “The Impact of Product Innovativeness on the Link between Development Speed and New Product Profitability”, Journal of Product Innovation Management, Vol. 23, No. 3, pp. 203‐214. Neutschel, B., Gaus, O., Raith, M.G. and Vajna, S. (2013) “Value‐Focused Thinking – Combining Product Development and Entrepreneurial Product‐to‐Market Strategies”, Proceedings of the ASME 2012 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference, Chicago, Illinois, August 12‐15, 2012, Vol. 7, 9th International Conference on Design Education, ASME 2013, DETC2012‐70925. NSF, National Science Foundation (2012), [online], http://www.nsf.gov/funding/pgm_summ.jsp?pims_ id=5261. Pahl, G., Beitz, W., Feldhusen, J. and Grote, K.H. (2005) Konstruktionslehre, Springer, Berlin. Proto, A., Tani, S., Bühnemann, J., Gaus, O. and Raith, M.G. (2012) "Knowledge Networks and Their Impact on New and Small Firms in Local Economies", OECD Local Economic and Employment Development (LEED) Working Papers, OECD Publishing. Raith, M., Staak, T. and Wilker, H. (2011) “High‐Expectation Entrepreneurship ‐ Strategic Planning for High‐Growth Start‐ Ups”, von Kortzfleisch, H.F.O. (ed.), Scientific Entrepreneurship ‐ Reflections on Success of 10 Years EXIST, EUL Verlag, pp. 305‐322. Vajna, S. and Naumann, T. (2001) “Implementation of the New IPD Study Course at the Otto‐von‐Guericke University Magdeburg”, Design Applications in Industry and Education, Proceedings of the 13th International Conference on Engineering Design (ICED 01) Glasgow, pp 277‐284. Warren, A., Hanke, R. and Trotzer, D. (2008) “Models for University Technology Transfer: Resolving Conflicts between Mission and Methods and the Dependency on Geographic Location”, Cambridge Journal Regions, Economics and Society, pp. 219‐232. Werner, A., Faulenbach, N. and Brockmeyer, A. (2008) Das Gründungsverhalten Älterer. Eine empirische Analyse mit den Daten des Gründerpanels des IfM Bonn, Institut f. Mittelstandsforschung Bonn (ed.), IfM‐Materialien Nr. 184, Bonn. Yoon, E. and Lilien, G.L. (1985) “New Industrial Product Performance: The Effects of Market Characteristics and Strategy”, Journal of Product Innovation Management, Vol 3, pp. 134‐144.

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Cooperation Activities for Innovation: An Empirical Analysis Applied to Iberian Countries Sandra Nunes1, Teresa Costa1 and Luísa Carvalho2 1 Economics and Management Department, Business School, Setúbal Polytechnic Institute, Portugal and CMA/FCT/UNL 2 CEFAGE‐ University of Évora, Portugal and Economics and Management Department, Business School, Setúbal Polytechnic Institute, Portugal sandra.nunes@esce.ips.pt teresa.costa@esce.ips.pt luisa.carvalho@esce.ips.p Abstract: The entrepreneurial structure of Iberian countries is mainly composed by small and medium enterprises (SME). To overpass the actual economic crises it is important to innovate in order to add value to products and services. In this context, innovation can help these firms to become more competitive and cooperation for innovation activities could be a key factor, for instance, to gain economies of scale, share the risk and to achieve new knowledge. This paper studies the cooperation for innovation activities in Portugal and Spain, analysing how several variables, such as R&D intensity, firm size, marketing and sector can contribute to cooperative activities of firms. The research uses Community Innovation Survey (CIS 2008, micro‐data) to Iberian countries and applied a logistic regression to study cooperation activities for innovation. We believe that the results obtained for these two countries provide important clues concerning different arrangements of cooperation activities and highlight some innovation patterns. Keywords: innovation; cooperation; CIS; Iberian countries

1. Literature review 1.1 Cooperation for innovation According to Tether (2002:949), “Innovation cooperation means active participation in joint R&D and other technological innovation projects with other organizations. It does not necessarily imply that both partners derive immediate commercial benefits from the venture. Pure contracting out work, where there is no active participation is not regarded as co‐operation.” Several studies point out the positive economic impact of cooperation on the competitiveness of firms (Powell et al, 1999; Hagedoorn et al, 2000; Cassiman and Veugelers, 2002), as well on performance and knowledge spillover and on success in the development of new products (Miotti and Sachwald, 2003; Sivadas and Dwyer, 2000). Cooperation for innovation must assure absorptive capacity in order to firms’ benefits from external spillovers and increase the profitability of R&D cooperation (Cohen and Levinthal, 1990; Cassiman and Veugelers, 2002). Cooperation activities also contribute to increase firm’s capability and their ability to benefit from future cooperative R&D projects (Mark and Graversen, 2004). 1.1.1 Cooperation for innovation in Iberian countries The outbreak of the global economic crisis changed the performance of modern economies. Some of the effects of the crisis are the production decline, bankruptcy of many financial intermediaries and a huge fall of turnover in financial markets. The consequences for the firms are: profit decline and a lack of financial funds that affects the systems of innovation in different countries. This subject, innovation and cooperation for innovation remains understudied. Most of the literature on innovation and empirical studies fail to carry out sufficiently in‐depth investigations to examine innovation, particularly in Iberian Peninsula. During the period 2008‐2010 Portugal was one of the countries with higher propensity to develop innovation activities (60% of firms). Concerning product and process innovation the countries with higher propensity to develop product and process innovation were Cyprus (62% of all product and process innovative firms), Austria

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Sandra Nunes, Teresa Costa and Luísa Carvalho (51%), Slovenia (45%), Lithuania and Hungary (both 43%). Portugal and Spain revealed lowest propensity to develop this type of innovation. In Portugal, 20% of firms developed product and process innovation and in Spain 22% of firms developed this type of innovation. Table 1: Innovation activity and co‐operation during 2008‐2010

EU27 Belgium Bulgaria C. Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovakia Finland Sweden U. Kingdom Iceland Norway Croatia Serbia Turkey

Cooperation partners Enterprises with All types of From another From the United From China or innovation innovation EU27 Member States India activity, % of all cooperation with State, EFTA or enterprises other enterprises or Candidate institutions country % of all product and process innovative enterprises 52.9 26.5 11.4 3.1 2.0 60.9 42.3 23.4 7.1 3.2 27.1 22.4 12.8 3.0 1.8 51.7 34.2 20.9 3.8 2.8 54.7 39.7 : : : 79.3 24.3 8.2 2.2 1.5 56.8 42.1 30.0 3.0 1.8 59.5 28.5 17.6 6.9 3.0 : : : : : 41.4 22.3 5.3 1.1 0.5 53.5 36.1 16.2 6.4 3.7 56.3 12.1 4.0 1.0 0.8 46.2 62.3 37.8 7.3 5.5 29.9 29.1 20.6 5.1 4.4 34.5 43.3 25.6 3.9 3.9 68.1 32.2 27.2 7.0 6.0 31.1 43.2 17.0 2.2 1.9 41.5 18.5 13.1 4.5 2.7 56.7 33.5 13.2 3.2 2.5 56.5 51.0 30.1 5.5 2.9 28.1 33.5 15.6 3.0 1.9 60.3 19.5 8.7 1.8 0.8 30.8 24.1 : : : 49.4 44.7 34.8 7.6 6.0 35.6 34.7 30.0 4.8 3.4 56.2 39.8 27.5 12.2 8.9 59.6 38.8 22.2 10.6 6.8 44.2 : : : : 63.8 32.2 13.1 4.2 : 43.5 30.6 16.4 5.9 3.4 42.4 32.6 19.9 3.9 2.8 51.7 24.9 14.4 3.1 2.9 51.4 18.7 5.5 2.1 1.9

Source: Eurostat, 2013

1.2 Factors that affect cooperation for innovation 1.2.1 R&D intensity and cooperation for innovation R&D is an important input used to study occurrence of innovation activities (Cohen and Klepper, 1991, 1992; Unger, 2005; Okamuro et al, 2011). The intensity of R&D can result in different performance. For example, a large sector can achieve a certain amount of R&D with an average intensity and a small sector can achieve the same contribution of R&D with a high intensity. Usually the measure of R&D intensity is the ratio of R&D

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Sandra Nunes, Teresa Costa and Luísa Carvalho investment and sales or revenue, so the percentage of revenue that is reinvested (Nunes et al, 2012). In a managerial perspective, R&D intensity is recognized as a robust phenomenon linked with resource allocation and new product development (NPD) portfolio strategies (Freyre, 2006; Kloeber, 2007). In academic view, several researchers, primarily in the domain of economics, highlight the consistency of R&D intensity. This research focuses on the industry as a unit of analysis and made an effort to prove that R&D intensity exhibits less variance within an industry then between industries. The majority of these efforts are based on analytic models of R&D spending (Kamien and Schwartz 1978, Nelson 1988, Cohen and Klepper, 1996). 1.2.2 Firm size and cooperation for innovation The size is also a central factor in the study of innovation (Pires et al 2008; Carvalho, 2010; Nunes et al, 2012). Acs and Audretsch (2003) identify five factors which facilitate innovation in large firms: 1) the innovation process absorbs high fixed costs (Galbraith, 1956; Comanor, 1987); 2) only the large firms with market power can appropriate the economic return of R&D (Levin et al, 1987; Cohen and Levin, 1989; Cohen and Klepper, 1991, 1992); 3) investment in R&D is very risky; when small and medium size firms invest a high proportion of their resources in R&D they are vulnerable to the outcome of the R&D process. Furthermore, larger firms can maintain a diversified portfolio of innovation projects in order to reduce their overall risks of performing innovative activities (Pires et al, 2008); 4) scale economies in production may produce economies of scope for R&D and 5) innovation costs are higher, in relative terms, for a small firm than for a larger firm. Financing costs may be higher for smaller firms due to capital market imperfections. Other studies relate firm size with the number of patents confirmation that the number of patents raises with the size of the firm (Bound et al, 1984; Scherer, 1984). Additionally, some studies propose that the relative contribution of small and large firms to innovation depends on industry conditions and, such as, market structure (Acs and Audretsch, 1987; Dorfman, 1987). Attending to cooperation for innovation, some studies refer differences in size. Large firms frequently have an R&D department with an important role in product innovations, in internal and external cooperation. Small firms prefer partnerships and networks to overcome limitations such as the lack of R&D department and resources (Zakic et al, 2008). 1.2.3 Sector and cooperation for innovation There are some differences between manufacturing and the services (Pires et al, 2008, Sarkar et al 2008). The absence of homogeneity inside the sector justifies the division of sector according to the technology intensity (Tether, 2001, 2002; Pires et al, 2008). Manufacturing firms are divided into four sub‐sectors: high technology, medium high technology, medium low technology and low technology. The classification of the services firms considers both the nature of the technology used and the services that each subgroup provides to the market (Miles, 1994; Tether, 2002): Knowledge intensive and less knowledge intensive services (OECD, 2009). Concerning the relation of sector and cooperation for innovation, cooperation with external partners assume an important role specially, in the case of highly R&D intense sectors and for innovations that are radical or imply knowledge and skills that firms’ don’t hold internally domain (Bayona et al., 2001; Miotti and Sachwald, 2003). 1.2.4 Marketing factors and cooperation for innovation Attending to the competitiveness factors that affect market performance, this study consider as marketing factors: increase or maintain market share, introduce products to new customer groups and introduction of the products into new geographic markets. 1.2.5 Increase or maintain market share The firm’s propensity to innovate depends on several internal and external factors that include aspects such as research, information search activities, and methods to protect the inventions, design, production, distribution and marketing.

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Sandra Nunes, Teresa Costa and Luísa Carvalho Concerning the innovation effects of demand factors it can be assumed that high export shares of sales and degree of diversification stimulate the development of innovation activities (Felder et al., 1996; Kamien and Schwartz, 1982; Nelson, 1959; Wakelin, 1998). Since firm size is not uniform within an industry, the market share is also an important indicator of market structure. Similarly to what happens with the market concentration, the intensity of R&D tends to increase market share, however, can reduce dramatically when a firm captures the entire market monopoly. Some studies point out that innovating firms are more likely to collaborate compared to non‐innovating firms. The one exception is to help keep current customers, suggesting that non‐innovators are more defensive concerning the maintenance of market share. Additionally, the collaboration for non‐innovators are linked with sharing of R&D (Kitson et al, 2001). 1.2.6 Introduce products to new customer groups The development of new products is an exigent task. The teams involved in the development of new products are permanently seeking out external resources to overcome the learning curves related to new technologies and new markets (Schilling and Hill, 1998). Several authors studied the participation of the customers in development of products (Leonard‐Barton, 1995; Rothwell, Freeman and Townsend, 1974; Von Hippel, 1988). For Brown and Eisenhardt (1995) customer involvement in this development has given important contributes to enhance product concept effectiveness. However, other author’s don’t agree with this perspective (Wayland and Cole, 1997). For them one of the most important factors that limited the participation of customer in product development is related to the poor connectivity between customers and producers. Nevertheless, only some innovations create new costumers. Literature frequently refers to radical innovations as innovations that represent a new technology that result in a new market infrastructure. According to Garcia and Galantone (2002) when an innovation causes discontinuity at industry or market level it also causes discontinuities on the firm and customer level. When a radical innovation causes the appearance of a new industry, new firms and new customers also emerge for that innovation. So, radical innovations usually create a new demand that encourage new industries with new firms, competitors, distribution channels, and new marketing activities. Additionally, cooperation for innovation is a key variable to the success of the product innovation, and implies both internally cooperation between different functions (forming of teams of inter‐crossed functions) and external cooperation with other stakeholders (customers, suppliers, business partners, innovators, institutes, faculties, government, standardizing bodies, independent experts, etc.) (Zakic et al, 2008). 1.2.7 Introduction of the products into new geographic markets In a first phase firm recognizes that can be profitably sell a product in a new geographic market. Products for exports typically follow a similar pattern (Wells, 1971; Feenstra and Rose, 2000). Lin (2000) proposes a positive correlation between the decision of one firm to export and the export trend of neighbor firms. Additionally Bedi and Cieslik (2000) point out a relation between export concentrations of foreign industries and export volumes of local firms. Analyzing the relationship between cooperation for innovation and introduction of the products into new geographic markets, Tether (2002) argue that from a subjective firm perspective most firms still develop their new products, processes and services without developing formal cooperative arrangements for innovation with other organizations. Nevertheless, firms that engage in R&D and that are trying to introduce higher level innovations, such as, new products or services new to the market or to the firm, are more likely to engage in cooperative arrangements for innovation.

2. Hypothesis The literature review presented aims to explain the cooperation for innovation activities regarding, R&D intensity, firm size (size 08), marketing innovations (OMKTS, OMKTCG, OMKTGM) and sector. The research hypotheses are as follows:

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Sandra Nunes, Teresa Costa and Luísa Carvalho H1:

R&D intensity is positively related to co‐operative activities for innovation;

H2:

Firm size is positively related to cooperation activities for innovation;

H3:

Sector is positively related to cooperation activities for innovation;

H4:

Marketing is positively related to cooperation activities for innovation.

3. Data and methodology 3.1 Database and descriptive statistics The data source is the Community Innovation Survey (CIS 2008) for Portugal and Spain. The CIS takes place every four years in European countries in order to examine innovative activities in firms. The CIS is based on a harmonized questionnaire and survey methodology monitored by Eurostat. The harmonized CIS 2008 questionnaire (based on Oslo Manual, 1997) focuses on product and process innovation and looks mainly at the effects of innovation, sources of information about innovation activities and innovation expenditures. In line with our main goal, an analysis of factors that positively influence cooperation for innovation was made in Spain and Portugal. The study defines firms that undertake cooperative innovative activities using the following question from CIS 2008: During the three years 2006 to 2008, did your firm co‐operate on any of your innovation activities with other firms or institutions? This question allows for a yes or no answer. The selected sub‐samples are presented in table 2. Table 2: Samples by countries Sample (N)

Spain 5112

Portugal 2039

Table 3 presents the variables description. The dummies variables considered assume value 1 to the answers yes and 0 to answers no. In the case of the sector, the codification 1 refers to firms in manufacturing sectors and 0 refers to firms in services sectors. Table 3: Variables description Variable name Co

R&D intensity Size 08 Sector OMKTS OMKTCG OMKTGM

Description Dependent variable Dummy – firms that co‐operated with other firms or organizations in innovation activities Independent variables Ratio of intramural R&D expenditure in 2008 over Turnover in 2008 Qualitative ordinal with 3 categories (small, medium and large) Dummy – firms in manufacturing sectors Importance of increase or maintain market share – qualitative ordinal with 4 categories (not relevant, low, medium and high) Importance of introduce products to new customer groups – qualitative ordinal with 4 categories (not relevant, low, medium and high) Importance of introduce products to new geographic markets – qualitative ordinal with 4 categories (not relevant, low, medium and high)

Table 4 allows understanding the distribution of sectors in the samples. The manufacturing sector is, for both countries, the most representative, in Spain goes beyond 60%. Table 4: Sector classification by country Sector classification Manufacturing sectors Service sectors

Spain 3167 1945

Portugal 1130 909

Table 5 reveals the distribution of firms according to their size. Portugal and Spain present a high preponderance of small firms in the sample. In Spain, we have 56% of small firms versus 12% of large and in Portugal the percentage is 57% compared to 11%, as we can see the distribution is similar. Figures 1 and 2, present the information of tables 4 and 5, considering the relation between the variables observed.

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Sandra Nunes, Teresa Costa and Luísa Carvalho Table 5: Firm size classification by country Firm Dimension (size08) Small (=<50) Medium (>50 and =<249) Large (>=250)

Spain 2864 1622 626

Portugal 1161 647 231

Figure 1: Firm size vs Sector in Portugal

Figure 2: Firm size vs Sector in Spain

4. Empirical results The empirical study used a logistic regression to investigate the effects of a number of explanatory variables on a binary response variable (a variable which can take only two values, 0/1 or no/yes). In the present study, this response variable represents the presence or absence of cooperation in the innovation process. Logistic regression relies on maximum likelihood estimation rather than OLS estimation and is generally used to study this type of model. Tables 6 and 7 presents the model including all variables identified in literature reviewed for Portugal and Spain, respectively. Table 6: Logistic regression identifying co‐operators for innovation in Portugal Variable Firm Size

Constant R&D intensity Sector Small Medium High

Coef.

Wald

Sig

Odds‐ratio

1,113 ‐,146 ,036 ‐1,426 ‐,995 ‐‐

46,504 1,145 ,141 80,666 35,748 ‐‐

,000 ,285 ,707 ,000 ,000 ‐‐

3,044 ,864 1,037 ,240 ,370 ‐‐

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Sandra Nunes, Teresa Costa and Luísa Carvalho Variable

OMKTS

OMKTCG

OMKTGM

Not relevant Low Medium High Not relevant Low Medium High Not relevant Low Medium High

Coef.

Wald

Sig

Odds‐ratio

,087 ‐,540 ‐,344 ‐‐ ‐,272 ‐,425 ‐,186 ‐‐ ‐,145 ‐,008 ‐,265 ‐‐

,061 3,899 8,165 ‐‐ ,968 3,825 2,385 ‐‐ ,646 ,002 4,555 ‐‐

,804 ,048 ,004 ‐‐ ,325 ,050 ,123 ‐‐ ,422 ,960 ,033 ‐‐

1,091 ,583 ,709 ‐‐ ,762 ,653 ,830 ‐‐ ,865 ,992 ,767 ‐‐

According to results presented in Table 6 some variables not present significance at least 10%, to improve the model these variables were removed from the model. Table 7: Logistic regression identifying co‐operators for innovation in Spain Variable Firm Size

OMKTS

OMKTCG

OMKTGM

Constant R&D intensity Sector Small Medium High Not relevant Low Medium High Not relevant Low Medium High No relevant Low Medium High

Coef.

Wald

Sig

Odds‐ratio

,203 ,001 ,210 ‐1,020 ‐,529 ‐‐ ,416 ,076 ,114 ‐‐ ‐,132 ,028 ‐,025 ‐‐ ‐,740 ‐,495 ‐,321 ‐‐

4,273 ,030 11,250 124,364 30,326 ‐‐ 4,032 ,492 2,471 ‐‐ ,521 ,059 ,089 ‐‐ 24,107 22,485 13,144 ‐‐

,039 ,862 ,001 ,000 ,000 ‐‐ ,045 ,483 ,116 ‐‐ ,470 ,807 ,766 ‐‐ ,000 ,000 ,000 ‐‐

1,225 1,001 1,234 ,360 ,589 ‐‐ 1,516 1,079 1,121 ‐‐ ,876 1,029 ,975 ‐‐ ,477 ,609 ,726 ‐‐

Once again also for Spain (Table 7) there are some variables that are not significant at a level of at least 10%. In order to improve the quality of the model it was used the forward logistic regression method that allowed obtaining the final model present in Tables 8 and 9. Table 8: Final logistic regression model for Portugal Variable Firm Size (Sig. 0,000) OMKTS (Sig. 0,000)

OMKTGM (Sig. 0,029)

Constant Small Medium High Not relevant Low Medium High Not relevant Low Medium High

Coef. 1,133 ‐1,461 ‐1,026 ‐‐ ‐,011 ‐,703 ‐,419 ‐‐ ‐,255 ‐,106 ‐,335 ‐‐

Wald 51,449 85,348 38,360 ‐‐ ,001 7,115 13,493 ‐‐ 2,509 ,540 8,329 ‐‐

Sig ,000 ,000 ,000 ‐‐ ,975 ,008 ,000 ‐‐ ,113 ,463 ,004 ‐‐

Odds‐ratio 3,105 ,232 ,358 ‐‐ ,990 ,495 ,658 ‐‐ ,775 ,900 ,715 ‐‐

It was possible to observe (Tables 8 and 9) that the final model is slightly different for Portugal and Spain. In both models all variables are significant at a 5% level. The variables “Firm size” and the “Importance of introduces products to new geographic markets” are common to both countries, indicating that the size of the

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Sandra Nunes, Teresa Costa and Luísa Carvalho firm and the increase in exports are the biggest innovation indicators. Furthermore, it is noted that the variable “Sector” is significant in Spain but not in Portugal, and exactly the opposite regarding the variable “Importance of increase or maintain market share”. Table 9: Final logistic regression model for Spain Variable Firm Size (Sig. 0,000) OMKTGM (Sig. 0,000)

Constant Sector Small Medium High Not relevant Low Medium High

Coef.

Wald

Sig

Odds‐ratio

,232 ,200 ‐1,015 ‐,526 ‐‐ ‐,722 ‐,445 ‐,290 ‐‐

5,889 10,291 123,862 29,973 ‐‐ 36,164 28,774 16,474 ‐‐

,015 ,001 ,000 ,000 ‐‐ ,000 ,000 ,000 ‐‐

1,262 1,221 ,363 ,591 ‐‐ ,486 ,641 ,748 ‐‐

Table 8 reveals that the odds ratio for cooperation for innovation decreases when comparing companies with high importance of increase or maintain market share to all other classes. Similar results are possible to find for the importance of introduce products to new geographic markets and also for the firm size. It is possible to conclude that in Portugal in all cases the upper classes has a higher probability of cooperation for innovation. Regarding the results for Spain, Table 9, allows similar conclusion for the two common variables (firm size and importance of introduce products to new geographic markets). Finally, the results showed that the odds ratio of a firm that cooperates for innovation increases in firms from services sector. Table 10: Model adjustment quality Cases correctly classified Hosmer and Lemeshow Test Qui‐Square (sig.) Omnibus test Qui‐Square (sig.)

Portugal 62,4%

Spain 66,4%

9,898 0,194

8,605 0,377

142,999 0,000

196,725 0,000

The adjusted model quality (Table 10), allowed observing that the percentage of correctly classified cases is in both cases over to 60%. The chi‐square statistics indicates, for both countries, that the independent variables are relevant in explaining the dependent one, the results of Hosmer and Lemeshow test confirms the overall quality adjustment.

5. Discussion of results and concluding remarks This paper examines the cooperation activities for innovation in Iberian countries. The entrepreneurial structure of Iberian countries is mainly composed by SME. This kind of cooperation could be a key factor, for instance, to gain economies of scale, share the risk and to increase knowledge. The empirical model allows highlight some particular aspects and also validate the hypotheses. Regarding the first hypothesis (H1: R&D intensity is positively related with co‐operative activities for innovation); since this variable was excluded from the final model (denoting non‐significance) nothing can be concluded about this relationship. The results tend to confirm that R&D intensity cannot be considered a perfect indicator to measure the cooperation for innovation in Portugal and Spain. The results also suggest that data are particularly composed by SME and some approaches refer a lack of studies applied to SME (Bayona et al, 2001; Fontana et al, 2006). Concerning the second hypothesis (H2: Firm size is positively related to cooperation activities for innovation), it is significant in both countries and the odds‐ratio between the different classes has the expected relationship. The results suggest that the relationship established have negative effects. These results are counter‐intuitive as expected, therefore, an issue that requires further investigation.

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Sandra Nunes, Teresa Costa and Luísa Carvalho With reference to the third hypothesis (H3: Sector is positively related to cooperation activities for innovation); the obtained results also allow confirming the results for Spain. In Portugal, this variable was not significant and was excluded from the final model. This indicates a positive effect in the cooperation for innovation that increases when the company belongs to the service sector. Cooperation with external partners assumes an important role especially in services, in radical innovations or in innovations that imply knowledge and skills not available internally (Bayona et al, 2001; Miotti and Sachwald, 2003). Concerning to the last hypothesis (H4: Marketing is positively related to cooperation activities for innovation), only the variable “Importance of introduce products to new geographic markets” was considered significant for both countries. The odds‐ratio between the different classes suggests that the relationship established have negative effects. These results are counter‐intuitive as expected. Also, this issue requires further research. The variable “Importance of increase or maintain market share” appears only for Portugal, and once again the effects have negative sign. Finally, the variable “Importance of introduce products to new customer groups” was not significant for both countries. An analysis of the results suggests the following remarks:

R&D intensity is not an appropriate variable, maybe because the economic structure of these economies are mostly services and the percentage of cooperation for innovation in these cases are lowest than the EU average.

Size influences positively cooperation for innovation in both countries confirming other studies cited in literature review.

Sector influences positively cooperation for innovation in Spain. However, the empirical study point out a different result to Portugal. Portugal has an economic structure where 99% correspond to SME and more than 70% of the firms belongs to service sector. In service sector the cooperation for innovation assume a more tacit profile instead of a formal cooperation.

Marketing factors reveal different behaviours. The factor introduces products to new geographic markets are significant to booth countries. Concerning the literature review the cooperative arrangements assume fundamental importance in both cases due to the reduction of the risk associated to internationalization process mainly in the case of more peripheral countries. Market share appear significant only to Portugal, suggesting that some marketing strategies are linked to market dimension, in the case of Portugal to a small market. Finally, the factor introduce products to new customer groups, are not significant in booth countries, the results could be related with economic structure of Iberian countries mainly composed by SME. The economic structures are predominantly composed by structures of perfect competition and monopolistic competition. This kind of economic structures don’t promote cooperation arrangements in the markets.

This study is mainly exploratory and provides clues for further investigation in order to understand and detail the behaviour of cooperation activities for innovation. Further research should aim to overtake the limitations in the present work such as: identifying other relevant variables that influence cooperation for innovation in southern countries.

Acknowledgements The authors would like to thank the Statistical Office of European Union for making European CIS data available for their research. This research was partially supported by national funds through FCT, Foundation for Science and Technology, projects Pest‐OE/MAT/UI0297/2011 (CMA/FCT/UNL).

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Organizational Innovation – can job Enrichment Enhance Employee? Morena Paulišić, Tea Golja and Barbara Unković Juraj Dobrila University of Pula, Pula, Croatia mpauli@unipu.hr tgolja@unipu.hr barbara.unkovic@unipu.hr Abstract: Recently, an assistant manager of the biggest hospital complex in Croatia gave a statement on organizational culture claiming it is much more likely that an environment favourable to innovation will be more responsive to innovation stimulating the flow of the idea. This creates a particular culture of innovation where those who do not innovate are the outsiders. So, innovative capability is perceived to be important asset for sustainable competitiveness and this was a “push” to our research. According to Carroll (1973) humanistic management is often called job enrichment and today humanistic management is every day more important in service industry and often connected with companies’ success. In accordance with previous studies which stressed the role of job design for employee innovativeness in the paper we observe the concept of organizational innovation and the variety of job enrichment strategies as basic ingredients of employee motivation to create new values. The paper starts by defining theoretical approach of job enrichment as HR strategy to enhance innovative behaviour at work place. The aim of this paper was to investigate the implications of changing role of HRM on organisational innovation with the focus on job enrichment. The authors’ purpose was to describe actual business situation of HRM on five biggest hotels in Croatia and to examine what determine the extent to which HR strategies in form of job enrichment can persuade innovation. A field research has been carried out in 2012 through semi‐ structural interview in which our theoretical hypotheses were discussed trying to find a pattern of HR strategies enabling innovation. Results are reported as descriptive observations and implications. Comparison of companies showed the differences between organisation of HRM unit; HR managers’ expertise; job descriptions; job enrichment; innovativeness and companies’ success. Research results showed that in case of Croatia, as expected because of political history individualism is contrasted with collectivism as a characteristic of an organization's culture inclined to innovation. Hotel companies which overcome traditional approach to HRM and included in job redesigning different HR strategies as job enrichment, performance management, and multi‐tasking … are more successful. Therefore we argue that the data support job enrichment strategies in reaching organisational innovativeness. Keywords: organizational innovativeness; workplace; job enrichment, hotel industry; Croatia

1. Introduction There are wide array of possibilities which strongly influence the innovation process ‐ from organizational culture, social responsibility, business ethics, to innovative human resource management. Our intention was to detect what human resource management (HRM) does in order to enhance organisational innovativeness with hypothesis that job enrichment strategies can enhance employee to create added value for the organization. The reason for such hypothesis is in theory that workplace innovations provide competitive advantage to organizations and the main goal of human resources management should be to answer a question: How can employees be motivated to give more and can we contribute to organizational innovativeness all in order to give an added value to organisation? One of possible answer could be job enrichment because it involves new ways of thinking and motivating employees. The vision of organizational innovativeness (Gjerding & Rasmussen, 2007) is a phenomenon that occurs through a combination of institutional management (organization, job design), group management (cooperation, team work), and self‐management (task, work environment). Innovative working is a key challenge for many organisations; although complex we believe that the right combination of different job enrichment strategies can create a formula for success. Encouraging innovation as an outcome poses a major challenge for human resource management, to guide and develop leadership, policy, knowledge creation, information systems, practices, processes, and strategy that support the creativity and implementation of innovation (Rose, 2005, 85) and for entire company. But, we have to bear in mind, innovation is not just a question of the employees becoming open‐minded and creative; it involves interdependencies that play out at the organizational level and beyond (Evans, 2012). So if workplace innovations provide competitive advantage to organizations, companies must put effort to ensure employee driven innovation (EDI), especially in service sector. It refers to daily review of organisational processes and practices often across internal boundaries and among employees not assigned directly to the task. But as Evans (2012) said understanding of the dynamics of organizations is crucial to the development of EDI, not just a backcloth but as constitutive of the ways in which activities are structured and how employees act. Therefore, changes are required in job design which should incorporate environmental dynamics, the

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Morena Paulišić, Tea Golja and Barbara Unković organization’s resources, and individual preferences (Kamery 2004, p.141). One method that can be used in the process of designing motivating jobs (Kamery 2004, p.141 according to Robbins and Coulter 1996) is job enrichment.

2. Discussion 2.1 Preconditions for innovative organization In today world innovation seek to drive economic growth and to assure organizational success. Often innovation is not radical, it is incremental based on constant improvements. Innovation is not always a question of product / service it is also a question of better internal processes which assure work well‐ being, commitment to work, job satisfaction influence on clients and stakeholders. In deep, it is a question of overall job enrichment. Increasingly, research on motivation is focused on approaches that link motivational concepts to changes in the way work is structured (Robbins et al., 2010, 173). Modern managers are interested in theories of motivation as sources of alternative methods for encouraging motivation, innovation and high performance. As Torrington et al. (2009, 255) stated: if organisational strategy is innovation; HRM policies must: assure interaction and coordination among groups and individuals; performance appraisal must reflect longer‐term and group based achievements; job must allow employees to develop skills that can be used in other positions in the firm; compensation system that emphasize internal equity; allow employee to be stockholders and have more freedom to choose the mix of components that make up their pay package; broad career paths to reinforce the development of a broad range of skills. Other words job enrichment. Nedelko & Potocan (2012, 37) suggested that thinking in innovative environment means: interdependency, partial harmony / partial diversity, constant change and radical change. The way in which the job is designed determines also the additional accessorizes available for stimulating the full potential of enrichment. Job sharing is believed to broaden the depth of organizational knowledge, bringing two diverse sets of skills, experiences, and perspectives to a position that would traditionally be occupied by only one person. With such arrangements both can benefit, the organization and the job‐sharing partners (Hunter, 2000). Job rotation policies by their observation should also generate new ideas how the company could operate better. Ichniowski and Shaw (2003) used an “insider” approach to understand how human resource management practices affect performance effects. Innovative HR practices, and their common objectives, include problem‐ solving teams aiming at involving in solving production problems, rotation of workers across jobs to increase worker flexibility and teamwork, careful screening and selection of workers in order to identify those who have both high‐level job and task‐related skills and broad job definitions. On the other hand innovations in HR practices produce tangible performance gained by reinforcing productive working behaviour (Ichniowski and Shaw, 2009). Today’s jobs are really complex and often employees’ expectations are motivating jobs. Most employees seek – because of motivational factors – autonomy, responsibility, and their own control. In return, they are committed, innovative, and overall interested in the work they do (Gonan Božac et al, 2012). For HR managers it is important to design motivating jobs in order to be competitive through innovations. Generally people are interested to “be involved”. So job enrichment arises as possible HR strategy.

2.2 Job enrichment as HR strategy Job enrichment is an intra‐organizational, procedural method to enhance organizational innovativeness and it is based on people’s expectations. Job enrichment (Accel Team 2005) is one of main tools in the managers’ kitbag for motivating the team among approval, praise and recognition; financial initiatives; good communications etc. Most important it allows the individual in organisation to grow, to be important, to give suggestions, to organise, to take responsibility, to use its skills and competences. Job enrichment (Robbins et al. 2010, Kamery 2004) refers to the vertical expansion of jobs that provides increased worker responsibility (i.e. planning and evaluating duties; etc.). Job enrichment could be a mixture of empowerment upgraded with responsibility in order to oversee the whole process of a certain role. Job should be organized in a way to allow the employee to do a complete activity. An enriched job organizes task so as to allow the worker to do a complete activity, increases the employee’s freedom and independence, increases responsibility and provides feedback so individuals will be able to assess and correct their own performance (Robbins et al. 2010, p.176). Job enrichment offers great opportunities for change, with improvement in staff morale, greater utilization of personnel, and improved services as the result (Grose, 1976), so it can enhance innovative work. Drucker (1974, 2001) points out that experiment in job enrichment have so far been confined to cleric operations, but that it seems particularly applicable to knowledgeable work positions. Job enrichment offers a solution to the «donkey work» (Grose, 1976). Job enrichment increases complexity of the work (Mullins 2010), giving

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Morena Paulišić, Tea Golja and Barbara Unković employee responsibilities normally allocated to supervisors offers to individuals more autonomy, by removing supervisory role, or redesigning it to involve other activities more in line with their talent and offering greater opportunities for psychological growth. This has more recently been linked to the related concept of employee engagement, employee empowerment and high performance working system (Buchanan & Huczynski 2011.) When employees take accountability for their own actions or duties it generates a sense of ownership directing them to think logically and responsibly. Considering a certain level of role clarity managers can influence situational‐level motivation by empowering employees to choose to act (Cadwallader et al., 2010). Then employee becomes a better judge of its own actions striving for an active participation and innovative thinking towards betterment of the organization and personal growth. Having more control over a task the employee is more disposed and more open to innovativeness (Saavedra & Kwun 2000, Dodd & Ganster 1996). Those intangible resources that firms employ in order to increase their profit and boost innovativeness are seemly protected 'magical potions'. People’s attitudes and behaviour regarding their job can be shaped as much by the structure of the company within which they work, as by the personalities that they possess and the groups and teams of which they are a part (Buchanan & Huczynski, 2011). So the question is: What kinds of strategies spur innovations? Different authors give different strategies for job enrichment. Mohr and Zoghi (2006) suggest job rotation, information sharing, teams, quality circles and classroom training. While Robbins et al. (2010, 177) explain that actions for enriching a job are: combining tasks, form natural work units, establish client relationship, expand jobs vertically and open feedback channels. But for success of suggested actions have to be supported by job dimensions as: skill variety, task identity, task significance, autonomy and feedback (Robbins et al. 2010, p.177). For McShane and Von Glinow (2005) there are two ways to enrich jobs: clustering task into natural groups (stitches highly interdependent tasks into one job) and establishing client relationship (involves putting employees in direct contact with their clients rather than using the supervisor as a go‐between). Dauda (2010, according to Blauner, 1972) focuses on self‐teams; engagement; and feedback (open communication). While Oladele et al. (2010) in detail suggest the utilization of the following job enrichment techniques: removal of control of a subordinate; assign a complete unit of work that can be done by a subordinate without following job procedure; provision of feedback directly to employee by supervisor; assignment of new or specialized tasks; rotating assignments or job schedules; implementing participative management; removal of difficult section of assignments; adjusting performance target; reduction of control of a subordinate; provision of additional authority to subordinates; increasing the degree of decision making of subordinates; encouraging increased use of techniques; increasing the amount of recognition for a job well done; involvement of subordinates in the identification and solution of problems that affect them and the organization; provision of employees with the feelings of belongingness; and combination and /or rearrangement of tasks to be more challenging. Or simply job enrichment (Gonan Božac et al., 2012) stresses the humanizing and self‐fulfilling potential of an expanded organizational role, including: scheduling (when you do what during the day); decision making (meaningful involvement in the decisions that affect your tasks, your job, and your role); meaning (who does your work help and how important does it seem to you); and feedback (the information that you receive on how your efforts contribute to the goals of your unit, users, etc.).

3. Research results 3.1 Methodology A field research has been carried out in 2012 through semi‐structural interview in which our theoretical hypothesis were discussed trying to find a pattern of HR strategies enabling innovation. Semi‐ structural interviews were conducted with HR managers of the five biggest hotels in Croatia. Framework of themes of job enrichment strategies in enhancing organisational innovativeness were formalised to be explored. The topics covered within the interview were cautiously defined. Among the authors of this article, one had a relevant previous working experience in employment agency and also as HR director, so we avoided the two main biases – untrained interviewer with low motivation (Shoughnessy et al., 2012). The interview was designed as face – to – face coffee table talk with visit of the workplace. Interview lasted approximately 45 minutes. Semi‐ structured interviews had a list of topics in the same order with the possibility to use probes judiciously in order to get the respondents to elaborate further on ambiguous or incomplete answers. The advantages of a free‐response question are that they offer to a respondent greater flexibility. However difficulties arise in recording and scoring responses to open‐ended questions. So, after investigating we agreed to provide the results in a form of ‘candidate profiles type of document’ in grid, as it is used as part of selection procedure in

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Morena Paulišić, Tea Golja and Barbara Unković order to keep the quality of the gathered data and relief the understanding of the matter. The structure of the topics and its order followed a planned scenario. In general, interview design was: after a brief introduction the HR manager was asked to present its working experience in short in order to get a profile overview and skip the initial spurious interpretation from our side. However the ability to generalize from a single case depends on the degree of variability in the population from which the case is selected, psychologists have agreed that with visual perception study is possible to generalize, even based on one individual (Shoughnessy et al., 2012). Afterwards each interview started with the HR department scanning so to get the scheme of it and gain access to real processes. Here open questions were posed for an insight of the processes blueprint. Following the line of topics to discover we skipped into job enrichment field and asked closed questions on its familiarity with used methods, if in use an open question was served to find out the practice. Job descriptions and process mapping question was a chronological step further in revealing the internal organisation issues while focusing on innovative traces in the system. In fact important fragments came out as direct evidence of past company behaviour as a result of selective wear of the one being interviewed. A closed question on internal culture was on turn, and for performance management an open one enabling HR managers to explain and combine previously mentioned topics. Two short closed questions for finalising the interview were asked at the end regarding international management and staff members, and self‐perception and success. The conclusion drawn by both sides were ‘it was a dialogue that both sides could benefit from’. Results are provided in a form of ‘candidate profiles type of document’ in grid, as it is used as part of selection procedure in order to keep the quality of the gathered data and relief the understanding of the matter.

3.2 Findings Comparison of companies showed the differences between organisation of HRM unit; HR managers’ expertise; job descriptions; job enrichment; innovativeness; internal culture; performance management and companies’ success (table 1.). Table 1: Companies’ profile document Topics HR manager expertise overview

Company A Lawyer, 20 years working in the same unit of the Company

Company B Economist. Experienced various job positions from low operative jobs in hotels, marketing unit until HR manager.

HR unit constituent parts

Personnel unit with composition: Employment, Education (just for low level workers), Payroll, and Employee administration.

Human Potential Unit with composition: Employee administration, Payroll, and Training and Development. Part of a bigger business group but can operate independently.

JOB ENRICHMENT

Never heard. They use

Yes, they use job rotations,

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Company C Lawyer; have changed several companies in the same industry. Similar internal cultures. Being an independent consultant for a while and came back. Human Potential Unit with composition: Search and selection, Training and Development and Employee administration.

Company D Lawyer, recently joined the Company. Most working experience gained in government public institutions.

Company E Psychologist, before had own consultancy company for a relevant amount of time.

Till recently a Personnel unit, but firmly on the way to became Human Potential Unit. Composition at the moment: Employee administration, Search and selection and Organizational affairs (job descriptions and workplace systematization).

Yes, they do job rotations but

Never heard. But their management

Human Resources Unit with composition: Employee administration affairs (including Search and selection) and Training and development (carrier planning, succession and performance management). Yes, job rotation

Morena Paulišić, Tea Golja and Barbara Unković Topics methods

Company A evaluation once a year. Do not wider jobs neither systematically move employees.

Company B and they use interdisciplinary teams among business functions.

Company C there is no systematic approach. No carrier planning or promotion process.

Process blueprint and Job descriptions

They have it, but very old dated, need refreshments.

Have process blueprints but no job descriptions.

They have it, but very old dated, need refreshments.

Encourage improvement and employee participation. During off pick period they hold workshops were everybody in the Profit Centre is invited to give a suggestion. Then their operations present the new planning for the next year. They think they are on the border between individualist and collectivist society (‘when somebody fails they think a lot about that person and what to do’). They manage performance by yearly valuation for middle and high management. Low level employees have stimulation fee

Not focused on innovativeness. Mentioned that middle and top management exchange opinions on trainings. They ‘do not expect suggestions from maids’.

Do not think about it.

Collectivists, but getting better, they said.

They think they are individualist with a huge collectivist heritage.

Collectivists.

Recently established a Performance management system. Structured in 3 levels: for administration and general

Do not manage it; they plan to introduce a performance management system in 2014. But still they have appraisals; For low level employees

Very structured, for middle and top management consist of yearly bonus. Several criteria within

INNOVATIVENESS They are not and motivation focused on it, for it do not motivate it.

Internal culture – Individualist or Collectivist

They think they are on the border between collectivists with social system heritage and western culture.

Performance management – measuring?

Do not motivate performance, but have variable element of pay (till 30%). Chief decides on it, mostly for an

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Company D (international) company does lead the HR strategy. After explaining the possible methods he said: that the management Company does trainings and development, job rotations, carrier programmes. Recently started to communicate in between, before there was no link at all. No process mapping, but working on Job description preparation, old dated.

Company E system (structured approach depending of type of rotation), widening jobs through increased complexity of jobs, change of vocation/job procedure, succession programme, and carrier plan. Have all processes mapped, and designed Job description based on them. Yes, they have a tailored programme for improvement suggestions at all employee levels.

Morena Paulišić, Tea Golja and Barbara Unković Topics

Company A extraordinary effort, but there are no transparent or clear criteria.

Company B for season picks. Have clear criteria and percentage.

Self‐perception and success

Successful. Employees work there until retirements. Exceptions are seasonal workers. Recently established an interdisciplinary team to prepare an Action plan for HR till 2014. (Haven’t mentioned until being asked about future plans). 549 32.146.281

Successful, everybody stay till retirements. The same seasonal workers every year. Use internal audit and mystery shoppers.

1353 81.621.895

922 60.334.946

869 55.110.371

1625 71.963.291

(‐2.521.995)

(‐1.116.597)

7.110.138

2.985.200

(‐4.051.179)

2.521.995

32.938.666

10.006.727

7.992.000

8.337.333

Other remarks

No. employees Revenue 2011 (EUR) Profit 2011 (EUR) Long term investments 2011 (EUR)

Company C Company D affairs, heads of quantitative production units criteria, and for and low level middle and top employees. management KPIs Measuring and (criteria based on rewarding cost of work and performance is subjective based on BARS measure of or Behaviourally ‘respecting’ the anchored rating job). They set scales. goals and projects Descriptive but with no categories and framework, and goal setting. no guidelines. There is no punishment, neither appraisal. During the seasonal pick two months in a row the stimulation part is shared among employees based on numbers of nights. Successful, even They perceive seasonal themselves as workers the successful. Do not same. Every few conduct internal years they climate check the questionnaires. internal climate. Recently have They do not have introduced vision, mission and ‘Talent corporate culture management strategy. program’. They have freshmen program (3 years long) and a Introduction programme for new employees.

Company E thematic topics, clear set of guidelines, in Company framework.

Successful, even very low percentage of sickness (in seasonal picks). Matured process operations, process grid in line and well combined horizontally and vertically.

Due to differences in strategic approach in analysed hotel companies we can identify that most successful in leading HRM is company E. Although the company with most value added in 2011 (added value of 26.190. 000 EUR) was Company C. Company E, is on second place with value added of 19.572.000 EUR. This company is “new” company integrated in September 2010 from three different hotel companies, so they are still in

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Morena Paulišić, Tea Golja and Barbara Unković alignment phase but huge attention was given to HRM. Company is using interdisciplinary approach in HRM function, the manager is psychologist with experience in human resources; the department is organised in two main parts with focus on: Employee administration affairs (including search and selection processes) and Training and development section (including carrier planning, succession and performance management). From all job enrichment techniques that are available, company is using: job rotation system; widening jobs through increased complexity of jobs, change of vocation/job procedure, succession programme, and carrier plan. Specific is also that they have all processes mapped and job description based on them. Also they enhance innovativeness with tailored made programme for improvement, suggestions for all employees’ level. The companies’ orientation is on matured process operations, process grid in line and well combined horizontally and vertically. The company also have own human resource academy. At this point we need to consider also the value orientation of the individual and company too because all companies are struggling with the problem of internal culture as well as culture of people in Croatia (with the collectivistic culture). The problem arising because collectivism is the idea that a group’s well being is more important then the individual, while individualistic value structure emphasize personal identity, uniqueness, freedom, worth of individuals as core value, all mechanism to enhance organisational innovativeness. If we consider rewards, employees working in a collectivistic culture primarily employ the norm of equality to determine how rewards should be doled out, regardless their competence and success. Although, there is a change in reward management, for example Company E has structured performance measurement ‐ for middle and top management consist of yearly bonus and several criteria within thematic topics, clear set of guidelines, in Company framework. But employees working in individualistic companies tend to distribute rewards to a norm of equity, based on the amount of contribution someone has made or the quality of their performance, and this is quality improvement in our value system which has to be done. Collectivism makes also difficulties because companies often have international management and staff , in case of Company E ‐ board members, and specialists and international staff, English language is commonly used and having an impact as cultural intervention, as well as higher expectations from international superior toward local staff members. Due to huge difference in public perception as well in organisation functionality, revenue, investments (in people and assets) of the analysed companies it is interesting point of interview: self‐perception of companies in which all said that they are successful!?

4. Conclusion The company E with most comprehensive human resource management (HRM) using job enrichment techniques stimulates innovativeness and motivation for it. From the research is evident that companies are not using all possible job enrichment techniques. But those companies which reorganised their HRM and are using job enrichment strategies encourage innovations. Innovative Human Resource practices include: job rotation system; widening jobs through increased complexity of jobs, change of vocation/job procedure, succession programme, and carrier plan. In future job enrichment strategies must be observed because innovations in HR practices produce intangible assets – sustainable competitive advantage gained from working behaviour so role and functions must be maintained. The ultimate goal of such strategy or HR programme is to provide sufficient enrichment and acceleration to the gifted ones to allow their talents to flourish and increase the likelihood that they will reach an innovative concept of a company product, service or procedure. In organisational context we must be aware of the role of culture in enhancing organisational innovativeness. Research results also showed that in case of Croatia, as expected, because of political history individualism is contrasted with collectivism as a characteristic of an organization's culture inclined to innovation. Hotel companies which overcome traditional approach to HRM and included in job redesigning different HR strategies as job enrichment, performance management, and multi‐tasking … are more successful (highest revenue and high investments in long term assets). Therefore we argue that the data support job enrichment strategies in reaching organisational innovativeness.

References Accel Team (2005) Aplication of employee motivation theory to the workplace, [online] http://www.accel‐ team.com/motivation/practice_oo.html Buchanan,D.A. & Huczynski, A.A.(2010) Organizational Behavior (7th ed.), Pearson Education Ltd., Essex. Cadwallader, S., Burke Jarvis, C., Bitner, M.J. and Ostrom, A.L. (2010) “Frontline employee motivation to participate in service innovation implementation”, Journal of the Academy of Marketing Science, No 38, pp 219–239. Dauda, Y.A. (2010). Managing Global Technology Innovation and Work System Dynamics: Implication for employment relations in Nigeria. Retrieved July 21, 2011 from www.ilera‐ online.org/15thworldcongress/files/.../CS1W_34_DAUDA.pdf

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Morena Paulišić, Tea Golja and Barbara Unković Dodd, N. G. and Ganster, D. C. (1996) “The interactive effects of variety, autonomy, and feedback on attitudes and performance”, Journal of Organizational Behaviour, No.17, pp 329–347. Drucker P. F. (2001) Management‐ an abridged and revised version of Management: Tasks, Responsibilities, Practices (Drucker series, 1974), Butterworth Heinemann, Oxford. Evans, K. (2012) Employee‐driven innovation and workplace learning: Exploring present realities, future possibilities and enduring changes, 4 [online] http://www.lline.fi/en/article//karen/employee‐driven‐innovation‐and‐workplace‐ learning‐exploring‐present‐realities‐future‐possibilities‐and‐enduring‐challenges. Gjerding, A.N. & Rasmussen, J.G. (2007). Organizational innovation and how it challenges management theory, Working paper measuring the dynamics of organisations and work. Retrieved July 30, 2011 from http://vbn.aau.dk/files/12716320/Organisational_level_‐_WP_2_‐_ANG.pdf Gonan Božac, M., Prester, J. and Paulišić, M. (2012) Job Enrichment – A pattern for Innovative SMEs. In M. Dabić and V.Potocan (Eds.),Entrepreneurship and Innovation (pp.177‐201) University of Zagreb and University of Maribor, Maribor. Grose, B.D. (1976). “Donkey Work” and Job Enrichment in the Academic Library. The Journal of Academic Librarianship. [online]http://www.mendeley.com/research/on‐my‐mind‐donkey‐work‐and‐job‐enrichment‐in‐the‐academic‐ library/ Hunter, L.W. (2000) “The adoption of innovative work practices in service establishments”, The International Journal of Human Resource Management, Vol 11, No. 3, June, pp 477 – 496. Ichniowski, C. and Shaw, K.L. (2003) “Beyond Incentive Pay: Insiders’ Estimates of the Value of Complementary Human Resource Management Practices”, Journal of Economic Perspective, Vol 17, No. 1, winter, pp 155‐180. Ichniowski, C. and Shaw, K.L. (2009) Insider Econometrics: Empirical Studies Of How Management Matters, Working Paper 15618, December. Kamery, R.H (2004) “Employee motivation as it relates to effectiveness, efficiency, productivity, and performance”, Proceedings of the Academy of Legal, Ethical and Regulatory Issues, Vol.8, No.2, pp 139‐144. Mc Shane, S.L. and Von Glinow, M.A. (2005) Organisational behavior: emerging realities for the workplace revolution (3rd ed), McGraw Hill, New York. Mohr, R.D. & Zoghi, C. (2006) Is Job Enrichment Really Enriching? US Department of Labor Statistics, BLS Working paper 389. [online] http://www.bls.gov/osmr/pdf/ec060010.pdf Mullins, L.J. (2010) Management & Organizational behavior, FT Prentice Hall, Essex. Nedelko, Z. and Potocan, V. (2012) Employees Innovativeness and Personal Value: A Case of Slovenia. In M. Dabić and V.Potocan (Eds.) Entrepreneurship and Innovation (pp 35‐55), University of Zagreb and University of Maribor, Maribor. Oladele, O.I., Subair, S.K., and Sebina, N.V. (2010) “Knowledge and utilization of job enrichment techniques among district agricultural officers in Botswana”, African Journal of Agricultural Research, Vol 5, No. 21, pp 2918‐2924. th Robbins, S.P., Judge, T.A. and Campbell, T.T. (2010). Organizational Behavior (13 Ed). USA:Pearson Education Ltd., Essex. Rose, D. (2005) Human Resources, High Involvement Work Processes, and Work Outcomes: An Exploratory Study. Unpublished doctoral dissertation.School of Management, Queensland University of Technology, Queensland. Saavedra, R. and Kwun, S. K. (2000) ”Affective states in job characteristics theory”, Journal of Organizational Behavior, No. 21, pp 131–146. Shaughnessy, J., Zechmeister,E. and Zechmeister J. (2012) Research Methods in Psychology. (9th ed), McGrow‐Hill Higher Education, New York. Van Praag, C.M. and Versloot, P.H. (2008) “The Economic Benefits and Costs of Entrepreneurship: A Review of the Research”, Foundations and Trends in Entrepreneurship, Vol 4, No. 2, pp 65–154. Torrington, D., Hall, L., Taylor, S. and Atkinson, C. (2009) Fundamentals of human resource management, Prentice Hall, Essex.

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The Institutions of Social Entrepreneurship in the USA, UK and Germany Within a Context of Market‐Based vs. Bank‐Based Systems Ruslan Pavlov Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia pavlovru@mail.ru Abstract: Since the beginning of the world economic crisis the level of unemployment across different countries increased significantly and so did social and welfare polarization of people. Under these conditions the emergence of social entrepreneurship could be viewed as an additional opportunity for the disadvantaged people to enhance their welfare and improve their living quality. As all the phenomena of such kind its activity should be coordinated by some special institutions in order to develop successfully, thus enhancing its aggregate performance. According to the rating of the Global Entrepreneurial Monitor (GEM), the United States have the highest rank in the growth rate of social enterprises for a short‐time perspective, which can be determined by the effect of such factors as Community Development Financial Institutions (CDFI), which provide some incentives for the business as well as for the communities to take part in the social projects. The paper reviews different kinds of economic systems inherent to certain types of integration between financial and industrial resources. So, the system of industrial development of the USA relies in most part on the stock market, while that of several European countries, such as the United Kingdom and Germany prefer to use credit resources, or the loan capital. In contrast to that, the financial systems of the developing economies, such as the Russian one, present to use both types of the financial systems aforementioned and combine the microcredit institutions with those of fundraising. The paper contains some implications for such countries suggesting them to consider some opportunities of evolving their market‐based institutions and bank sector to create a more suitable institutional system to support the development of social entrepreneurship. Keywords: social entrepreneurship, institutions, market‐based systems, ethical markets

1. Introduction Social entrepreneurship has become a very popular phenomenon among different scholars nowadays. It presents a great interest not only because of its extraordinary nature, but also due to the paradigm crisis of the neo‐liberal economic model, whose features are becoming increasingly evident for the recent times. The events which happened on 17 September 2011, when the protest movement ‘Occupy Wall Street’ began in Zuccotti Park, were impressionable by their scale and impact. The wave of protest movements all over the world that followed this action showed that the social discontent with economic inequality of people has been growing. According to the U.S. Census Bureau data, the proportion of overall wealth—a measure that includes home equity, stocks and bonds and the value of jewelry, furniture and other possessions—held by the top 10% of the population increased from 49% in 2005 to 56% in 2009 (Morin, 2012). At the same time the share of economically excluded people is growing steadily, which is evidenced by the recent data on the high rates of unemployment in Portugal and Spain. It is interesting to note that the left movement ideology has attracted lots of new followers which reflects, in particular, in the Marxism revival. ‘Why Marx was right?’ by T. Iglton proved to be a bestseller since lots of problems, connected with the system peculiarities of the paradigm being criticized by the contemporary scholars, were efficiently elaborated in the Marxist’ terms and some disturbances in the social and economic system resulted from the current trends of the mainstream policy were emphasized against the same disturbances the world economy faced more than a century ago (Eagleton, 2011). Such analogies have become of a great importance allowing for the crisis of methodological tools in the modern economics. Besides, the legitimacy of the left political movement in Europe is increasing, which is evidenced by the victory of the social‐democrats at the last parliamentary elections in Italy and the presidential in France. These are, in turn, the signs of poverty growth, labor migration, social exclusion and the failure to solve such problems by means of traditional ways of applying market mechanisms. Such challenge suggests to think about social entrepreneurship as a possible way to mitigate the distortions stated above. It can be viewed not only as an economic or social phenomenon, but also as a political movement, as it challenges the dominating paradigm at all the levels of its pervasion, forcing the governments to introduce some important measures aimed at supporting its development.

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2. Hierarchy of social entrepreneurship institutions The available literature on social entrepreneurship allows us to argue that there were several attempts to classify this phenomenon, though they were based upon a certain criterion, regardless of the fact that it might have different scales of development. In this context the classification provided by Nicholls (2007) seems to be successful, as it challenges the dominant paradigm at different dimensions. According to it, social enterprises challenge the dominant paradigm at three levels, micro (the enterprises), meso (new markets; intermediaries) and macro (socio‐economic impact; policy implications). These refer to social enterprises that (1) respond to market failure and/or “institutional void” by developing new products and services, (2) contribute to the reconfiguration of markets to generate new or increased social value and (3) challenge institutional arrangements through political action. From Nicholls' point of view, the third level of institutions should be presented by social enterprises. Though it is rather an excessive assumption, as in addition to social enterprises should also involve the ways of mitigating social problems at the micro‐level, which become embedded into an original institutional form. Thus, in order to enable an adequate reflection at micro‐level, different ways of eliminating social cataclysms within a given micro‐environment should be included into this concept, which don’t not necessarily have the form of social enterprises. Thus, if we imagine the hierarchy of social entrepreneurship institutions, we’ll get the picture as that presented in Figure 1. It’s an improved version of Nicholls’ classification as a pyramid with three levels, the first of which should present the macro‐ level institutions, the second deals with the activities of intermediaries and markets, e.g. social capital markets, and the third one presents the myriad of the local country‐ and region‐specific institutions which are inherent to the particular place shaping its origins and nature, while contributing in some way to forming the relative institutions at the meso‐level. The intermediaries presenting a nexus of some financial institutions designed to support social enterprises can be viewed as meso‐level structures coordinating the activities of those from the bottom level. So, Community Development Financial Institutions (CDFIs) in the United States can exemplify this kind of institutions, as they present a network of special innovative financial mechanisms embedded in the current institutional structure surrounding communities. The macro‐level institutions are those which influence much the dynamics of social entrepreneurship as a socio‐economic phenomenon in the given country or worldwide. They can be embedded in certain regulations, laws, policies or some original institutions, which are capable to change the existing status quo at the level of a given country, not within certain communities or districts.

Government and local authorities

Large‐scale institutions set up by individuals

Macro‐level Social Stock Financial Market Intermediaries Meso‐level Matched Micro‐ Industrial and Public bargain finance Provident Limited market Institution Society Company Micro‐level Figure 1: Three levels of social entrepreneurship institutions

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2.1 Social reforms as macro‐level institutions The macro‐level institutions are hard to specify, as the impact executed by a politician or a public figure, can be formalized into the system of certain institutions, as well as be realized within a certain political strategy. The first case can be exemplified by a famous public figure Elena Panaritis, who initiated the property rights reform in Peru, which improved significantly the life quality not only of the residents, but of the immigrants as well. Allowing for that the system of regulating property rights was rather disorderly and hazardous in this country, as the houses of people were not secured properly against any fraud, she undertook a special reform designed to improve the situation in this area and to fill the institutional gap with a special agency called “Registro Predial”. It was a special registry designed to refine the property rights system. In 1996 Peru’s government agreed to extend the property rights reforms nationwide, with funding from the World Bank. The government created a new commission, Cofopri, which would work in tandem with “Registro Predial”, sharing the process of transforming Peru’s property market, which Panaritis called transforming the “Unreal” to Real. The reform did more than change perceptions, however. The security created by the new property rights system generated tangible social and economic benefits for formal property owners that were not available to informal owners and the formal property rights spurred investment in property. Finally, the formal documentation enabled significant increasing in private‐sector loans (Panaritis, 2007). It is not surprisingly that due to such action Panaritis has got a title of social entrepreneur. Another case of social entrepreneurship, implying the adherence to a specific strategy that modifies greatly the position of certain local communities, but at the same time has a nationwide effect, is connected with some political measures introduced by the former US president Bill Clinton. As Figure 2 shows, the rank of early stage social entrepreneurial activity (SEA) in the United States is the highest, as compared to those of other countries, according to the data provided by the Global Entrepreneurship Monitor (2009). SEA is the social equivalent of the total early‐stage entrepreneurial activity index (TEA) which is measured as the percentage of a country’s working‐age population who are actively trying to start a new business (nascent entrepreneurs) and those who at least partially own and manage a business less than 3.5 years old (a baby business). Its highest rate in most part can be explained by the longevity of charity traditions in the United States which would be of the same force as the entrepreneurship ones. Numerous examples mentioned by Clinton (2009) in his book “Giving/How Each of Us Can Change the World” suggest that. Besides, he is known as a person launching several charity initiatives, but he should be called “social entrepreneur” not only for that reason. He managed to force the financial institutions to provide loans for the low‐income communities, while most of them refused to do that before. According to the amendment of 1995 to the Community Reinvestment Act of 1933, they might be closed in the case of refusal. Such measure can be treated not only as social, but also as entrepreneurial, as it had the same effect as that implemented by Panaritis. The highest rate of early stage entrepreneurial development can be explained in part by the environment inspiring people to engage in business of such kind, that was formed under the period of Clinton’s presidency. We can’t help but mention emergence of the Community Development Financial Institutions which shaped greatly the institutional structure to support social entrepreneurship at that time. 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50%

na Ch i

Ru ss i

Br az i

US A

it a ly

Fr an ce G er m an y

0.00%

Figure 2: Early‐stage social entrepreneurial activity (SEA) rate in different countries, 2009

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2.2 Social stock market and loan stock institutions at the meso‐level The meso‐level institutions present the intermediary level in this structure. Marking this group of institutions as a specific category is of great importance because it is not only a superstucture over that beneath, but also a factor which shapes ant determines the behavior and performance of the micro‐level institutions. So, for instance, the social capital market which is coordinated by a network of international financial organizations, such as the International Association of Investors in the Social Economy which was thoroughly investigated by Mendell and Nogales (2009), can be viewed as a cluster which began to grow from the bottom of this pyramid, but it can influence significantly the subsequent trends of development of micro‐institutions worldwide. In this context the emergence of a social stock market should be mentioned. For the recent decade there were several attempts in the world aimed at constructing some mechanisms to enable social enterprises to act as conventional business enterprises – that is to provide them with the opportunity to issue shares, but allowing for the high‐level risk connected with their trading at an ordinary stock exchange, it should be advisable to let them trade at a special stock exchange designed for that. So, the United Kingdom and Germany begin to play a pivotal role in installation and deployment of such mechanisms. Whereas the former belongs to the market‐ based countries range, the latter belongs to another group, consisting of bank‐based countries, but it didn’t miss the chance of adopting such mechanisms which seem to be effective. A special meso‐institution, such as Social Stock Exchange Association (SSEA), has been operating in Germany for the recent 5 years. It is designed not only to ensure forming the social stock market within this country, but also expands its influence abroad to help other countries which are engaging in this difficult and controversial process. Besides implementing a pilot project in Germany, SSEA is engaged in similar activities in Portugal, where the processes of launching a social stock exchange are underway. Moreover, it organizes different events for similar initiatives to get involved, collaborate and learn from each other’s experience (SSEA, 2013). The initiators of such project are deemed to be aware of the financial risk connected with the assets of social enterprises, implying the low return rate on the capital invested. The main task of SSEA project in Germany is to create a platform that will offer investors comparability on the social and technological impact on their investments, which will yield a slightly lower (single digit) financial return). Though this platform is not launched yet, it has a preliminary stage which expressed in the meeting which was held on 25 March 2011. At this meeting five social ventures were pitching to a dozen investors for a financing volume of roughly € 20 million (Kuhlemann, 2011). We should think that taken such event as the first indicator characterizing the activity of social stock market in Germany nowadays, we can make a conclusion that in any case Germany leaves behind the UK where the total sum raised from the ethical issue shares amounted £ 50.1 million by 2005 (Hartzell, 2007) that equals € 58.6 million which is about three times as many as this value. Table 1: Number of ethical share issues and total raised in the UK Period 1984‐1990 1991‐1995 1996‐2000 2001‐2005 Total

Number of issues 6 8 13 16 43

Total raised (£ million) 3.35 4.17 10.55 32.03 50.1

The process of launching the social stock exchange is also still ongoing, as in Germany. Nevertheless there are several ways of executing such operations beyond such exchange. Such operations are possible due to a three‐ step system of ethical share investment in the UK which presents a way for social enterprises to adopt their abilities within a less stringent environment than that for the existing business enterprises. So, these steps are: the Off‐Exchange (OFEX), the Alternative Investment Market (AIM) and the London Stock Exchange (LSE). All of them can be considered as a hierarchical tree, in which companies graduate from one level to the next as they grow in size. Indeed, AIM was established by the LSE for companies at an earlier stage of development. The markets higher up the tree offer greater liquidity, but are more expensive to list on and the listing requirements more stringent in terms of disclosure of the price sensitive information. Thus a company might first choose to list on OFEX, where the cost of listing is only around £ 10,000 a year or less, but trading there can be deceptive, as some OFEX shares are not traded at all for long periods. The share price then remains static and may not reflect the value that a share might achieve in a more liquid market. The lack of competition and the absence of due confidence among investors cause the fall in the share price. Although many companies go straight to AIM, a listing on OFEX is often a first step towards an AIM listing, as it is a chance for them to attract major institutional investors and to increase their reputation. However, fees for listing on AIM are likely to be between £ 300,000 and £ 500,000 even before marketing costs (Hartzell, 2007). For a social

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Ruslan Pavlov enterprises, where a high profit level is not to be expected, share issues therefore need to be in the £ 10 to £ 20 million range to stand a chance of covering the costs of fees. Raising this level of investment is often unrealistic, allowing for the financial condition of social enterprises. The larger of the AIM companies move to the London Stock Exchange. Some of them have a balance sheet as small as £ 10 million, but most are much larger. However there is a threat of a hostile takeover for the enterprises seeking to attract large amounts from the institutional investors or venture capitalists. That is also the reason which prevents social businesses from being the participants of the mainstream market. While the UK demonstrates an example of enhanced activity in the field of social stock operations, Germany appears to be one of the leaders on the development rate of microfinance institutions (see Table 2) and in this sense matches its position as a bank‐based country absolutely. In most part Germany’s successes in the development of microcredit system can be explained by the effective performance of such meso‐institution as the German Microfinance Institute, as it provides a wide range of different services, in particular, counselling and training for MFIs (e.g. their loan officers), designing electronic loan processing tools and accrediting MFIs for the risk capital fund which is called “Microfinanzfonds Deutschland” (El‐Zoghby, Gähwiler, Lauer, 2011). Table 2: Main microfinance indicators in selected European countries Country Germany Italy Spain UK Romania Bulgaria Czech Republic Slovakia France Poland Netherlands Hungary

Number of loans disbursed 4,625 3,223 8,773 1,252 2,496 68,348 ‐ 982 121,000 130,888 43,508 104,754

Microfinance Indicators Total value of loans Average Loan Size disbursed (EUR M) (EUR) 52,276,375 11,303 22,451,418 6,966 97,800,000 9,943 13,420,000 10,718 18,847,296 7,551 432,890 6,334 ‐ 4,500 155,000,000 157,841 852,500,500 7,045 ‐ 2,024 739,636,000 17,000 371,876,700 3,550

Average Interest Rate (%) 6.92 5.80 5.00 13.40 ‐ ‐ ‐ 6.50 0.5 11.00 ‐ ‐

2.3 Matched bargain market in the UK as an example of micro‐level institutions As in the United States and Germany the social capital market is only at the stage of installation, while in the United Kingdom it is at the stage of deployment yet, we’ll focus only on the English institutions as having settled fundamentally and providing a very valuable experience on this point. In this country a company a company not listed on the mainstream markets can usually only trade its shares through a matched bargain market. This is usually run by a broker or a recognized financial institution, and involves holding a list of buyers and sellers of the shares and matching them at the price they both wish to pay. So the matched bargain market for a certain enterprise can be viewed as a micro‐level institution. Matched bargain markets usually operate for one company in isolation rather than for several companies. Moreover, the Financial Services and Markets Act limits the extent to which the investment can be marketed. Price‐setting on a matched bargain market is usually a haphazard affair. Quite often it is left to buyer and seller to agree, but if any price at all is recommended, it is usually the broker running the market who would recommend a price, based on information provided by the company. Thus in a matched bargain market, the company itself has much more control over the share price. This is usually regarded as an unsatisfactory situation open to abuse, as two conditions necessary for an efficient stock market are not met. The first one is that the market is sufficiently liquid for expectation of value to be quickly reflected in the current price. The second is that investors have all and equal information available to them surrounding the situation of a company. When these conditions are not met, anomalies occur and some individuals can benefit over others due to the drop in the share price as stated in the previous subsection. Speaking about matched bargain markets, it’s interesting to note that those companies which didn’t list on OFEX and AIM have achieved wonderful results. To approve our suggestion derived in the previous section that the division of countries according to the criteria, whether it is a market‐ or a bank‐based system, coincides with the development of the same kind institutions for social enterprises in these countries, we’ll

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Ruslan Pavlov provide some data concerning the growth of capital amount raised as a result of share issues by three most successful social enterprises of the United Kingdom: Ttaidcraft, Shared Interest and Wind Fund. Table 3: Three leading social enterprises in the amount of shares issued Company

Year

Legal form

Type of investment

Traidcraft

1984

PLC

Amount raised (£M) 0.3

1986 1991 2002

PLC PLC PLC

Share Share Share

1 0.4 3.25

Shared Interest

1995 1996 1997

IPS IPS IPS

5 Year Loan stock 5 Year Loan stock 5 Year Loan stock

0.65 0.85 1.2

Wind Fund

1995 1998 2005

PLC PLC PLC

Share Share Share

1 1.3 4.75

Thus, according to these indicators, we can conclude that all the three companies achieved such great results, having issued their shares beyond the mainstream market, but whereas Traidcraft and Wind Fund are public limited companies (PLCs), Shared Interest is an industrial and provident society (IPS) which has a limited ability to attract funds. Moreover, the redemption period for the bonds issued by IPSs is rather short. So, the investors usually have less opportunities to buy and sell such bonds, as they would have dealing with bonds issued by a conventional business enterprise. Wind Fund happened to be the most successful among these companies, as it managed to raise its capital from £ 1 million in 1995 to £ 4.75 million в 2005, which is comparable with AIM in its scale. Though Traidcraft managed to have even 2,400 shareholders, while the average number of the AIM company’ shareholders is around 800 (Hartzell, 2007). This fact suggests that a matched bargain system presents something like an economic miracle which is developing along with its immanent laws and has an ability to outachieve the existing formal markets.

3. The system of microcredit institutions and social stock exchange in the USA, Germany and the UK The model of institutions presented here is a sophisticated version of Nicholls’ classification which enables us to make it clear what kind of financial institutions are best developed in a particular country at the particular level. So we can compare the respective institutions of social entrepreneurship in these countries with their profiles – whether it is a market‐based or a bank‐based system, according to the classification presented by Demirguc‐Kunt and Levine (2003). In bank‐based financial systems such as Germany and Japan, banks play a leading role in mobilizing savings, allocating capital, overseeing the investment decisions of corporate managers, and in providing risk‐management vehicles. In market‐based financial systems such as England and the United States, securities markets share center stage with banks in terms of getting society’s savings to firms, exerting corporate control, and easing risk‐management. Table 3 presents three countries, two of which are market‐based (the United States and the United Kingdom) and the third is bank‐based (Germany). The distribution of the respective institutions for social entrepreneurship looks like that for the commercial sector in these countries. Different laws, regulations and standards coordinating the activity of the respective fields of social investment systems presented here are treated as macro‐institutions. Community Reinvestment Act of 1977 with the amendment of 1995 which resulted in increasing the opportunity window for the low‐income households is worth mentioning first. The Act amending the German Investment Act of 2003 (also known as the Amendment Act of 2007 played a major role in forming an environment for the development of microfinance institutions in Germany. It enabled the emergence of two meso‐institutions in microfinance area: the German Microfinance Institute and the Microfinance Fund “Germany”. As for the system of regulating social stock exchange, it should be stressed once more that the most successful pattern of it is represented by the UK financial system which is, in turn, a market‐based country. Maybe that is the reason of its leadership among all the other European countries. In addition, the system of regulating transactions in AIM is simplified so that AIM companies are supervised by a nominated adviser (referred to as a “nomad”) rather than by a securities regulator (in the UK, this is the Financial Services Authority (FSA). All the transactions of AIM companies are

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Ruslan Pavlov subject to the AIM Rules for Companies (AIM Rules). AIM’s simplified admission procedures generally result in savings in time and cost for an AIM admission as compared to a main market or other listing. In most part the creation of such institution was predetermined by the increased activity of matched bargains, which was, in turn, caused by the traditions of using stock exchange as a leading mechanism to support industrial development in this country. Table 3: The loan capital and social stock institutions in the USA, Germany and the United Kingdom

USA

Germany

Loan Capital Institutions Community Reinvestmen t Act of 1977 as amended further

Social Stock Institutions The United States Securities Act of 1933

Meso‐ institutions

Community Developmen t Financial Institutions

Green Stock Exchange (launch in 2014)

Micro‐ institutions

Web‐ resource ‘www.kiva.o rg’

New York Stock Exchange

Macro‐ institutions

Loan Capital Institutions The Act amending the German Investment Act of 2003 (the Amendment Act, 2007) The German Microfinance Institute (Deutsches Microfinanz Institut); The Microfinance Fund Germany (Microfinanzfo nds Deutchland) GLS Bank

Social Stock Institutions The Stock Exchange Act of 1896 as amended further

United Kingdom Loan Capital Social Stock Institutions Institutions Community Financial Investment Services and Tax Relief, Markets Act; Credit AIM Rules Unions Act for Companies

Social Stock Exchange (launch in 2013)

Community Developmen t Loan Funds

OFEX, AIM, LSE, Social Stock Exchange (launch in 2013)

NExT SSE

FINCA UK

Triodos mathed bargain market

4. In conclusion The main result of the paper is a modified version of Nicholls’ classification of challenges against the dominant neo‐liberal paradigm. It is modified so that it might include the main institutions orienting the activities of social enterprises which proved to be effective. Such model would help us to assess the completeness of coverage of the relevant aspects in the system of institutional regulation of the subject in issue. Its application allowed us to answer the question, what institutions are more developed in the countries observed and whether it matches the widespread opinion on the separation of countries between market‐based and bank‐ based. The result is that such trends hold rather true for the financial streams of social enterprises in the UK and Germany. Consequently, it should be advisable to recommend those countries having strong traditions of stock market development to put a special emphasis on the development of relative financial institutions to support social enterprises, whereas those relying upon a strong system of bank institutions would be reasonable to develop the microfinance sector to achieve the competitive advantage for their social enterprises. Besides, one should say some words about the way of attributing these implications to the analysis of the situation in developing countries. For instance, Russia might be subsumed under the group of bank‐based, rather that market‐based countries because of its path dependence connected with long traditions of bank monitoring system which originated in the Soviet Union and was performed by the State Bank. To speak about Russia as a market‐based country presents a great difficulty, because it lacks the established class of social investors which is well represented in such countries as USA and UK thereby contributing to their image as market‐based countries. Moreover, Russia has one of the lowest positions in the ranking of social th responsibility of business across different countries, occupying the 37 place (Belova, 2011). Only Turkey has a worse position being at the bottom of the list. The implications derived in the paper could be valuable when planning the strategy of development for different countries. The link between the kind of economic system and the respective institutions of supporting social entrepreneurship should be taken into account when

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Ruslan Pavlov projecting the strategy of development of financial mechanisms for social enterprises in the respective countries. As the amount of the paper is rather limited we hadn’t the opportunity to reinforce our implications by an empirical research. This task faces a problem of collecting data on the development rates of bank and market institutions in the respective countries, but it seems rather realistic to perform. So, maybe further it would be possible to construct a regression model showing the link between the level of development of market‐ and bank‐based economies and the respective rates of social entrepreneurship’ institutions in those countries.

References Belova T. (2011) “The most socially responsible countries”, [online] RBK Rating, http://rating.rbc.ru/article.shtml?2011/06/09/33318359 Clinton, W.J. (2007) Giving: How Each of Us Can Change the World, Alfred A. Knopf, New York. Demirguc‐Kunt, A., Levine R. (2003) “Bank‐based and market‐based financial systems: cross‐country comparisons”, [online] World Bank, www‐wds.worldbank.org/external/default/WDS ContentServer/WDSP/IB/1999/09/14/000094946_99072307505320/additional/126526322_200411172106.pdf. Eagleton T. (2011) Why Marx was right, Yale University Press, London. El‐Zoghby, M., Gähwiler, B., Lauer, K. (2011) Cross‐border funding of microfinance, Focus Note, No. 70, April, pp. 1‐3. GEM (2009) “United Kingdom 2009 Monitoring Report”, [online] Global Entrepreneurship Monitor, http://strath.ac.uk/media/departments/huntercentre/research/gem/GEM_UK_2009.pdf. Hartzell J. (2007) “Creating an ethical stock exchange”, [online] Skoll Centre for Social Entrepreneurship, www.sbs.ox.ac.uk/Skoll/Ethical_Stock_Exchange.pdf. Kuhlemann, A.‐K. (2011) “NExT SSE to promote ‘crowd investing’ in Germany”, Alliance, Vol. 16, No. 2, 2 June, p. 10. Mendell M., Nogales, R. (2009) “Social entrepreneurs in OECD member countries: what are the financial streams?” in The changing boundaries of social enterprises. Ed. A. Noya, Seoul, Work Together Foundation. Morin, R. (2012) “Rising share of Americans see conflict between rich and poor”, [online], Pew Social & Demographic Trends, www.pewsocialtrends.org/2012/01/11/rising‐share‐of‐americans‐see‐conflict‐between‐rich‐and‐poor/. Nicholls, A. (2007), What is the Future of Social Enterprise in Ethical Markets?, Office of The Third Sector, London. Panaritis, E. (2007) Prosperity Unbound. Building Property Markets with Trust, Palgrave Macmillan, New York. SSEA (2013) “Two major lines of SSEA work”, [online], Social Stock Exchange Association, www.socialstock.eu/what/

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Collaborative Strategies for Innovation Capacity‐Building: A Study of MIT’s International Partnerships Sebastian Pfotenhauer, Dan Roos, and Dava Newman Massachusetts Institute of Technology, Cambridge, USA

pfotenh@mit.edu roos@mit.edu dnewman@mit.edu Abstract: Over the past two decades, the key role of universities for innovation and economic development has become a central concern of policy‐makers and researchers alike. This paper discusses international university collaborations as a deliberate strategy in national and regional innovation policy to build innovation capacity through universities in transitioning economies. Using four of MIT’s major international partnerships as case studies – the Cambridge‐MIT Institute, the MIT‐Portugal Program, and the Masdar Institute of Science and Technology, and a suite of relationships between MIT and Singapore – this paper aims to provide a first analysis of this increasingly popular policy instrument. We will first develop a policy rationale for why countries seek to engage in such a collaborative, university‐centred strategy. Using a systems architecture approach, we will then analyse the different collaborative models employed in the four case studies and discuss how they address specific country needs and contexts. Our findings reject simplistic, quasi‐mechanistic notions of emulation and best‐practice transfer, and instead underscore the specific national character of each collaboration and the flexibility of the collaborations as a policy instrument. To illuminate how these questions of systemic embedding translate into program design, governance, and evolution, we further present a collaboration lifecycle model that can help inform policy decisions and program management for these collaborations in the future. We believe that MIT’s collaborations are no isolated occurrences, but spearheading a paradigm shift in international innovation policy whereby purposeful linkages to eminent entrepreneurial universities may become key instruments in innovation capacity building, thus redefining the role of leading universities in global economic development. Keywords: innovation policy, university collaborations, capacity building, collaboration models, systems architecture

1. Introduction For many years now, policy‐makers and researchers alike have stressed the idea that universities are the key to innovation and economic growth in the 21st century (OECD 2010; Goldin & Katz 2009). For many years, too, this assertion has usually been qualified by the observation that only a handful of universities – such as MIT, Stanford, or Caltech – are truly able to live up to this promise and excel at university‐driven innovation and entrepreneurship. Left with this troubling dual insight, governments around the globe have increasingly begun to look beyond their own borders for effective strategies, models and global “best‐practices” to turn their universities into innovation hubs and facilitate their country’s transition into a knowledge economy. Arguably, the successes of such emulation endeavours have been very mixed. What, then, if countries or institutions were to emulate “best practices” in innovation and entrepreneurship with the help of the sources of these very practices? Over the past 15 years, the Massachusetts Institute of Technology (MIT) has entered into a number of large‐scale international collaborations designed to foster university‐based innovation in the respective partner countries. Sponsored by the foreign governments, these collaborations go beyond traditional notions of emulation by directly linking one eminent entrepreneurial university – MIT – with several institutions abroad. From an innovation policy standpoint, MIT’s international collaborations are interesting for several reasons. First, they are all concerned, in one way or another, with the development of innovation capacity as embodied by the MIT model. Yet, the innovation needs of countries as different as Portugal, Singapore, Abu Dhabi or the UK differ immensely, and it is hence interesting to study how these collaborations differ in their design and objectives. Secondly, these collaborations are complex; that is, they address innovation capacity through a variety of levers, including human capital development, scientific and technological development, institutional and ecosystem development, as well as through national and international linkages across institutions. Thirdly, they are comparably large in scale and scope, involving typically hundreds of people, multiple institutions and scientific areas, and several tens to hundreds of million dollars of investment. Thus, they go significantly beyond traditional international university activities such as study abroad programs, dual degrees, or research partnerships. Furthermore, the intensive, limited‐ time collaborative model pursued by MIT and its partners differs markedly from the recent trend of international branch campuses, focusing primarily on the strengthening of regional partners, not spawning

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman branches. Fourth, all the collaborations are public‐private partnerships, driven mostly by public sector interests and investment, but involving a considerable number of industry partners as well. This paper analyses four of MIT’s recent international partnerships as a policy instrument for national and regional innovation policy in transitioning economies. In the following, we will discuss the motivations why countries seek to pursue such collaborative strategies with an institution like MIT, analyse different collaborative models with a view towards more general questions of collaboration design and systemic embedding, and discuss the collaboration lifecycle to highlight more practical questions of program governance and implementation, which can help to inform future projects of this kind.

2. Policy rationales for university partnerships as innovation strategies 2.1 The role of universities for innovation and the knowledge economy Universities have boldly moved to the centre stage of innovation policy (Thorp & Goldstein 2010; Berman 2011). Governments around the globe are focusing increasingly on the role of universities at the heart of the “knowledge triangle” – education, research, and innovation – capable of catering simultaneously to human capital formation, the creation of new knowledge, and the translation of this knowledge into innovation and technological advancement (Winckler 2010). Universities have also become major economic actors themselves. With the rise of “entrepreneurial university” models, they increasingly engage in the creation of proprietary knowledge, the commercialization of research through spin‐offs or licensing, and are measured not only by their intellectual but also their economic impact (Slaughter & Leslie 1997; Etzkowitz 2002). MIT, one of the standard bearers of university entrepreneurship, creates about $100M annual revenues through its Technology Licensing Office, and the revenues of companies founded by MIT graduates would, if gathered into an independent nation, make up the 11th‐largest economy comparable in the world, comparable to Russia and India (Roberts & Eesley 2009). The recent focus on universities in the economy is underwritten by decades worth of theoretical development in endogenous growth (Romer 1990; Aghion & Howitt 1998) and innovation, most prominently the theory of innovation systems (Lundvall, Bengt‐Åke 1992; Nelson, Richard 1993).

2.2 Collaboration, networks, and technological learning Theories of economic development have long emphasized the important role of international linkages. For decades, the prevailing development narrative has been one of technology transfer and gradual convergence to the innovation frontier, whereby less developed nations start out as adopters, gain expertise through imitation and import substitution, and eventually start innovating themselves (Kim 1997; Lall 1992). Yet, many countries struggle to close persistent gaps in scientific, technological, and innovation performance despite technology transfer, which has spurred new scholarship such as technological learning (Fransman et al. 1984; Kim 1997; Mani & Romijn 2004), which links opportunities to benefit from technology in the long run to the ability to build local capability (individual, organizational and systemic) and to adapt technologies as part of a local context; systems research, which underscores the interrelatedness of actors, institutions, regulatory frameworks, and policy sub‐sectors such as education, research, finance; and immigration; and the emergence of the “knowledge economy,” where access to knowledge hubs, rapid learning, human capital, communication and networks under conditions of increasing globalization are becoming the cornerstones of growth and competitiveness (Conceição & Heitor 1999; Archibugi & Lundvall 2001).

2.3 International higher education A third main policy rationale is the increasing internationalization of higher education (Knight 2007; Altbach 2007). Internationalization has been acknowledged as important instrument for capacity building in higher education, particularly for advanced science or other specialized degrees that might not available in the sending countries; for the cross‐border flow of skills and knowledge; research productivity; and labor force development. The number of internationally mobile students is estimated to triple to 8 million in 2025 (Bhandari 2009). As a consquence, many countries are at present trying to re‐set their international strategy to meet this “international imperative” and make a transition from a net‐sending to a net‐receiving country, which will allow them to benefit from these bright young individuals in their universities and labour market.

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2.4 Expertise, legitimacy, institutional reform and global visibility A fourth policy rationale can be found in the social interplay between expertise and legitimacy: Critical changes in an institution or system are often hard, if not impossible, to achieve from inside the institution or system alone. On the one hand, critical expertise and the means for change might not be readily available. Expertise on how to implement a successful innovation and entrepreneurship ecosystem around a university is, arguably, limited to a handful of universities, and foreign institutions might reason that they stand a better chance emulating this success models if they team up with these very universities. On the other hand, universities are comparabely inert and conservative institutions, embedded in a system deeply resistant to change because of hard legal structure, diverse political stakeholdership, and strong traditionalist‐type opposition. Partnering with an authoritative international brand institutions like MIT may put sufficient legitimacy behind institutional and systemic changes that might otherwise receive little support in the host country (Pfotenhauer et al. 2012). Moreover, the impact of research and innovation today is closely to visibility and participation key actor networks. Access to the MIT brand is also a means to increase the visibility of research and education activities, and to attract the attention of other player (e.g. industries).

3. Cases Our paper uses a case‐study approach to analyse strategic university collaborations as a policy instrument, using obtained through interviews, document analysis, extended periods of observation, and validation and triangulation through multiple sources. The case study approach is adequate for a number or reasons. First, it allows us to pursue an in‐depth investigation into a situation that has many of variables of interest while retaining a holistic perspective on a complex, systems‐specific instrument (Yin 1994). Second, our case study approach enables comparison between different manifestations of more general underlying phenomenon, i.e. international university collaborations as (specifically with MIT), and explore structural aspects across contexts and the flexibility of the instrument. Third, as suggested by (Siggelkow 2007), our cases have been selected with a view towards persuasiveness and generalizability. MIT has been a trendsetter in the domain of international university partnerships for technology development since the 60s and, arguably, it epitomizes the very innovation practices other countries and institutions seeks to “import.”

3.1 The Cambridge‐MIT Institute (CMI) CMI was launched in 1999 between MIT and the University of Cambridge, UK, to “enhance the country’s competitiveness and innovation by improving knowledge exchange between university and industry” (CMI 2008). Amidst a fierce public debate about the future and finances of British universities, Gordon Brown – then Chancellor of the Exchequer – became a strong advocate of the idea that British universities weren’t contributing enough to the economy and contemplated CMI as a possible solution. Although initial negotiations considered the possibility of creating a new university or partnering with a more Engineering‐type university, Cambridge was chosen for its high quality research and reputation, reaffirming the proud Oxbridge tradition of academic leadership in the UK. CMI ran for 6 years and involved a total of 43 faculty members (175 PIs) and 350 students on both sides of the Atlantic. CMI created 6 innovation‐oriented Master’s programs at Cambridge (Technology Policy, Micro‐ and Nanotechnology Enterprise, Engineering for Sustainable Development, Computational Biology, and Bioscience Enterprise, and Advanced Chemical Engineering), modelled largely after existing MIT programs, and engaged primarily in four domains of research (Energy and the Environment, Communications and Networks, Healthcare and Biotechnology, and Tomorrows Technology), all of which were chose because of their potential to attract industry collaboration, In addition, it introduced a number of ecosystem activities to foster innovation, such as “Knowledge Integration Communities,” the “consideration of use” principle to guide research activities, or “undergraduate research opportunities” for students.

3.2 The MIT‐Portugal program (MPP) In 2006, MPP was launched as a “strategic investment in people, knowledge, and ideas [that] can have a positive, lasting impact on the economy” (MIT 2005). MPP was conceived at the apogee of European university reforms surrounding the Bologna Process and the Lisbon Agenda, and reiterated the strong support for science in Portugal since the late nineties. MPP was designed to address several long‐standing systemic challenges: A “delayed” system due to the dictatorship until 1974, Portugal long focused on domestic access and massification, and only recently shifted discourses towards strong national research universities and international benchmarking (Heitor & Horta 2011). Despite an impressive catching‐up trajectory, the system

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman transition into a knowledge economy is far from complete and faces many challenges, such as limited university‐industry interaction, as underscored by the recent economic woes. MPP tried to strengthen excellence and critical mass in select focus areas by bringing together as a consortium 8 universities, 20 national research labs, and industry. The program focuses on four areas: Sustainable Energy Systems, Bioengineering Systems, Transportation Systems, and Engineering Design and Advanced Manufacturing, all of which are centred on an engineering systems core combining engineering with economics, management, policy, and social science. The program created 4 American‐style PhDs and 3 professional Master’s programs, which strongly focussed on innovation and entrepreneurship and radically broke with existing education traditions in Portuguese engineering. AS of today, MPP has gathered 214 Portuguese faculty and 70 faculty from MIT, and has thus far enrolled 452 graduate students at Portuguese institutions and 140 graduate students at MIT. The program has been renewed for another 5 years in 2013.

3.3 The Masdar Institute of Science and Technology (MI) In 2006, MIT signed an agreement with the government of Abu Dhabi to help establish a new research university – MI – as the centrepiece of the ambitious Masdar City project. Masdar City is spearheading the UAE’s socioeconomic transition from a booming oil‐based economy to a more diversified economy based on sustainable energy research and innovation, with the city itself acting as a test‐bed for technology and innovative urban design under desert conditions. It is at once also a touchstone for the future of the whole region. MI was conceived to develop the necessary local human resources, locally relevant research, and ecosystem to fuel this transformative vision. The MI‐MIT partnerships literally began by building MI from scratch, including faculty and student recruitment, the definition of a research agenda and educational programs, the design of physical infrastructure (including lab space) institute as well as the administrative, legal and virtual infrastructure. MI started out with a variety of research programs, which were later consolidated into three main research thrusts: Water, Environment and Health; Future Energy Systems; and Microsystems and Advanced Materials. As of today, MI’s offers 8 Master’s degrees related to the abovementioned areas, and added Interdisciplinary Doctoral Degree Program. MI has grown to a body of 86 faculty, and currently has 336 students of 52 different nationalities. The MI‐MIT collaboration has recently (2012) entered into its second phase.

3.4 MIT‐Singapore (SMA/SMART/SUTD) MIT’s longstanding collaboration with Singapore spans several programs. The Singapore‐MIT Alliance (SMA) was launched in 1998 primarily as an educational collaboration based on conventional distance education models with student rotation and a dual degree option, featuring a strong focus on research training. In collaboration with the National University of Singapore and Nanyang Technological University, SMA offered five educational tracks: Advanced Materials for Micro‐ and Nano‐Systems, Chemical and Pharmaceutical Engineering, Computation and Systems Biology, Computational Engineering, and Manufacturing Systems and Technology. SMA was complemented in 2007 by the Singapore‐MIT Alliance for Research and Technology (SMART), which added an explicit research dimensions to partnership and further jumpstarted the SMART Center as the first entity in the new Singaporian Campus for Research Excellence and Technological Enterprise. SMART aimed to attract MIT faculty for extended periods to Singapore (e.g. sabbaticals), where they would received their own laboratories and students, and collaborate with researchers from regional universities. SMART focuses on five research thrusts: BioSystems and Micromechanics, Environmental Sensing and Modelling, Future Urban Mobility, Infectious Diseases, and Low Energy Electronic Systems. In addition, SMART launched the Innovation Center, a translational unit modelled after MIT’s Deshpande Center to shepherd nascent technologies into commercialization. Finally, Singapore and MIT recently announced the joint creation of the Singapore University of Technology and Design (SUTD), which notably adds an undergraduate component to the suite MIT‐Singapore relationships and emphasises creative design thinking in engineering education. SUTD further offers Master’s degrees and an interdisciplinary PhD program.

4. Different collaboration models In the following, we will discuss selected key findings of a systems architecture analysis of the four MIT collaborations. Systems architecting is an approach to understand, design, and manage complex systems (Maier & Rechtin 2000). It allows us to understand how the components, or forms, of a system relate to certain systems functions, and shows how alternative architectures align or conflict with the stakeholder objectives. The goal of architectural analysis is not to assess the success of the collaboration according to some

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman external criteria. Rather, it is to understand the complex interrelation between multiple goals and activities (e.g. education, research, commercialization, ecosystem development) and the resulting trade‐offs in performance, as well as how systems constraints (e.g. political preferences or structural constraints) allow only certain architectures to materialize. For reasons of space constraints, the full architecture analysis will be detailed elsewhere. The analysis revealed four distinct models for collaboration (Fig. 1). CMI, first, follows a bilateral model. From the earliest stages, CMI was not conceived as MIT “helping” Cambridge, but as a symmetric “joint venture” between two institutions of equal standing, building on the “complementary strengths” of each institution and effecting “cultural change in both” (CMI 2008). This bilateral model was possible because the UK did actually have universities that were comparable in research and educational quality to MIT (though with significant cultural differences), and the idea that Cambridge was not on par with any other university in the world was politically not viable. From this bilateral core, the vision and effects of the collaborations were supposed to radiate outward into an affiliated network of universities in a hub‐and‐spokes fashion. This network further fostered the absorption and rapid dissemination of research in through a knowledge integration community model (Acworth 2008). Cambridge‐MIT Institute Bilateral Model

MIT‐Portugal Program Network Model

Masdar Institute of S&T Institution‐building Model

Singapore MIT Alliance Singapore University of Tech. & Design Functional Expansion Model

Figure 1: Different collaboration models identified by systems architecture analysis MPP, secondly, follows a network model. Portugal did not possess a single eminent university of the calibre of Cambridge, which made the bilateral model unlikely. Moreover, given the historical emphasis on social equity rooted in the post‐dictatorship era, a broad institutional base was politically preferable. Finally, one of the central intentions behind MPP was the creation of critical mass. In the network configuration, MIT served as a catalyst to incentivize intra‐Portuguese collaboration spanning research (e.g. all funded projects involved multiple Portuguese universities), education (e.g. by joint degrees between several Portuguese universities and student rotations between them), and innovation (e.g. national innovation events like venture competitions). The network approach carries even further: Parallel to MPP, the Portuguese government created similar partnerships with Carnegie Mellon, UT Austin, Harvard Medical School and the German Fraunhofer Society, which allowed Portugal to pool expertise from multiple domains.

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman MI, thirdly, can be best characterized as an institution‐building model. Rather than strengthening an existing university within an existing context, MIT was asked to assist with creation of the first graduate research university of the country in the proverbial middle of the desert. Therefore, the MIT‐MI partnership encountered a lot of “firsts” – for the institution, the ecosystem and the nation. For example, MI developed the first clean room of the country, was the first to import certain research equipment into the country, solve certain supply chains issues, safety standards (e.g. for hazardous waste management), and regulatory questions (e.g. questions of IP or human subjects research), and stimulate the creation of the UAE innovation ecosystem, which is still lacking multiple core components, from a research funding agency to a mature venture industry. While this institution‐building meant many hurdles for the MIT collaboration, it broke ground for future research in the UAE as a whole. Fourth, MIT‐Singapore follows a functional expansion model: Different functions have been successively added through new forms of collaboration. While SMA was focused on (Master’s level) education, it was later complemented by SMART, which added an (institutionalized) research component and an innovation center, and the launching of SUTD as a full‐fledged university with undergraduate focus. In contrast, CMI, MPP, and MI each simultaneously addressed education, research, and innovation through one collaborative arrangement. Fundamentally, the interactions between Singapore and MIT cover the same functions as the previous three archetypes, and comprise the same elements: bilateral interaction (MIT‐SMART), network (MIT‐NUS‐NTU), and institution‐building (MIT‐SUTD). What is different, though, is the separation and gradual roll‐out of functionality, which arguably speaks to the technocratic, highly planned systems management style that Singapore is known for. The four different models identified here are quite heterogeneous. Yet, their structural analysis holds some generalizable insights. First, it is striking that “one” instrument – a collaboration with MIT with the purpose of emulating innovation practices – takes a radically different forms in each case, which contradicts the widespread simplistic, quasi‐mechanistic understanding of “best‐practice transfer.” Looking at different architectures and their genesis in a comparative way provides an entry point to systematically account for, and theorize, cross‐national differences in ostensibly identical policy instruments, which is something that the innovation policy literature has sometimes struggled with in the past. Our analysis reveals how different architectures are shaped by different systems constraints and their socio‐political embedding, each idiosyncratic for a particular country (e.g. the elitist tradition of the UK university system leading up to a bilateral model of “equal standing”). Second, while we do not claim to provide an exhaustive description of all possible collaboration models, our analysis points out important building blocks and archetypes that underwrite different collaboration architectures. The Singapore case stands witness to how the three other models (bilateral, network, institution‐building) can be juxtaposed to render a distinct nation‐specific configuration.

5. Collaboration lifecycle To cast some more light on when and how these systems constraints affect the design and implementation of these international collaborations, the next part of our paper will discuss the “collaboration lifecycle.” This more process‐ and management‐oriented angle complements our architectural analysis by connecting the systems level to program level. By highlighting different collaboration phases and challenges in each phase, we hope to provide some strategic guidance for policy‐makers who wish to implement such programs in the future. Like the above architecture analysis, this lifecycle analysis is based on our in‐depth case studies with a view towards synthesis‐oriented comparison.

5.1 Collaboration initiation and design Our research finds three major collaboration phases, which are depicted in Fig. 2. In the program initiation phase, three factors must typically come together for a collaboration to happen. First, the program must fit into the larger systems context, defined by the recent trajectory of the national STI system, on‐going reforms efforts, or extraordinary challenges. Second, the collaborations typically needs a political champion, i.e. a government leader who is convinced of its strategic importance, can mobilize the necessary financial and political resources, and is able to shield the program from attacks. Third, the collaboration must be attractive to MIT, including faculty interest (e.g. unique research opportunities) and institutional interest (e.g. access to good students, sufficient funding).

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman The initiation phase is followed by a more formalized phase of program design that defines program objectives, assembles the program’s functional components, and articulates a legal (contractual) framework. All three tasks are subject to complex negotiation processes between the initiating key stakeholders, which primarily include representatives of the national governments (or sometimes a subsidiary organization) and senior leadership from MIT. In many ways, the touchstone of the program design phase is its translation into a contract. Three main issues frequently arise in the process. First, Intellectual Property (IP): Typically, the participating partners (institutions, countries) have very different (and at times outright incompatible) IP frameworks. Second, the partnerships are “hybrid” arrangements that fall in between traditional research collaboration and a consulting arrangement. That is, while part of the collaboration employs traditional academic collaboration models (e.g. joint research projects or student mobility), MIT typically also takes an advisory role on institutional models, curriculum design, faculty hiring, legal frameworks, infrastructure development etc. Third, contracts need to consider accountability and liability, both in terms of key performance indicators (KPIs) and reporting requirements. Discussions around KPIs are often fierce and almost always sawn with unrealistic expectations (e.g. the number start‐ups to be expected); similarly, different cultures and requirements for reporting may cause friction. The program design phase overlaps with what one could call a “year 0” before the official launch of the program. During this “year 0,” faculty members from both sides are brought together to explore areas of common interest and potential collaboration (e.g. through workshops), often facilitated through preliminary seed grants. The “year 0” also allows for the hiring of staff and ramping up educational programs. Experience shows that the “Year 0” is extremely important to set the stage wisely for a successful collaboration; once the program has been launched, performance pressure, standard operating procedures, political pressure and media attention may undermine easy adjustment along the way.

Figure 2: Collaboration lifecycle

5.2 Collaboration execution Program execution entails program governance on multiple levels. At the top level, the collaboration is typically run jointly by one collaboration lead on each side. These leads also members of a joint governing/steering committee that also includes a high‐level government representatives and MIT senior leadership. On an operational level, leads are typically supported by a operating committee with broader stakeholder representation. At the content level, each scientific area typically has “focus area leads” on both sides that oversee activities in this domain (both research and education). Frequently, purpose‐specific management positions are created such as a Director of Innovation or Director for Education. The collaborations typically also feature scientific advisory boards and/or external review boards, with representation of key national and international leaders. It comes as no surprise that the learning curve for collaboration of this magnitude and complexity is steep and long, and many initial decisions are being revised as the program evolves. The changes may include for

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman example consolidation or diversification of research projects or educational programs, implementation of new processes (e.g. a shift from discretionary funding to research calls), new program members, new activities (e.g. the addition of a venture competition), political intervention and budget adjustments, and many more. Typically, programs undergo at least one major revision during its lifetime, often associated to leadership change. Closely related to program governance is the establishment of adequate program evaluation structures. Program evaluation fulfils a dual role of demonstrating impact to donors, which is particularly important during program renewal negotiations, and facilitating real‐time program learning to adjust program performance over time. Performance assessment typically proofs extremely difficult: All collaboration pursue multiple goals and activities, and program impacts are often visible only with a lag of several years (e.g. publications, patents, economic stimulus, exports). Moreover, the program goals are typically inherently sociotechnical and targeted cultural change rather than a marginal publication increase. Therefore, the collaborations withstand attempts to impose simplistic measures of “success.”

5.3 Collaboration completion Completion of the initial program typically results in one of three scenarios: program termination (e.g. CMI), program continuation into a phase 2 (MPP, MI), or the creation of a new program (SMA/SMART/SUTD). The different scenarios are not necessarily a measure of program success; rather, they point to different functions of the programs in the respective national innovation systems, which may require longer or shorter activity. Different completion scenarios call for different transition strategies. Termination requires a smooth winding down of program activities to prevent shocks, including thinking about students in the pipeline, the identification of alternative funding sources, or a handover of all teaching responsibilities to the local universities. Program continuation may call for a strategic revision of program goals and activities, including the discontinuation or addition of certain elements. A new partnership starts the lifecycle from the beginning.

6. Conclusion In this paper, we discussed international collaborations as a novel policy instrument by way of which countries, regions or institutions can build innovation capacity through strategic interaction with eminent global research universities. Based on a comparative study of four of MIT’s recent major international engagements, we presented several models of how these partnerships can be set up (bilateral, network, institution‐building, functional expansion), and analysed how different configurations aligned with the particular innovation needs, systems constraints, and cultural norms of the partner country. Our findings suggest that international university collaborations of the type described here are a powerful and flexible policy instrument for countries seeking to enhance their innovation capabilities. We demonstrated how in each case the emulation efforts underlying these collaboration lead to very different manifestation, contradicting the prevalent notion of “best‐practice transfer” as something quasi‐mechanistic and uniform across contexts. Our comparative architecture analysis provides an entry point for how to theorize cross‐ national systemic differences in the context of university collaborations, and how certain systems constraints give rise to (or inhibit) certain collaboration architectures. While our case studies are far exhaustive, the models discussed here may hold some generalizable lessons facing a specific set of systems constraints may go about building innovation capacity in a collaborative fashion. They further provide a set of building blocks and archetypes from which one can begin thinking about design principles. For example, the case study of Singapore illustrates applied elements of all three other cases (UK, Portugal and Abu Dhabi), such that the latter can be seen as a sort of toolbox for other possible configuration. We further analysed the collaboration lifecycle in its various stages – initiation/design, execution, and completion – highlighting specific implementation challenges (e.g. contract design) for each stage. The lessons learned from the set of collaborations studied in this paper may prove useful for governments or institutions seeking to enter in a similar collaborative arrangement. We believe that MIT’s collaborations are no isolated occurrences, but spearheading a broader policy trend and possible paradigm shift in international innovation policy whereby governments and institutions increasingly seek strategic linkages to globally leading universities. The recent “recruitment” of Cornell University to build an engineering school in New York underlines the potential of this policy instrument also on a national level. This trend may, in the long run, redefine the already central role of eminent research universities in global

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Sebastian Pfotenhauer, Dan Roos, and Dava Newman economic development, moving closer to an active facilitation model for capacity building in science, technology, and innovation. More work needs to fully extract the lessons from these rich case studies, to broaden the empirical base, and to build a theory on complex international innovation partnerships that enables strategic architecting of such collaborations in the future.

References Acworth, E.B., 2008. University–industry engagement: The formation of the Knowledge Integration Community (KIC) model at the Cambridge‐MIT Institute. Research Policy, 37, pp.241–254. Aghion, P. & Howitt, P., 1998. Endogenous Growth Theory, MIT press. Altbach, P., 2007. Tradition and Transition: The International Imperative in Higher Education, Chestnut Hill, MA: CIHE Publishing. Archibugi, D. & Lundvall, B.‐Å. eds., 2001. The Globalizing Learning Economy, New York: Oxford University Press. Berman, E.P., 2011. Creating the Market University: How Academic Science Became an Economic Engine, Princeton University Press. Bhandari, R., 2009. Changes in International Mobility, Los Angeles, CA: NAFSA. CMI, 2008. Accelerating Innovation by Crossing Boundaries: The Cambridge MIT Institute 2000‐2006, Available at: http://www.regionalinnovation.org.uk/object/download/2302/doc/CMI%20Final%20Report‐web.pdf. Conceição, P. & Heitor, M., 1999. On the role of the university in the knowledge economy. Science and Public Policy, 26(1), pp.37–51. Etzkowitz, H., 2002. MIT and the Rise of Entrepreneurial Science, New York: Routledge. Florida, R., 2005. The World is Spiky. The Atlantic, Oct. Available at: http://www.theatlantic.com/past/docs/images/issues/200510/world‐is‐spiky.pdf. Fransman, M., King, K. & Bell, M. eds., 1984. “Learning” and the accumulation of industrial technological capacity in developing countries. In Technological capability in the Third World. Macmillan, pp. 187–209. Goldin, C. & Katz, L., 2009. The race between education and technology, Belknap Harvard. Heitor, M. & Horta, H., 2011. Science and Technology in Portugal: From Late Awakening to the Challenge of Knowledge‐ Integrated Communities. In G. Neave & A. Amaral, eds. Higher Education in Portugal 1974‐2009. Dordrecht: Springer Netherlands, pp. 179–226. Kim, L., 1997. Imitation to Innovation: The Dynamics of Korea’s Technological Learning, Boston, MA: Harvard Business School Press. Knight, J., 2007. Cross‐border Tertiary Education: An Introduction. In Cross‐border Tertiary Education: A Way towards Capacity Development. Paris: OECD, pp. 21–46. Lall, S., 1992. Technological capabilities and industrialization. World Development, 20(2), pp.165–186. Lundvall, Bengt‐Åke, 1992. National Innovation Systems: Towards a Theory of Innovation and Interactive Learning, London: Pinter. Maier, M.W. & Rechtin, E., 2000. The Art of Systems Architecting, Second Edition 2nd ed., CRC Press. Mani, S. & Romijn, H. eds., 2004. Innovation, Learning, and Technological Dynamism of Developing Countries, United Nations. MIT, 2005. Program Overview Brochure, MIT Portugal Program, http://www.mitportugal.org/index.php?option=com_docman&task=doc_download&gid=3&Itemid=383. Nelson, Richard ed., 1993. National Innovation Systems. A Comparative Analysis, New York/Oxford: Oxford University Press. OECD, 2010. The OECD Innovation Strategy, Paris: OECD. Pfotenhauer, S.M. et al., 2012. Seeding Change through International University Partnerships: The MIT‐Portugal Program as a Driver of Internationalization, Networking, and Innovation. Higher Education Policy. Roberts, E.B. & Eesley, C., 2009. Entrepreneurial Impact: The Role of MIT, The Kauffman Foundation and MIT Sloan School of Management. Romer, P., 1990. Endogenous Technological Change. Journal of Political Economy, 98(5), pp.71–102. Siggelkow, N., 2007. Persuasion with Case Studies. Academy of Management Journal, 50(1), pp.20‐24. Slaughter, S. & Leslie, L.L., 1997. Academic Capitalism: Politics, Policies and the Entrepreneurial University, John Hopkins University Press. Thorp, H.H. & Goldstein, B., 2010. Engines of Innovation: The Entrepreneurial University in the Twenty‐First Century, Chapel Hill, NC: University of North Carolina Press. Winckler, G., 2010. Innovation Strategies of Europeam Universities in the Triangle of Education, Research, and Innovation. In L. E. Weber & J. J. Duderstadt, eds. University Research for Innovation. Glion Colloquium. Economica, pp. 107–124. Yin, R.K., 1994. Case Study Research: Design and Methods. Thousand Oaks, CA: Sage Publications

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The Internationalization Process of German High‐Tech SMEs: An Empirical Analysis Andreas Pinkwart and Dorian Proksch HHL Leipzig Graduate School of Management, Leipzig, Germany pinkwart@hhl.de dorian.proksch@hhl.de Abstract: Much research has been done about the internationalization process of companies since the 1970s. However, only few studies applied the findings to high‐tech SMEs and different researchers have pointed out this lack of research (see e.g. Rialp and Knight 2005 and Kriedrich and Kraus 2009). Our contribution attempts to fill in the previous research gap using a longitudinal study to analyze the internationalization process of German high‐tech startups. Our data set consists of 120 venture‐capital‐financed German high‐tech SMEs of which 41.6 per cent of them went international. The data was collected directly from the original transaction documents at the venture capital companies. This enabled us to collect reliable quantitative (e.g. the financial figures) and qualitative data (e.g. the market entry strategy). We showed that the companies followed a structured process for going international which mainly consists of the following four parts: Early Planning, Protecting IP, Raising Funds and Building Networks. The German high‐tech SMEs plan for their internationalization within their business plan and then stick to the plan. They analyze the patent situation and file international patents if possible. In addition, they sometimes have to seek for a way to finance their internationalization. Furthermore, they actively work on expanding their international network, most using trade fairs as a first step. Comparing the national with the international group we were able to quantitatively verify this process. In addition, we enhanced our process model by findings derived from our qualitative data. We used investigator triangulation to ensure the reliability of our approach. Our findings are contrary to the international new venture theory currently discussed in literature and support the process theory of internationalization. Keywords: internationalization, German high‐tech SME, internationalization process, venture capital, longitudinal empirical study

1. Introduction The research area of internationalization evolved in the 1970s and 1980s and most of the existing theories were developed during that time (Rialp et al 2005). Three main models were built to describe the internationalization process: the Uppsala internationalization process model (Johanson and Vahlne 2005), the born‐global model (Madsen and Servais 1997) and the born‐again global model (Bell et al 2003). The first model assumes that companies go through a step‐by‐step approach while becoming international so as to minimize risks as much as possible. Therefore, they try to use strategies, which were proven correct in the domestic market. This model is referred to in literature as Process Theories of Internationalization (PTI). The born global approach describes that new ventures may go international right or shortly after founding without following a structured process. Similarly, the born‐again global model states that a company goes international quickly following a specific event like being taken over by another company or experiencing a change in management. These two models are referred to in literature as International New Venture Theory (INVT). We analyzed the internationalization process of German high‐tech SMEs. The particular lack of research in the field of high‐tech SMEs was pointed out by Rialp et al (2005) and Kriedrich and Kraus (2009). In addition, Johnson (2004) and Crick and Spence (2005) stated that high‐tech SMEs should be analyzed separately because they internationalize more rapidly and use different market entry strategies. Burgel and Murray (2000) reported that technology firms in particular follow a rapid internationalization approach. Schweins and Kabst (2011) confirmed this by analyzing German high‐tech SMEs and added that although they internationalized quickly, these firms used an incremental approach. George et al (1999) showed that a systematic internationalization approach lead to better results. On the other hand, Bürgel et al. (2000) showed that internationalization that occurs quickly leads to faster growth. By using longitudinal empirical data we were able to analyze the internationalization process of German high‐tech SME’s in detail and derive a more specialized model.

2. Theoretical framework Current models of the internationalization process give an abstract description about the factors and steps in internationalization. However, Jones (2001) stated that these comprehensive theories might not be applicable

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Andreas Pinkwart and Dorian Proksch for small high‐technology firms and that rather a series of sub models should be used to explain the internationalization process. We therefore try to connect different models used in current research and apply them to an empirical data set. We thereby combine the theories of technology, financing and networking in internationalization and add a rarely discussed point in the literature ‐ the planning of the internationalization. Table 1: A summary of current literature in the five research fields of internationalization Dimension Early Planning

Authors Cieslik and Kaciak (2009) Fletcher (2007) Burgel and Fier (2000)

Protecting IP

Autio et al (2000) Zou et al (2010) Saarenketo et al (2004)

Raising funds

Westhead (2001) Fernharber (2007) Lutostarinen and Gabrielson (2006) Sharma and Blomstermo (2003) Zaig and NG (2006) Ojala (2009)

Building Networks

Results New ventures internationalize either right from the beginning or not at all Preparation of an international business plan predicts internationalization International sales in the business plan increases the likelihood of internationalization An imitable technology positively influences the international growth Technology capability (including IP protection) is one of the main drivers of international growth Patents have an emerging role as being a determinant for internationalization The ability to acquire financing does not predict the propensity to export The level of venture capital in an industry correlates with the likelihood to internationalize A shortage of financing is a significant challenge for early internationalization Born global firms built their international network early on Networks can be an effective way to penetrate international markets Companies build strategic relationships to internationalize

Current research results were described in table 1. These led us to four steps in an internationalization process. For each step of the internationalization process we were able to derive a hypothesis, which we will describe in the following parts.

2.1 Planning of internationalization Cieslik and Kaciak (2009) argue that start‐ups that focus initially on the domestic market are less likely to export their products. That can lead to the counter hypothesis that ventures which already plan to internationalize in their business plan are much more likely to go global. This was supported by Fletcher (2007) who described writing an international business plan as a main determinant of internationalization. Burgel and Fier (2000) found that the plan for international sales in the business plan increased the likelihood to contract an international distributor. We want to find out if this is also the case for German high‐tech SMEs: H1: International operating German high‐tech SMEs planned their internationalization already in their business plan.

2.2 IP protection To shield themselves from competitors the high‐tech SMEs can file patents for their technologies. Saarenketo et al (2004) state that patents have an emerging role as becoming a determinant for internationalization. That can especially be the case for SMEs because they lack the resources for a fast and aggressive market entry. Zou et al (2010) mentioned that the technology capability (consisting of patents and explicit knowledge) is one of the main drivers of international growth. In contrary, Autio et al (2000) argue that an imitable technology positively influences the international growth. It forces the company to act faster. We want to find out the IP protection strategy by German high‐tech SMEs: H2: International‐operating German high‐tech SMEs filed international patents upon internationalization.

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2.3 Financing The internationalization process can create additional costs. These may include travel expenses, costs for new staff members or translation services. Therefore, a company would want to seek new financing upon internationalization. Westhead (2001) surprisingly found that the ability to acquire financing does not predict the propensity to export. However, more recent results state the opposite. Lutostarinen and Gabrielsons (2006) argued that a shortage of financing is an important challenge for early internationalization. Fernharber (2007) described that the likelihood to internationalize rises when more venture capital financing is available within an industry. We want to find out if German high‐tech SMEs try to acquire new financing upon internationalizing. H3: German high‐tech SMEs acquire a new financial investment round prior to their internationalization.

2.4 Network building Various studies stress the importance of an international network. For example, Sharma and Blomstemo (2003) describe how born global firms build their international network very early to enable quick integration into other networks. Zaig and NG (2006) describe that network relationships can be an active way to penetrate international markets. These international networks are actively built and strategically chosen as described by Ojala (2009). High‐tech SMEs often use the possibility to present their products in trade fairs to build their international network. We want to find out if German high‐tech SMEs actively build their networks before internationalizing. H4: High‐technology SMEs build an international network prior to internationalizing.

3. Methodology 3.1 Sample We carried out a survey with 120 high‐tech SMEs. We collected the data from eight different public venture capital funds (VCF) in Germany, which financed these companies. They were financed within 18 months upon being founded and their business models were built on technical innovations. We collected the data directly from the VCF and had access to the original documents. That enabled us to collect reliable, longitudinal data. We had access to the decision files (business plan, due diligence, investment committee paper) and the continuous reporting (qualitative and quantitative reporting, milestone reports, board meetings). That gave us a broad perspective about the development of SMEs. We were able to collect quantitative data (e.g. the financial figures) and qualitative data (e.g. the market entry strategy). An already carried‐out pretest with eight high‐tech SMEs showed the feasibility of this approach. We used a codebook to be able to transform the qualitative data. The codes were derived from literature and were adjusted based on the result of the pretest. We used investigator triangulation to ensure the reliability of our approach. One of the authors and an assistant coded the data. We looked at high‐tech SMEs, which were initially financed between 2005 and 2011; the average age was 5.1 years. SMEs from the following industries were included: information technology, life science, material science, energy and telecommunication. Of the 120 companies in our sample 50 went international. Therefore, the internationalization ratio is 41.6 per cent. Table 2 shows a description of our sample. Table 2: Overview of our sample Variable Number of international cases Number of national cases Number of all cases Number of cases which planned for internationalization in their business plan Internationalization ratio Average age of firms

We state a company as being international if it:

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Value 50 70 120 48 41.6 % 5.1 years

Andreas Pinkwart and Dorian Proksch

founded a branch in a foreign country;

built a joint‐venture with an international company; or

initiated international sales activity e.g. indicated through meetings with international clients.

3.2 Measures and variables To test our hypothesis in the area of planning we looked at the business plans and the decision files of the SMEs to find out if a possible internationalization was already mentioned. We therefore coded it binary, 1 for mentioned and 0 for not mentioned. We then looked at the text, where there was mentioning of internationalization and searched for patterns. To verify our hypothesis in the area of IP protection we looked at whether international patents were filed. We found this data in the business plans, the decision files and the qualitative monthly reporting. We coded 1 if international patents were filed and 0 if not. We then looked at text, where there was mentioning of IP protection and possible problems in dealing with it. For testing our hypothesis in the area of financing we looked at how many financing rounds the companies have gone through. We can state this by the number of term sheets available. We also looked at the qualitative reporting to find out if the SMEs mentioned that they need more capital for the internationalization. To verify our hypothesis about the international network we looked at the business plans, the decision files and the qualitative reporting. We coded 1 if an international network was mentioned and 0 if not. We then looked at the textual phrases containing any information about the international network. Table 3 shows the descriptive statistics of our variables for our total data set, as well as for the national and international group separately. Table 3: Average values of the variables for the international groups of German high‐tech SMEs Variable General Age of firm Planning Planning in the BP IP protection International patent filed Financing Number of financial rounds Network International network building

International Group Mean/ Share Std. Dev.

National Group Mean/ Share Std. Dev 5.75 1.606 0.404 0.494

5.068

2.508

0.595

0.497

0.380

0.490

0.129

2.040

1.009

1.814

0.548

0.503

0.211

Total Mean/ Share Std. Dev 5.510

3.354

0.484

0.502

0.337

0.233

0.424

1.386

1.908

1.243

0.411

0.353

0.480

To encode our qualitative data we used a codebook with codes derived from literature. After conducting a pretest with eight high‐tech SMEs we adjusted our codebook to get a better fit to our available data. We used investigator triangulation to ensure the reliability of our approach and encoded the variables “Planning in the BP” and “International network built”. Currently, more than 50 intercoder reliability measures are used. However, only Scott’s Pi, Cohen’s Kappa and Krippendorff’s alpha are widely accepted in literature (Lombard et al, 2002). We calculated the values for all three intercoder reliability indicators. After two rounds of encoding the data we received a Cohen’s Kappa larger than 0.81 for all of our variables. Landis and Koch (1977) stated that this value can been interpreted as nearly perfect. In addition, we calculated the values for Scott’s Pi. It’s higher than 0.9 and therefore can be interpreted as excellent (Lombard et al, 2002). Finally, we calculated Krippendorff’s alpha. The value is higher than 0.8 and can be interpreted as acceptable

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Andreas Pinkwart and Dorian Proksch (Krippendorff, 2004). In summary, we have an excellent intercoder reliability for all our variables. Table 3 summarizes the intercoder reliability measures. Table 4: Intercoder reliability for the encoding of our qualitative data Planning in the BP International network built

Percent agreement 97 %

Scott’s Pi

Krippendorff’s Alpha 0.937

N agreement

N disagreements

0.936

Cohen’s Kappa 0.936

97 %

0.934

4. Results We used One‐Way ANOVA to test if the identified variables were related to going international. The binary measurement of the internationalization (yes or no) attributed to the choice. Using ANOVA, we could identify if the variables had a significant difference in the national and in the international group. To test if the results were significant we provided the F‐value and the P‐value. The results are summarized in table 5. In addition, we enhanced our results with examples of our findings from the qualitative data. Looking at the planning we can state that this variable is significant. High‐tech companies, which go international, planned that within their business plan. We can accept H1. Looking at the qualitative data we found that the business plans often included an analysis of international competitors, a market assessment and a market entry strategy. In view of the intellectual property protection, we can state that this variable is highly significant. High‐tech companies protect their technologies with international patents upon entering international markets. We can accept H2. Looking at the qualitative data we found that the high‐tech SMEs often consult patent lawyers to analyze the patent situation or see if regulations apply. Some high‐tech SMEs say that they want to remain in the European market because the patent situation there is easier to manage. With regards to financing, we have to reject H3. The number of financial rounds doesn’t differ significantly between the national and international group. However, we found examples from the qualitative data that German high‐tech SMEs do seek additional funding to finance the internationalization process. Regarding the international network, we can state that the variable is highly significant and we can accept H4. High‐tech SMEs built international networks upon internationalizing. From our qualitative data, we see that they visit international trade fairs to build up their networks. Also, they use their own international networks and the networks of their investors. Scientific based high‐tech SMEs plan to publish their results in international journals to attract attention and increase their network with people in the field. Table 5: Results of the one‐way ANOVA for each tested variable Variable Planning Planning in the BP IP protection International patent filed Financing Number of financial rounds Network International network built

Degrees of freedom 98 119

F‐value 3.617 11.088

P‐value 0.060 0.001

Sig. S S

119

0.961

0.329

13.408

0.000

5. Discussions In this section we discuss our results in the four areas of: Planning of internationalization, IP protection, Financing and Network building. Firstly, we analyzed the role of planning in the internationalization process. We found that German high‐tech SMEs make the decision early whether to internationalize or not on and stay with that decision. Our results are in line with the research by Fletcher (2007), Burgel and Fier (2000). Cieslik

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Andreas Pinkwart and Dorian Proksch and Kaciak (2009) stated that new ventures internationalize right from the beginning or not at all. We can’t confirm that statement but argue instead that the decision of German high‐tech SMEs to internationalize is made at the beginning. The planning process includes analyzing international competitors, the assessment of the market potential and the planning of the market strategy. Secondly, we analyzed the role of IP protection and found this to be highly relevant. German high‐tech SMEs first check the patenting situation and then file international patents. They don’t want to risk violating other patents and they want to protect their IP in foreign markets. This confirms the results of Saarenketo et al (2004) and Zou et al (2010). We can state that German high‐tech SMEs are following a risk adverse patent strategy. Thirdly, we looked at the role of financing. We found that German high‐tech SMEs don’t have more financing rounds. This can be due to the young age of 5.1 years in average of the companies in our data set. Possibly, the number of financing rounds differs significantly from each other between national and international high‐tech SMEs if we were to compare them at a later stage. Another reason could be that the number of financing rounds is not higher but the amount of capital raised is more. We were able to show that the international high‐tech SMEs were significantly able to raise more capital in a previous study. This is in line with our results from H1 that the companies already plan for their internationalization from the beginning. Also, our qualitative results showed that some high‐tech SMEs were seeking new funds to finance their internationalization approach. Fourthly, we looked at the creation of international networks and showed that this is highly relevant. This supports the results of Zaig and NG (2006) who describe that building networks is a way to penetrate a market and Ojala (2009) who describes that the international networks are often strategically chosen. Our qualitative results confirm that German high‐tech SMEs are strongly aware of the importance of networks and actively build them. They mainly use trade fairs to first present their products to international buyers. They also use their already established networks and if possible the networks of the VCF. In addition, they use scientific publications to extend their international research network. German high‐tech SMEs don’t seem to simply follow a very structured internationalization approach in whole but also follow a structured networking approach. This could be an area for further research.

Figure 1: The steps of the internationalization process of a German high‐tech SME Figure 1 summarizes our results. Our research showed that the internationalization approach of German high‐ tech SMEs is similar to the Uppsala model developed 40 years ago. German high‐tech SMEs are using a highly structured approach. These findings are also consistent with the results of Schweins and Kabst (2011) who found that SMEs internationalize quickly but in a structured way. A reason for that may be that bringing high‐ tech products or services to the market itself requires a complex and structured approach. The founders may therefore be accustomed to a structured process and therefore tackle the internationalization with the same approach. We were able to create a detailed model of the internationalization steps by enhancing our quantitative results with qualitative findings. 6 Limitations, implications and outlook Our study has the following limitations:

Our research method allowed us to identify and examine the steps German high‐tech SMEs take while going international. However, our research approach doesn’t allow for building conclusions as to the order of these steps. That’s an area for further research.

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We included companies, which were founded between 2003 and 2011 with an average age of 5.1 years. Therefore, we may have more born‐global SMEs in our data set and would have seen a higher internationalization rate if we conducted our study on a set of longer existing businesses. However, we found that most companies already mention their intention to internationalize in their first business plan. Only few companies were included which mentioned their willingness to internationalize and haven’t done so yet.

Our data set only includes data from German companies. It would be interesting to conduct a comparative study to see if the identified internationalization of high‐tech SMEs can also be found in other countries or if it is biased within the German culture.

Our research showed that German high‐tech SMEs follow a highly structured process when internationalizing. That is contrary to the results of the born‐globals. Our results may be attributed to the way high‐tech SMEs work. To develop their products for market‐readiness they have to follow a highly structured approach. That’s why they may be inclined to work in a structured way in general. We encourage further research in this area to verify this. Our results enable researchers to have a better understanding of the internationalization process of German high‐tech SMEs. Combining quantitative and qualitative research we were able to verify our suggested process model and enhance it with actual examples. This can also help high‐tech SMEs to better structure their internationalization process and investors to better support them. In the future, we plan to conduct a survey with the investment managers of the examined VCFs to prove our findings. Also, we plan to build a study comparing the group of high‐tech SMEs, which already internationalized with those that are still planning internationalization.

References Agarwal, S. and Ramaswami, S. (1992) ‘Choice of foreign market entry mode: Impact of ownership, location and internalization factors‘, Journal of International business studies, Vol. 23, No. 1, pp.1–27. Autio, E., Sapienza, H.J. and Almeida, J.G. (2000) ‘Effects of age at entry knowledge intensity, and imitability on international Growth‘, Academy of Management Journal, Vol. 43, pp.909–24. Bell, J. et al. (2003) ‘Towards an Integrative Model of Small Firm Internationalisation‘, Journal of International Entrepreneurship, Vol. 1, pp.339–363. Burgel, O. and Murray, G.C. (2000) ‘The International Market Entry Choices of Start‐Up Companies in High‐Technology Industries‘, Journal Of International Marketing, Vol. 8, No. 2, pp.33–62. Bürgel, O. et al. (2000) ‘Internationalisation of high‐tech start‐ ups and fast growth‐evidence for UK and Germany‘, ZEW Discussion Papers, No. 00‐35, pp.1–27. Cieslik, J. and Kaciak, E. (2009) ‘The Speed of Internationalization of Entrepreneurial Start‐Ups in a Transition Environment‘, Journal of Developmental Entrepreneurship, Vol. 14, No. 4, pp.375–392. Crick, D. and Spence, M. (2005) ‘The internationalisation of “high performing” UK high‐tech SMEs: a study of planned and unplanned strategies‘, International Business Review, Vol. 14, No. 2 pp.167–185. Fernhaber, S.A. McDougall, P.P. and Oviatt, B.M. (2007) ‘Exploring the Role of Industry Structure in New Venture Internationalization‘, Entrepreneurship: Theory & Practice, Vol. 31, No. 4, pp.517–543. Fletcher, R. (2007) ‘A holistic approach to internationalisation‘, International Business Review, Vol. 10, 2001, pp.25–49. George, S., Biscarri, G. and Monti, J.A. (1999) ‘The Role of the Internationalization Process in the Performance of Newly Internationalizing Firms‘, Journal of International Management, Vol 8., December, pp.10–36. Jones, M. V. (2000) ‘First steps in internationalisation Concepts and evidence from a sample of small high‐technology firms‘, Journal of International Management, Vol. 7, pp.191–210. Johanson, J. and Vahlne, J.‐E. (2009) ‘The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership‘, Journal of International Business Studies, Vol. 40, No. 9, pp.1411–1431. Johnson, J.E. (2004) ‘Factors Influencing the Early Internationalization of High Technology Start‐ups : US and UK Evidence‘, Journal of International Entrepreneurship, Vol. 2, 1999, pp.139–154. Kiederich, Andreas and Kraus, S. (2009) ‘Investigating new technology‐based firm internationalization: the impact on performance, the process and the antecedents‘, International Journal of Business Research, Vol. 9, No. 2, pp.1–13. Krippendorff, K. (2004) ‘Reliability in Content Analysis‘, Human Communication Research, Vol. 30, No. 3, pp.411–433. Landis, J. R. and Koch, Gary G. (1977) ‘The Measurement of Observer Agreement for Categorical Data‘, Biometrics, Vol. 33, No. 1, pp.159‐174 Lombard, M., Snyder‐duch, J. and Bracken, C.C. (2002) ‘Content Analysis in Mass Communication‘, Human Communication Research, Vol. 28, No. 4, pp.587–604. Luostarinen, R. and Gabrielsson, M. (2006) ‘Globalization and Marketing Strategies of Born Globals in SMOPECs‘, Thunderbird International Business Review, Vol. 48, No. 6, pp.773–801.

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Andreas Pinkwart and Dorian Proksch Madsen, T.K. and Servais, P. (1977) ‘The Internationalization of Born Globals: an Evolutinary Process?‘, International Business Review, Vol. 6, No. 6, pp.561–583. Ojala, A. and Tyrväinen, P. (2007) ‘Market Entry and Priority of Small and Medium‐Sized Enterprises in the Software Industry: An Empirical Analysis of Cultural Distance, Geographic Distance, and Market Size‘, Journal of International Marketing, Vol. 15. No. 3, pp.50‐59. Ojala, A. (2009) ‘Internationalization of knowledge‐intensive SMEs: The role of network relationships in the entry to a psychically distant market‘, International Business Review, Vol. 18, No. 1, pp. 50–59. Rialp, A., Rialp, J. and Knight, G. a. (2005) ‘The phenomenon of early internationalizing firms: what do we know after a decade (1993–2003) of scientific inquiry?‘, International Business Review, Vol. 14, No. 2, pp.147–166. Saarenketo, S. et al. (2004) ‘Dynamic knowledge‐related learning processes in internationalizing high‐tech SMEs‘, International Journal of Production Economics, 89(3), pp.363–378. Schwens, C. and Kabst, R. (2011) ‘Internationalization of young technology firms: A complementary perspective on antecedents of foreign market familiarity‘, International Business Review, Vol. 20, No. 1, pp.60–74. Sharma, D.D. and Blomstermo, A. (2003) ‘The internationalization process of Born Globals: a network view‘, International Business Review, Vol. 12, No. 6, pp.739–753. Westhead, P., Wright, M. and Ucbasaran, D. (2001) ‘The internationalization of new and small firms: A resource‐based view‘, Journal of business venturing, Vol. 16, pp.333–358. Zain, M. and Ng, S.I. (2006) ‘The impacts of network relationships on SMEs’ internationalization process‘, Thunderbird International Business Review, Vol. 48, No. 2, pp.183–205. Zou, H., Liu, X. and Ghauri, P. (2010) ‘Technology capability and the internationalization strategies of new ventures‘, Organizations & Markets in Emerging Economies, Vol. 1, No. 1, pp.100–120.

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Entrepreneurship ‐ Successes and Failures of Start‐Up SMEs on Regional and International Markets Aneta Ptak‐Chmielewska Institute of Statistics and Demography, Warsaw School of Economics, Poland aptak@sgh.waw.pl Abstract: In this paper we analyse the basic characteristics of start‐ups: the winner and the loser. Above 90% of new enterprises are sole‐traders. The support of entrepreneurship needs research such as firms survival in the context of business demography. This information type is crucial for developing a good policy supporting the enterprise survival. Simultaneously, supplying such information is insufficient. New survey types are needed. Recently the interest in firms survival in Poland has increased significantly. To cover the need for more detailed data there was panel database used. The survey covers the five‐year history of enterprises’ activity and the sample covers only enterprises employing initially fewer than 50 workers. In this paper only the sample of 2349 enterprises established in 2004 was selected. In results we can point out that micro enterprises were mostly self‐employed owners. With at least one worker, the survival chances were higher compared to self‐employed owners. Enterprises operating on local or regional markets had lower survival chances compared to enterprises operating nationwide or internationally. Expanding outside regional and local markets offers lower liquidation risk. The effect of places of activities is stronger with time, which means that expanding activities decreases the liquidation probability , and increases the existence time. Expansion is significant with regard to number of employees. The most crucial factor was the first‐ year profits. First‐year profits meant lower liquidation risk compared to enterprises making a loss or suspending their activity. Regarding demographic characteristics of the main owner a conclusion may be drawn, that an enterprise with a highly educated owner experienced in management had a lower liquidation risk. First‐year investments increased the survival chances. The first year was the most important because at that time the main drive for being on the market was observed. Keywords: entrepreneurship, SME and Microfirms, enterprises survival, Cox regression model

1. Introduction Demographic analysis regarding human population can be adopted to the analysis of entrepreneurs population. In business demography an entrepreneur is the research object, whereas processes characteristic of the population of enterprises such as the birth process, death process and population dynamics are the subject. Business demography analysis explains processes in the enterprises population using macro and micro determinants. Above 90% of new enterprises are sole‐traders (including self‐employment). Micro (demographic characteristics of entrepreneurs) and macro factors (basic macro indicators) influencing the business success can be analysed. The development of enterprises and entrepreneurships creates new employment possibilities. The support of entrepreneurship needs research such as business demography in the context of population dynamics. The increase in this field raises the demand for databases consisting of data on newly established enterprises (births) and enterprises exiting market (deaths) and their activity time (survival). This information type is crucial for developing a good policy supporting the enterprises survival. The supply of such information is insufficient. The analysis of the birth and death rates is a starting point for an analysis and research on stimulants of new enterprises establishment, barriers enterprises report and the basis for analysing bankruptcy and liquidation reasons. There is an urgent need for new type of surveys, retrospective surveys and panel surveys. Recently the interest in business demography in Poland has increased significantly. A relevant source of data regarding micro and small (up to 50 workers) enterprises is a panel survey that has been conducted by CSO since 2002. “Creation and operation conditions, development prospects of Polish enterprises established in the years …” is a publication regarding the results of this CSO research. The data th regard results of research on the sample of enterprises in annual periods. Enterprises are followed up to 5 year of the activity. The panel survey can be a source for assessing the enterprise survival but it does not constitute information about population necessary to indicate demographic ratios for the whole population of enterprises. For this paper and survival analysis a panel of SMEs (up to 50 workers) established in 2004 was selected. The sample consists of 2349 enterprises with information of their five‐year activity covering years 2004 ‐2009. All enterprises active in 2009 were censored.

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Aneta Ptak‐Chmielewska

2. Theoretical aspects In theories connected with enterprise management (Poznańska, 2008): “Liability of Smallness”, “Liability of Newness” and “Ecological Economy”, the position of a small enterprise on the competitive market is much weaker. They are put at a disadvantage with regard to economy of scale, distribution chains, market research. However, according to the market niche theory, a small size can create many opportunities (Caves, Porter, 1979), such enterprises are able to reach market niches inaccessible for large companies. Liability of Newness links the success with the time the enterprise operates on the market. The probability of market exit is much higher for new enterprises than for those surviving at least one year. Ecological economy refers to biological theories (Hannan, Freeman, 1989; Carroll, Hannan, 2000) focusing on three enterprise groups: new, developing and shrinking. The ecological theory is focused on the enterprise life cycle: birth, survival and death determinants. In this context “business demography” serves as a tool to measure life cycle, the length of subsequent stages of existence and their determinants on the micro level. The growing interest in theories connected with institutional aspect of enterprise development is also quite important (Gruszecki 2008). Often in “business demography” papers (Scarpetta et al. 2000) and the enterprise life cycle papers, theory of creative destruction by Schumpeter can be found (Schumpeter, 1934). According to this theory, creating new enterprises and liquidating existing ones are key elements of general dynamics of the economy. It also triggers the learning process which affects the enterprise life cycle (Jovanovic 1982). Companies learn about their potential and survival opportunities by generating profits. To minimise the uncertainty risk connected with lack of information at start, companies try to enter the market as small entities thus lowering potential losses if they fail. The enterprise may actively influence its profitability by observing its situation after entering the market and also by taking actions to increase income and profits (Ericsson, Pakes, 1995). The U‐shape of the hazard function confirms such an influence of active and passive enterprise learning. New companies need time to assess their efficiency. Such a behaviour is known as “liability of the adolescence” in contrast to “liability of the newness” (Bruderl, Schussler, 1990; Fichman, Levinthal, 1998). Recently we noted dynamic growth in using statistical and econometric models and analysis regarding firm survival. Both cross‐sectional and longitudinal models and analysis are applied. A very detailed review of literature and research was presented in “Firm survival: methods and evidence” by Miguel C. Manjo´n‐Antolı´n and Josep‐Maria Arauzo‐Carod (Empirica (2008) 35; pp. 1–24). Basic factors influencing firm’s survival are: internal factors specific for an enterprise and external factors connected with macroeconomic situation and the environment. External factors are connected with sector, geographical space and business cycle. External factors are connected with the concept of market “pull” and “push” factors affecting the entry and exit . The market‐pull hypothesis states that greater demand creates more opportunities for starting companies due to greater market absorption. Market push hypothesis assumes that high unemployment level may contribute to self‐employment and opening own business activity. Freedom to enter and exit the market constitutes the main mechanism of functioning a competitive market economy (Balcerowicz, 1999). If there is no such freedom or when this freedom is limited, the economy starts to be uncompetitive, which leads to inefficient allocation of resources. Regarding enterprises population dynamics, three aspects and areas must be considered: entry, exit and survival. Entry may be motivated by higher earnings as self‐employed (Creedy and Johnson 1983, Audretsch 1995, Geroski 1995, Vivarelli 2004) as well as escape from unemployment as push factor. Entry barriers like financial constraints (Evans and Jovanovic 1989, Cabral and Mata 2003) are significant. Some entrepreneur characteristics may be important: self‐realisation, fulfillment of aspiration, better social status (Creedy and Johnson 1983, Vivarelli 2004). Market exit shows that more than 50% of new firms exit within first 5 years (Geroski 1995, Mata, Portugal and Guimaraes 1995, Johnson 2005), which is due to just mistake according to true Schumpeterian displacement‐ replacement effect (Geroski and Mazzucato 2001).

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Aneta Ptak‐Chmielewska Survival success is the effect of self‐decisions or due to financial difficulties. Big role is played by loan constraints (Becchetti and Trovato 2002, Hurst and Lusardi 2004). The internal factor is human capital of entrepreneur workforce and skills (Lazear 2004, Silva 2006), and also sex, but this is mixed effect (Cooper et al. 1994), not confirmed. The sector heterogeneity of survival (Audretsch 1991, Marsili 2002) is also significant. Initial papers regarding the enterprise survival have appeared recently in Poland. Markowicz (2012) applies Cox model analysing enterprises from Szczecin region based on REGON register. Dehnel (2011) applies small area estimation techniques for basic business demography ratios for SMEs in Poland. Some works of Ptak‐ Chmielewska (2011, 2012d) apply non‐parametric (Kaplan‐Meier) and semi‐parametric (Cox regression) methods for retrospective data for one region in Poland.

3. Background situation in Poland Regarding external factors we describe basic figures of macroeconomic situation in Poland in 2004. In 2004 the GDP level was high on the increasing turn. Inflation (CPI) was generally low but at the local peack. Unemployment was high (c.a. 18%) but decreasing. Years 2004‐2005 were good to start a business, the economy was in the up‐turn cycle. Local crises were observed in 2001‐2002 and again in 2009. As pointed in Ptak‐Chmielewska (2012c) the survival and enterprises’ population dynamics are not fully correlated with macroeconomic factors. 25 20

in %

15 10 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP

CPI

Unemployment

Source: CSO (Central Statistical Office) Database. (GDP – Gross Domestic Product, CPI – Consumer Price Index). Figure 1: Macroeconomic situation in Poland in years 1998‐2012

4. Methods Event history analysis is defined as the set of different statistical techniques used for description and analysing life course of the individual. This process is described by survival time defining the time from the start of observation till the moment of the end or the moment of survey if it happens before the end of the process. Comparing event history analysis with traditional cross‐sectional research one must stress that the biggest advantage of the first is supplying information about the process dynamics. In recent years methods of failure time analysis started to be used in social sciences. The event of liquidation eliminates the enterprise from the observation and is treated as the ending event in the single episode model. According to number of categories the distinction is made between single‐events and multiple‐events models. Methods of estimation (Frątczak, 2005) distinguish between parametric and non‐parametric methods. This is based on assumptions about the functional form of time distribution (T). If there are no such assumptions, non‐parametrical methods are applied with classical example of life table models. Non‐parametric analysis

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Aneta Ptak‐Chmielewska gives information about changes of individual behaviours schemes in time. In parametric approach the time between events is assumed to be random variable with specific distribution. The most frequently used distributions are: exponential, Weibull, Gompertz. In parametric analysis regression methods are used including the influence of time on hazard rate and the inclusion of explanatory variables and heterogeneity of the population. The combination of two approaches is named semi‐parametric approach (Cox regression model). The parametric component is based on specified influence of explanatory variables on the hazard rate, but non‐parametric component does not specify functional distribution of the time. Censoring is very characteristic for event history data. If information is not available then it is censored. The most typical is right censoring when the time till event is not known but it is longer than observation period. Take the interval variable T as the time till event occurrence since the time t0. Distribution of variable T may be described in a few different ways apart from density and cumulative function also by survival and hazard functions.

survival function

S(t ) = P (T > t ) where S(t) means unconditional probability that event occurs after time t, so the enterprise will survive at least till time t. This function describes the survival pattern in the population.

hazard function

h (t ) = lim

Δt → 0

P (t ≤ T < t + Δt | T ≥ t ) Δt

where h(t) is conditional density of time to event occurrence (conditional that the event did not occur till time t), so h(t)Δt means (approximately) probability that the event occurs in a very short period of time (t, t+Δt), conditional that the individual survived at least till time t. The most frequently used model is semi‐parametric proportional hazards Cox regression model. For Cox regression model the hazard function is given by: h(t | x1 ,..., x k ) = h0 (t ) exp(α1x1 + ... + α k x k ) , where: h0 (t ) ‐ means base hazard, parametrically non‐specified function of time and X1,X2,…Xk‐ means explanatory variables (including time dependent variables). Cox proposed also the special type of estimation method called pseudo‐likelihood (Cox, 1972). It divides the likelihood function for proportional hazards model into two parts: first including only information about parameters α i and second, including information about parameters α i , and hazard function. Division into two components is justified because first depends only on sequence of events occurrence, does not depend on exact time of occurrence, and the second is 0 and is omitted. Main advantage of Cox model is assessment of many variables influence on the process without necessity of base hazard h0(t) specification. The main disadvantage of Cox model is hazard proportionality assumption. This assumption imposes that for each pair of individuals in any time the hazard rate is fixed. Despite this limitation of Cox model, it is attractive for researchers in case of (Blossfeld and Rohwer 2002): unknown shape of hazard in time, no theoretical bases for parameterization or no possibility of functional shape of hazard specification and when the main interest is focused on explanatory variables influence on hazard. The only disadvantage of Cox model is proportionality assumption which implies fixed proportion of hazard for individuals during the observation time period. This problem may be solved by including additional time dependent variables. For checking the proportionality assumption the easy way is to include the interaction with time, the significance of these parameters confirms that the proportionality assumption is violated. In this case the model is named non‐proportional hazards Cox regression model. Results of Cox model estimation are parameters describing the influence of explanatory variables on the probability of event occurrence and on the base hazard.

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5. Empirical results Analysis of enterprises’ survival requires information about exact dates of starting and ending activities. Data available in registers like REGON (Register of Business Activities), covering all enterprises are not up‐to‐date and are useless in enterprises’ survival analysis. KRS (National Court Register) or VAT (Value Added Tax System), Central Statistical Office data (SP– annual questionnaire for enterprises and F‐02 statistical financial statement) do not cover all enterprises. This situation requires representative surveys. Panel representative survey on micro and small enterprises sample conducted by CSO since 2002 is a good source of data. More about data sources is available in Ptak‐Chmielewska (2012a). The sample of 2349 enterprises established in 2004 was selected consisting of 2/3 of enterprises with below 10 workers and 1/3 of enterprises with 10‐49 workers, representative for a whole country separately for micro and small enterprises. Basic characteristics are enclosed in table 1. 43.6% of enterprises were still active after 5 years and those enterprises were censored. Table 1: Enterprises characteristics Variable name legal form area of activity (2005) export (2005) places of activity (2005) number of workers (1) 2005 number of workers (2) 2005 number of workers (3) 2005 type of activity profit/loss (2005) owner’s sex owner’s age owner’s education owner’s type of previous work owner’s source of maintenance way of start loan for a start investments (2005) barriers (demand) 2005 barriers (supply) 2005

Description 1=’company with and without legal personality’ 0=’sole‐trader’; 1=’domestic or international market’ 0=’local or regional market/no information’; 1='exporting' 0=’non exporting/no information; 1=’several locations’ 0=’single location/no information’; 1=’employer’ 0=’only owners/no information’; 1=’10 and more workers’ 0=’0‐9 workers/no information’; 1=’5 and more workers’ 0=’0‐4 workers/no information’; 1=’production’ 0=’non‐production/no information’; 1=’profit’ 0=’loss/no information; 1=’male or company’ 0=’female’; 1=35 and older or company’ 0=’below 35’; 1=’higher, post‐secondary or company’ 0=’lower’'; 1=’private, state company manager or company’ 0=’other/no information’; 1=’main source of maintenance or company’ 0=’not a main source of maintenance/no information’; 1=’as new’ 0=’other: take‐overs, mergers etc/no information’; 1=’at least 50% from credit’ 0=’below 50% from credit/no information’; 1=’investing’ 0=’non investing’/no information’; 1=’demand barriers’/ no information’ 0=’no barriers’; 1=’supply barriers/no information’; 0=’no barriers’;

Sources: own elaboration. Registration as a company should provide higher survival chances due to share capital required by law at start compared to sole traders who are not expected to contribute any capital. Companies appear more frequently in the production sector, sole traders in services. Enterprises which expanded above regional market or

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Aneta Ptak‐Chmielewska succeeded in exporting are more successful. Enterprises with at least one worker are more successful than sole traders. First year is crucial and only profitable enterprises have more survival chances. Some barriers reported determine the entrepreneur profile. Some demographic entrepreneur characteristics also matter due to internal factors and human capital. Older, experienced and educated entrepreneurs are expected to succeed, however this effect is not confirmed in literature. The effect of main owner’s sex is not definitely confirmed. More successful are enterprises started as a result of mergers or take‐overs rather than new start‐ups. If a start‐up succeeded in getting the loan it proves owner’s management abilities. Investments and external financing mean that management skills are confirmed and chances for a success are increased. As dependent variable the time from registration to failure was adopted. Multivariate method, the Cox regression model, was applied. Interactions with time were analysed to check proportionality assumptions and time varying effects. Table 2: Results of Cox regression estimation Variable legal form area of activity export places of activity number of workers (1) number of workers (2) number of workers (3) type of activity profit/loss owner’s sex owner’s age owner’s education owner’s type of previous work owner’s source of maintenance way of start loan for a start investments barriers (demand) barriers (supply)

DF 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Parameter ‐0.14125 ‐0.14559* 0.07626 ‐0.32811* ‐0.22225* ‐0.07662 ‐0.24477 ‐0.33619* ‐0.69099* 0.12738* 0.15579 ‐0.37099* ‐0.34568* ‐0.07858 0.14753 ‐0.28944* ‐0.51306* ‐0.00551 0.41703*

Hazard Ratio 0.868 0.865 1.079 0.720 0.801 0.926 0.783 0.714 0.501 1.136 1.169 0.690 0.708 0.924 1.159 0.749 0.599 0.995 1.517

Interaction with time ‐0.13698 ‐0.08292 0.19325 ‐0.30514* ‐0.15200* 0.04572 ‐0.20668 ‐0.06916 ‐0.39946* 0.07583 ‐1.46489* ‐0.04692 0.24287* ‐0.00201 ‐5.67596* ‐0.16965 ‐0.24327* ‐0.41107* ‐1.02238*

*significant at 0.05 level. Source: own elaboration. 11 from 19 included effects were significant at level 0.05. Operating nationwide or internationally means 13.5% lower liquidation risk than operating regionally and locally. This is connected to places of activity. More than one unit gives 18% less liquidation chances . Expansion is evident in case of exporting but this effect was not significant. The enterprise size matters. At least one worker decreases the liquidation threat. More successful are companies in production sector, liquidation chances are 29% lower. Regarding entrepreneur’s demographic profile the effect of sex is not obvious. It was expected that male ownership increases the survival, but the effect is opposite. Education increases survival chances. Owners with managerial experience have 30% lower chances of failure. The motivation can be different but the effect is confirmed. Managerial abilities confirm the ability to convince a bank to grant a loan. First‐year investments in assets are also important, survival chances are increased and this effect accelerates with time. Regarding first‐year supply barriers, this effect is positive, means liquidation chances are increased if the enterprise reports barriers, but the acceleration with time is in opposite direction. Supply barriers matter but at the beginning, their effect is not so important in subsequent years. Only interactions with time for places of activity, number of workers (1), profit/loss, owner’s age, owner’s type of work, the way of start, sources for investments, barriers were significant at level 0.05. Those results confirm the time varying character of the influence of those variables on liquidation process. All significant effects were negative, which means they accelerate the effect of the main variable in negative direction. The more places of

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Aneta Ptak‐Chmielewska activities, the smaller liquidation chances, and this effect is stronger with time. Expansion is also significant in case of employees. First‐year profit is important, because a loss at start means 50% higher liquidation chances. This effect accelerates with time. Owner’s age being first the positive effect, diminishes with time. Age 35 and over is not high enough to start a business because the difference between younger under 35 and older over 35 is not significant, but the interaction with time is significant.

6. Conclusions and discussion Summarising results of semi‐parametric Cox regression model we point out that:

predominantly micro enterprises were self‐employed owners. With at least one worker, chances of survival were higher compared to self‐employed owners.

operating locally or regionally gives lower survival chances than operating nationwide or internationally. Expansion outside regional and local markets meant lower liquidation risk.

First‐year profit is crucial. It meant lower liquidation risk compared to enterprises reporting a loss or suspending activities.

Owner’s education and management experience prove a lower liquidation risk. Conditions of activity and barriers are important. First‐year investments increase survival chances. The effect of places of activities is stronger with time, which means that expanding activity decreases the liquidation probability, and increases the time of existence. Expansion is significant in case of number of employees. First‐year profit is important, loss at start means 50% higher liquidation chances. This effect accelerates with time. According to theories proposed and classifications used to explain the enterprise survival we proposed to distinguish between internal and external factors. Internal factors The first internal factor is the size and age, numerous investigations have found that larger and older firms have lower hazard rates than smaller and younger ones. However, this effect is not uniform. The effect of size is not linear however decreasing (Mata and Portugal 1994, Esteve et al. 2004, Strotmann 2007), but the age effect is more often U‐shaped (Agarwal and Gort 2002, Esteve and Man˜ez 2007). The effect of size and age is different for countries and type of activities ( Lo´pez‐Garcı´a and Puente 2007, Ptak‐Chmielewska 2010). The size‐age effects are only significant for single‐person firms, and there is no size effect in new branches and subsidiaries (Audretsch and Mahmood 1994, Mahmood 2000). This means that the effect of ‘‘liability of adolescence’’ differs across different types and sectors. According to the ecological theory (Hannan 2005), smaller firms have a higher risk of failure ‐ ‘‘liability of smallness’’ (Freeman et al. 1983) and younger firms have higher risk of failure ‐ ‘‘liability of newness’’ (Stinchcombe 1965). In our sample most micro enterprises were self‐employed owners. Company with at least one worker, gives more survival chances compared to self‐employed owners. The second factor, i.e. ownership, is also significant in firms survival. New plants have higher hazard rates than new branches or just diversifying firms (Audretsch and Mahmood 1995, Agarwal and Gort 2002, Kimura and Fujii 2003, Mata and Portugal 1994). In our sample new companies had higher liquidation risk however this effect was not statistically significant. Multi‐plant firms have more chances to survive than single‐plant firms (Mata et al. 1995). This effect was confirmed for Polish SMEs, in our model this effect was significant. Multi locations meant lower liquidation risk. There are studies focusing on differences in firm’s legal structure (Mata and Portugal 2002, Esteve et al. 2004; Esteve and Man˜ez 2007). Evidence from Germany finds that limited liability companies are more likely to exit than sole proprietorships (Harhoff et al. 1998). For one region in Poland the evidence shows that sole traders are the most risky group, and any form of partnership decreases the risk of failure (Ptak‐Chmielewska 2010). However in our model for the whole sample for Poland it was not significant.

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Aneta Ptak‐Chmielewska Other strategic activities are advertising and exporting (Kimura and Fujii 2003; Esteve et al. 2004; Esteve and Man˜ez 2007). Such firms have lower hazard rates of exit (Mata and Portugal 2002). In our sample we considered dummy: exported in first year or not exported, but this effect was not significant. Considering the socio‐demographic profile of an entrepreneur as the most deterministic in enterprise failure we describe below the owner’s demography. In 29% of enterprises the owner was a woman, in 35% ‐ a man and the rest was without the main owner. In 55% of enterprises the owner was younger than 35 and in 13% ‐ younger than 25 when starting the business in 2004. Main owners have at least secondary education (78%), 35% declared tertiary. 12% of owners were unemployed before starting their business, which means that influence of market “push factor” was insignificant (see also Ptak‐Chmielewska 2012c). In 55% of cases employment in own enterprise is the main source of owner’s maintenance. In our model effects of owner’s sex (but opposite), education, type of experience were significant. The evaluation of situation and conditions helping or disturbing enterprises’ development was focused on the environment and barriers. 50% of enterprises did not invest during first year. Almost 48% of enterprises used own funds, only 9.25% used loans or subsidies. With time, share of non‐investing entrepreneurs slightly increased but financing structure changes were rather small. Half of entrepreneurs did not report any barriers in sales and production development. In subsequent years the share of enterprises not reporting barriers decreased slightly. First year was most important to make a decision whether to stay on the market. 26% of enterprises reported too high competition, other barriers were not significant. External factors Industry, geographical space, business cycle play most important role (Manjoń‐Antolıń and Arauzo‐Carod 2008). First, industry‐specific characteristics such as technology, entry rates and scale economies seem to explain differences in survival rates across firms. High‐tech industry firms have lower survival probability (Audretsch 1995; Agarwal et al. 2002, Esteve and Man˜ez 2007). This sector is very monopolized and this factor plays a key role in ability of start‐ups to enter the market and influences their ability to survive. Higher hazard rates may be interpreted as the result of barriers in the initial firm’s activity typically occurring in highly innovative industries (Agarwal and Gort 2002). High entry rates have a positive effect on the probability of failure for entrants and existing firms (Segarra and Callejoń 2002; Mata and Portugal 2002; Honjo 2000; Lo´pez‐Garcıá and Puente 2007; Mata et al. 1995). Survival is higher in industries with low entry barriers and low minimum efficient scale (Audretsch and Mahmood 1995; Strotmann 2007). The smaller the minimum efficient scale the easier for new firms is to reach a competitive size of activity, but this effect is not obvious for high technology sectors and new units (Mata and Portugal 1994; Audretsch and Mahmood 1994). In our research we controlled for type of activity and reported barriers. Production enterprises have higher survival chances, however the effect of high‐tech sector could not be confirmed due to lack of data. The second, the geographical space, according to New Economic Geography factors, such as, agglomeration economies, affects performance (Fujita et al. 1999). Empirical evidence is inconclusive, some authors find that rural areas represent higher survival chances but some neglect it (Strotmann 2007; Honjo 2000; Fotopoulos and Louri 2000). In Poland urban enterprises have higher survival chances (Ptak‐Chmielewska 2010). According to our results enterprises operating locally or regionally had lower survival chances than enterprises operating nationwide or internationally. The situation varies by regions in Poland (Ptak‐Chmielewska 2012b). The third, the business cycle, survival chances are related to business cycle, higher in the upswings and lower in the downturns. Business cycle upturn, shows negative and statistically significant coefficients in most results with evidence that firms founded in periods of low unemployment have longer survival time (Audretsch and Mahmood 1995; Mahmood 2000; Disney et al. 2003; Go¨rg and Strobl 2003; Ptak‐Chmielewska 2012c). Macroeconomic conditions at the time of entry determine the survival probability (Mata et al. 1995). Concluding, we found that internal factors like socio‐demographic owner’s characteristics: education, previous experience, motivation are significant for a success. External situation and barriers matter considerably. Some results confirmed basic previous research findings but some detailed results gave new insight into start‐ups failure or success. Expanding activities nationwide and internationally is important and increases the survival probability. First‐year survival is crucial, however strongly connected with profits, investing in assets and barriers (demand side). Those effects accelerate in time. Research in this area including methods with time varying effect of characteristics was very rare and our work gives more light into this area.

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Entrepreneurship Education: A View Across Outcome Expectations and Antecedents in Students of Higher Education Augusto de Castro Rocha1, Maria José Aguilar Madeira Silva2 and Julia Discacciati1 Master in Entrepreneurship and Business Creation, University of Beira Interior, Portugal 2 Research Centre for Spatial and Organizational Dynamics (CIEO), University of Beira Interior, Portugal

gutorocha@gmail.com msilva@ubi.pt judiscacciati@hotmail.com Abstract: This research aims to identify aspects associated to the outcome expectations and entrepreneurial antecedents that are predicted to influence Portuguese students to follow entrepreneurial career. To empirically test the hypothesis, we used secondary data taken from the survey EEP (Entrepreneurship Education Project) applied in Portugal. It is an approach that reviews the education directed to entrepreneurship and a theoretical approach about the outcome expectations and entrepreneurial antecedents. After this theoretical approach, it´s made a statistical study of the results of the EEP questionnaire ‐ Portugal and then the results are discussed. The sample was considered for result analysis of this study included a total universe of 2054 responses from Portuguese Universities EEP project. To this tests, we used the logistic regression for the outcome expectations and to antecedents, we used first a factor analysis and after a nonparametric test for comparison of means of two independent samples. It can be seen that the look on the expected results Autonomy, may have a relevant impact when we analyze the outcome expectations by the Portuguese students of higher education. May also be conclude that aspects such as family members who have created a business project, previous work experience and previous work experience that failed may affect the propensity to create and manage a new business project. Keywords: entrepreneurship education, outcome expectations, entrepreneurial antecedents, EEP, entrepreneurship

1. Introduction The entrepreneurship education has developed over time several lines of approach to set theory in order to contribute to the development of the business profile in higher education students (Franco et al. 2010) and identify factors that may influence the creation of their own business by college students (Rodrigues et al. 2010). The theme of entrepreneurship education has become so important, that there is indications that this type of practice in education should also expand to secondary school (Marques et al. 2012). There are studies regarding entrepreneurship teaching in Portugal for higher education (Redford 2006; Franco et al. 2010; Teixeira & Davey 2008; Rodrigues et al. 2010; Davey et al. 2011), however it is still a subject that need to be developed. As this is seen as a very important issue in the hole world, a global study has emerged which aims to measure various constructs relating to entrepreneurship teaching. This study is called EEP (Entrepreneurship Education Project) and it is a joint project conducted in over 800 countries with coverage of more than 400 universities. This work performs an analysis of data of this questionnaire applied in Portugal, with a specificity regarding the outcome expectations and entrepreneurial antecedents. In summary, this study aims to identify components of the process of entrepreneurship teaching and the way that those components can influence and lead to a more structured and efficient teaching of this subject.

2. Theoretical framework 2.1 Concepts about entrepreneurship education Entrepreneurship has developed positive effect in previous generations and has key role in economy of countries. It helps in the development of a nation, and also generates a series of contributions to that population. It is through these gains that can be emphasized that the teaching of entrepreneurship has a key role in the educational formation (Rodrigues et al. 2010) and a positive impact in the approach towards entrepreneurship (Packham et al. 2010). The teaching of entrepreneurship is not only aimed on individuals that want to develop new companies, because, as Pittaway & Cope (2007) say, it should cover the following

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Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati interests: employability skills, social enterprise, self‐employment, employment in small businesses, small business management and management of high‐growth ventures. In Portugal, students have certain indecision about following with their own jobs or be employed on behalf of others (Davey et al. 2011), despite knowing that the example provided during the school plays a key role in shaping the entrepreneurial profile (Teixeira & Davey 2008). The entrepreneurship education, in this case Portugal, happens to be a reality because it is a response to intrinsic needs of the market (Redford 2006) and probably is crucial to introduce innovation processes in the market by having more students prepared for their careers (Wilson 2008). Several studies approve of entrepreneurship development policies implemented by governments in the education system, help to include entrepreneurial attitudes and values in students (Audretsch & Beckmann 2007; Parker 2007; Stevenson & Lundström 2007; F. J. Greene & Storey 2007). The importance of these policies is mainly to promote a strong educational system in teaching entrepreneurship, aimed at encouraging constant innovation (Acs & Szerb 2006). In order to create those policies, Thomas & Kelley (2012) suggest a pattern of actions aiming to transform the educational system of the countries that want to introduce their students in entrepreneurial activities. Among the items that are suggested by the authors are: Develop national plans for entrepreneurship education; Create interministerial working groups (education, economics, research and technology, etc.); Creating public or private agencies to promote entrepreneurial education; Working with leaders in educational institutions, and Reassessing rules and regulations of the University.

2.2 Outcome expectations The anticipation of favorable results gives the individual a sense of satisfaction (Lent et al. 2009). Expectations for results are important factors in determining whether an individual can pursue an entrepreneur career. Studies such as Townsend, Busenitz, & Arthurs (2010) indicate that with the growth of the phases of business plans analysis, those entrepreneurs with high expectations result can have a more practical view of his own business and not choose a certain path only for their expectations. However there are also studies such as Cassar (2010) which indicates that entrepreneurs overestimate the results of their projects, so you can hide some failure. This brings the importance of entrepreneurship education adequately, because there are indications that the quality of education directed to entrepreneurship may have an impact on the results that a company may have (Zhao et al. 2005), although more tests are needed to ascertain this fact. An entrepreneur aims to search for positive results from their entrepreneurial activity. Entrepreneurs have in essence a pursuit for independence, self‐fulfillment and financial success when they decide to start a new business (Carter et al. 2003). One explanation for the entry of an individual into a new business venture has a direct link with the expectation of having a good financial result (Cassar 2007; Shepherd & Patzelt 2011) and such good financial results can be guaranteed to provide an adequate family safety (Edelman et al. 2010). H1: The need for financial success is positively and significantly associated with the outcome expectations in the implementation of a new business project for Portuguese university students. H2: The family safety is positively and significantly associated with the outcome expectations in the implementation of a new business project for Portuguese university students. Autonomy represents an achievement of objectives that can be targeted and endorsed by the individuals themselves, since they are responsible for their consequences. There is also a study of Gelderen (2010) which proves that autonomy during the entrepreneurship education in order to discuss individual circumstances, better prepares individuals to practice entrepreneurial activity more autonomously. Individuals who have autonomy at work, both working on their own or others, are most benefited (Prottas 2008). H3: Autonomy is positively and significantly associated with the outcome expectations in the implementation of a new business project for Portuguese university students. When individuals seek entrepreneurial activity as a follow up of their careers, they may be seeking a personal development greater than if they had continued to work for others (Guzmán & Santos 2001). The choice of an entrepreneurial career has an intrinsic motivation for self‐realization / personal gain (Tyszka et al. 2011) seeking flexibility and the use of time itself through independence (Carter et al. 2003). For example, in the area of technologically innovative companies, personal gain through self‐realization is a great reason to start a new

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Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati business (BarNir 2012). The expectation of self‐realization (Carter et al. 2003; Cassar 2007; Edelman et al. 2010) is an expected result for those seeking an entrepreneurial career. H4: Personal gains (self‐realization) are positive and significantly associated with the outcome expectations in the implementation of a new business project for Portuguese university students.

2.3 Antecedents Future entrepreneurs who have family members who have started a business project are more likely to pursue an entrepreneurial career (Delmar & Davidsson 2000), confirming that positive models are important for this (Davidsson 1995), including the family ones. (Altinay et al. 2012). Building on the basis of what is reported above that family members can influence the possibility of someone starting a new business project. H5a: Family who created a business project, influences the confidence to successfully build and manage a new business project by Portuguese university students H5b: Family who created a business project that failed, influences the confidence to successfully build and manage a new business project by Portuguese university students Previous experience of an administrator / manager has a direct link to the success of a new undertaking that he participate (West & Noel 2009). Several companies are conceived during previous working experiences (Bhide 1994; Terjesen & Sullivan 2011). And the growth of these new companies may be intrinsically linked to the fact that the entrepreneur was employed or not before taking new business project (Capelleras et al. 2010). H6a: The previous professional experience on a new enterprise influences the confidence to create and successfully manage a new business project by Portuguese university students H6b: The previous professional experience on a new enterprise that has failed influences the confidence to create and successfully manage a new business project by Portuguese university students

3. Methodology In this context, after what was seen during the literature review, it comes to the conclusion that the literature little addresses the expected results by the Portuguese higher education students wishing to participate in the creation of a new business project. It follows that this study will be exploratory, because according to George (2002), an exploratory study is useful for the construction of new knowledge in a particular area, thus maximizing the information that may be collected in a given sample (Tukey 1977).

3.1 Database The data used to make this research work were collected through a survey that was submitted to the Portuguese higher education students, the project participants EEP. The EEP is designed to be a project with a global reach, with defined objectives to realize the impact that the entrepreneurship education will have on college students, through knowledge of motivational processes related to who intends to pursue a career and entrepreneurial transformation of a student in an entrepreneur (Liguori et al. 2011).

3.2 Method used To review the Outcome Expectations, found that the logistic regression method would be most appropriate. Since the dependent variable is analyzed qualitatively and fits as nominal dichotomous (yes / no) (Menard 2002), tells us the use of a regression method categorical this case, logistic regression (Maroco 2007; Harrell 2001). Furthermore, the variable indicates participation or not in a given occurrence (Bethlehem 2008), therefore another indication that the most appropriate method is logistic regression. When the analysis is performed with respect to Antecedents, first performed a factor analysis to determine a measurement scale (Maroco 2007) for determining degrees of confidence to create and successfully manage a new business project. To evaluate which tests are used, you should consider whether these factors follow a normal distribution. It is then used nonparametric Mann Whitney test for comparison of means of two independent samples.

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4. Analysis and discussion of results 4.1 Sample characterization Gender is used in this work in order to characterize the sample at a level of knowledge of the rate of entrepreneurial expectation for each sex. Gender is addressed in several studies on entrepreneurship (BarNir 2012; Terjesen & Sullivan 2011; Carter et al. 2003; Teixeira & Davey 2008), with a variable positioning, very dependent of the sample used. Even the genre may have a greater effect not on actually entrepreneurs, but those who have the expectation of being entrepreneurs in the future (Zhao et al. 2005). Among respondents who were asked which their gender was identified as 44.16% are male while 55.84% are female. Another interesting aspect to see the group answered the questionnaire EEP Portugal is in relation to Family Wealth. This analysis is that the families of the respondents are mostly middle class (83% of respondents), while 8.18% are considered poor and 8.82% identify themselves as upper class. It is known that the family can have some influence on the entrepreneurial intention of an individual (Dyer 1994; Franco et al. 2010; Rodrigues et al. 2010) and financial level this family can influence this intention through due support.

4.2 Analysis and discussion of results 4.2.1 Factorial analysis Before testing the model with the application of logistic regression, we performed a factor analysis process to determine the factors related to confidence in the ability to successfully create and manage a new business project. To validate the factor analysis would be valid for the proposed model, we used the criterion measure of sampling adequacy Kaiser‐Meyer‐Olkin (KMO), which resulted in a KMO value = 0.590. As the value found is greater than 0.5, the adequacy of the sample is acceptable. To understand if the variables are significantly correlated, we resort to the Bartlett Sphericity test. As the p‐value <0.001, reject the hypothesis that the covariance matrix is proportional to the identity matrix, so variables are correlated significantly (Maroco 2007). Using the rule of eigenvalue with value greater than 1, it was decided to extract two latent factors. On Table 1 shows a summary of the factorial weights of each item analyzed for each of the two factors, the values of its eigenvalues, and the percentage of variance explained by each factor. Table 1: Presentation of setting values of the factors of factor analysis, Eigenvalues and Variance Explained Factor Item

Description

Parents have created business projects that affect the confidence to successfully build and manage a new business project Brothers or sisters have created business projects that affect the 2 confidence to successfully create and manage a new business project Grandparents create business projects that affect the confidence 3 to successfully build and manage a new business project Paid professional experience interferes confidence to successfully 4 create and manage a new business project Unpaid work experience interferes with the confidence to 5 successfully build and manage a new business project Eigenvalue Variance Explained 1

Familiar Confidence (CF)

Professional Confidence (CEP)

0,734

0,104

0,769

0,057

0,683

0,104

0,266

0,773

‐0,031

0,866

1,917 38,3%

1,122 22,4%

The first factor retrieved from factorial analysis shows high weights for items 1, 2 and 3 respectively and explained 38.3% of the total variance. For a clearer representation, the first factor is called Familiar Confidence (CF). The second factor which was extracted latent has higher values for Items 4 and 5 and explained 22.4% respectively of the total variance. To better understand this second factor is called Professional Confidence (CEP). In general, these two factors are responsible for explaining 60.7% of the total variance. 4.2.2 Logistic regression After defining the assumptions in the preceding paragraphs of this study, we constructed logistic regression

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Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati models able to test the proposed elements. It is tested a model of outcome expectations. For this feature toTable 2 which contains the OE Model (Outcome expectations). Table 2: Logistic regression of OE model ER Model Variable FUS FS Au PG

B S.E. p‐value Exp(B) 0,063 0,087 0,525 0,469 1,065 ‐0,011 0,059 0,035 0,853 0,989 0,234 0,090 6,670 0,010 1,263 0,083 0,071 1,385 0,239 1,087 Quality of the adjustment of the model Correctly predicted 65% Chi‐square

22,666; 0,000 (Sig)

‐2 Log likelihood

1497,662

The variable Autonomy (bAu=0,234; =6,670; p=0,010) showed a statistically significant effect on the Logit of the probability of participating in a new business project. In analyzing the quality of the adjustment related to the OE model, we can verify their predictive ability is 65%, which results from a comparison between the values of the response variable predicted by the model with those observed. The test indicates the ratio of likelihoods us G2(4)=22.666, p<0.001, concluding that there is at least one independent variable in the model with predictive power on our dependent variable. The statistical‐2LL (‐2 Log Likelihood) with the value of 1497.662 also corroborates to evaluate the goodness of fit and significance of OE model compared with the null model. To discuss the results, since they reject the hypotheses H1, H2 and H4, for not having been proven by model. But based on the number of results presented above, we can draw some interesting conclusions. When analyzing the OE Model, has an indication that the variable Autonomy can be identified with a statistically significant effect. So it was proven that Autonomy is positive and significantly associated with the expected results in the implementation of a new business project for Portuguese students (H3). 4.2.3 Test of factors To test the hypotheses H5a, H5B, H6a and H6B should be done statistical analysis on the factors derived from factor analysis: Familiar Confidence (CF) and Professional Confidence (CPE). To decide which test should be used, primarily has been used a normality test. The normality test can be seen in Table 3. Table 3: Normality test to analyze CF and CEP Familiar Confidence (CF) Professional Confidence (CEP)

Kolmogorov‐Smirnov Statistic df 0,193 157

Sig. 0,000

Shapiro‐Wilk Statistic df 0,917 157

Sig. 0,000

0,247

0,000

0,865

0,000

157

The assumptions of this statistical method, namely the normality of the distributions on both factors were evaluated, respectively, with the Kolmogorov‐Smirnov test with Lilliefors correction (KS(157)CF=0,193; p=0,000 e KS(157)CEP=0,247; p=0,000). With a probability of error of 5% could be concluded that the two factors do not follow normal distribution. The statistical software also provides the test results Shapiro‐Wilk, however the results of this test are best used when you have small samples. The factors CF and CEP do not follow normal distribution resort to non‐parametric tests in order to compare means. For the analysis we use the nonparametric Mann‐Whitney test as an alternative to t‐Student test to compare the means of two independent samples. This is "particularly when the assumptions of this test are not valid and is not possible, or desirable, to evoke the robustness of the test to violations of its assumptions" (Maroco, 2007, p.219). Notably in relation to family members who have created a business plan, it is possible to attempt for two analyzes of acceptance / rejection of the hypotheses. For these analyzes, we propose the analysis of Table 4 representing family that created a business project and Table 5 representing family that created a business project that failed.

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Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati Table 4: Mann Whitney´s non parametrical test representing family that created a business project Family No Yes Null Hypothesis The distribution of Familiar Confidence is the same across categories of Family

Mean ‐0,4592476 0,3600919 Test

N 69 88 Sig.

Std. Deviation 0,86915102 0,95090945 Decision

Independent‐Samples Mann Whitney U Test

0,000

Reject the null hypothesis

It appears that there are significant differences in the degree of confidence to create and manage successful business project in students that have family members who have created an enterprise project (p = 0.000). Therefore, this study confirms the hypothesis that family that created business project affects the confidence to successfully build and manage a new business project for Portuguese students (H5a). In this particular case until we can say that trust is higher in students who have family members who have created a business project. Table 5: Mann Whitney´s non parametrical test representing family that created a business project that failed Family (project that failed) No Yes Null Hypothesis The distribution of Familiar Confidence is the same across categories of Family_Failure

Mean ‐0,0692625 0,2983287 Test

N 124 26 Sig.

Std. Deviation 0,96281415 1,20824016 Decision

Independent‐Samples Mann Whitney U Test

0,054

Retain the null hypothesis

Considering those family projects that failed, there was no statistically significant differences for the significance level of 5% in average student confidence (Table 5). Therefore reject the hypothesis that family that created a failed business project affects the confidence to successfully build and manage a new business project for Portuguese students (H5B). Regarding hypotheses related work experience, make up two more analyzes related to confidence in creating and managing a new business project of whom have had previous professional experience (Table 6) and of those who have had previous professional experience that failed (Table 7). Table 6: Whitney´s non parametrical test representing those who have had professional experience Professional Experience No Yes

Mean ‐0,5752179 0,7931035

N 91 66

Std. Deviation 0,68474732 0,80552272

Null Hypothesis The distribution of Professional Confidence is the same across categories of Experience

Test

Sig.

Decision

Independent‐Samples Mann Whitney U Test

0,000

Reject the null hypothesis

For confidence to create and manage successful business project for students who have had previous experience is verified that there are statistically significant differences (p = 0.000). Thus, this study confirms the hypothesis that previous work experience in a new venture influences the confidence to create and successfully manage a new business project for Portuguese students (H6a). It can be argued, in the case relating to this sample, who had experience in a new business project has on average a higher degree of confidence compared to those who does not have experience. Watching professional experiences in previous projects that failed, there are statistically significant differences to the significance level of 5%. As the p‐value = 0.000, reject the null hypothesis of equality of means for the two groups. Thus, this study confirms the hypothesis that previous work experience in a new venture that failed influences the confidence to successfully build and manage a new business project for Portuguese students (H6B).

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Augusto de Castro Rocha, Maria José Aguilar Madeira Silva and Julia Discacciati Table 7: Whitney´s non parametrical test representing those who have had professional experience that failed Experiência Profissional (projeto que falhou) Não Sim Null Hypothesis The distribution of Professional Confidence is the same across categories of Falilure_Experience

Mean

Std. Deviation

‐0,0977659 0,8179307 Test

134 17 Sig.

0,97046272 1,01463835 Decision

Independent‐Samples Mann Whitney U Test

0,000

Reject the null hypothesis

5. Conclusion It can be seen that the look on the expected results Autonomy, may have a relevant impact when we analyze the outcome expectations by the Portuguese students of higher education. May also be conclude that aspects such as family members who have created a business project, previous work experience and previous work experience that failed may affect the propensity to create and manage a new business project. This last aspect is important above all because it is the influence for the positive direction, may indicate a possibility of learning from previous mistakes. Among the limitations of this study, we identify that the sample could be a wider scope, as it was applied in most schools of business. If it were a national sample for various courses and universities in Portugal, could reach more conclusive data to form a more robust model. Indication as to future lines of research, similar work could be done by analyzing the data in other ways. When considering entrepreneurship as a phenomenon, there is a more comprehensive perception of the real meaning of the term and it can be related to some phenomena of imbalance (microeconomic), such as technological breakthroughs, innovation, changes in the production process and pure profit and loss (Kirzner 2008). It is also indicated as future research line, perform the same study differentiating the employment situation of respondents, since that statement could influence the model. This could result in values of interest to analyze the results when the model has been unemployed, working full time or part time.

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Institutional Support Program for Entrepreneurship: The Experience of the University of Minho Cristina Rodrigues1 and Filipa Vieira2 1 Algoritmi R&D Centre, Departement of Production and Systems, University of Minho, Braga, Portugal 2 CGIT, Departement of Production and Systems, University of Minho, Guimarães, Portugal crodrigues@dps.uminho.pt filipadv@dps.uminho.pt Abstract: Entrepreneurship has a significant effect in promoting innovation, productivity, creating employment opportunities and economic development of a country. In many countries has been made a significant effort to promote entrepreneurship. An entrepreneur is someone who is able to develop new products and services, taking risks and identifying opportunities. The university programs have one important role in identifying business opportunities and support during the entrepreneurial process. Since Portugal has been particularly affected by the current crisis, with particular focus on the country's unemployment rate and economic operating conditions, which impact can have an academic initiative like the TecMinho’s IdeaLab of University of Minho? Since 2009, the University of Minho has in operation a business ideas laboratory, the TecMinho’s IdeaLab, which supports the generation and development of technology‐based and / or knowledge intensive business ideas. Having already completed eight editions, it is intended to support students and graduates of the University of Minho from any scientific area. In addition to testing the commercial potential of the ideas presented, evaluates the vocation and entrepreneurial skills of the participants through the various stages of the program. Besides presenting and discussing the results over time, the paper complements the analysis with a case study of participants and ideas that were selected to initiate the TecMinho’s IdeaLab workshop phase. Since its foundation, the TecMinho’s IdeaLab has supported the development of 126 business ideas and enabled for 291 entrepreneurs the acquisition of knowledge and skills in business development and business creation, regardless their training areas. In addition to the individual characteristics and skills of participants, we analyze the characteristics of the ideas presented, in order to contribute for the understanding of the evolution of the program. The presented results make a contribution in the Portuguese academic entrepreneurship theme and in particular in the University of Minho case. Keywords: entrepreneurship, support program, University of Minho, Portugal

1. Introduction The entrepreneurship origin lies in the recognition of an opportunity or a need, in meeting the necessary resources and the creation of a company. The universities, given their potential for knowledge and research, have been implementing programs to encourage entrepreneurship, particularly through the creation of technology transfer offices, incubators, entrepreneurship centers or establishing internal funds to stimulate the application of patents, revenue licensing and the creation of spin‐offs. Located in the northern region of the country, in a region of strong industrial implementation, the University of Minho created in 1990 the TecMinho, an interface with the peripheral business environment that provides a comprehensive set of services for managing innovations born at the University of Minho. TecMinho has three complementary departments, and beyond its technical and scientific component, has been developing initiatives to promote entrepreneurship such the creation in 2009 of TecMinho's IdeaLab, a program to support the generation and development of ideas for technology‐based business and / or knowledge intensive of students and graduates of the University of Minho from any scientific area. The present study aims to examine the TecMinho’s IdeaLab program to support entrepreneurship among University of Minho’s students and is organized into five sections, besides the introduction. Section 2 presents the importance of education in promoting entrepreneurship. Section 3 gives a brief summary of the Portuguese University of Minho’s program to support and promote entrepreneurship. Section 4 presents the case study of TecMinho’s IdeaLab with the analysis. Finally, Section 5 presents the main conclusions.

2. Entrepreneurs and education Entrepreneurship origin lies in the recognition of an opportunity or a need, in meeting the necessary resources and the creation of a company. Additionally it can be stated that, apart from putting the market in equilibrium,

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Cristina Rodrigues and Filipa Vieira entrepreneurs are individuals who are aware of the business opportunities and use the means at its disposal to make best use of these resources (Kirzner, 1997). The origin of the word "entrepreneur" resides in the French verb "entreprendre" which means “to undertake”. Entrepreneurs are held responsible for economic development, by introducing and implementing innovative ideas such as product innovation, process innovation, market innovation and organizational innovation. The implementation of these new ideas creates new companies which generate economic growth and supply new jobs for the working population (Van Praag, 1999). The work of Wong et al (2005) state that small businesses and newly formed firms create a substantial number of new jobs, with some studies showing that small and new firms are the source for the majority of new jobs created. Many countries have put policy priority on supporting entrepreneurship, but as Drucker (2006) said entrepreneurship is neither a science nor an art, it can be learned and should be practiced, because entrepreneurs are not born but are molded. Policy makers believe that increased levels of entrepreneurship can be attained through education and especially entrepreneurship education (Curteis, 1997). Several authors, such as Raijman (2001) and Askun and Yiidirim (2011) defend that education, by providing broad skills, training and knowledge facilitates the access to the business world through enabling individuals to assess the extent of the labor market, and the kind of goods customers demand, and to organize a business. For Carayannis et al (2003) there is no doubt that entrepreneurship education seeks to build knowledge and skills and also increases the likelihood of entrepreneurial success. Furthermore, Souitaris et al (2007) and Von Graevenitz (2010) added that entrepreneurship education increases the intention to start a new business. A key assumption underlying the entrepreneurship education is that entrepreneurship skills can be taught and are not fixed personal characteristics. Indeed, it has been shown that (1) the effect of general education as measured in years of schooling on entrepreneur performance is positive and (2) the business training is effective or the performance of people who applied for microfinance to start their own business (Oosterbeek et al, 2010).

3. Entrepreneurship at the University of Minho The spread of the negative effects of the international financial and economic crisis has significantly affected the activity of the Portuguese economy, with particular emphasis and impact on the unemployment rate of the country and the conditions of its economy. The emergence of entrepreneurs, able to identify and seize opportunities, invest and create wealth and jobs are critical to the recovery and development of national economy (GEM, 2010). A recent study confirms a new generation of Portuguese entrepreneurs with higher qualifications (LINI, 2009) but data from the GEM survey indicated in 2010 a score to Portugal of just 4.5% for the rate TEA (early‐stage activity entrepreneurship tax), a significant decrease of the value obtained in 2007. Regarding gender distribution of entrepreneurs in Portugal, the number of entrepreneurs male (5.9%) is equivalent to about twice the number of female’s entrepreneurs (3%) (GEM, 2010). At the academic level, the programs of institutional support for academic entrepreneurship are recent, but there is an increase in the last four years of individual initiatives of the various public universities. One of earlier examples was the University of Minho, a public university located at the north of Portugal. Established in 1973, began its teaching activity in 1975 and offers nowadays a portefólio with several courses at all levels of higher education whose quality has been evidenced by several national and international assessments. The scientific and academic activities of the University of Minho are organized into two separate campi. The Gualtar campus, located in the city of Braga, is where are the courses of exact and natural sciences, social sciences and humanities. The Azurém campus in the city of Guimarães, hosts the schools of architecture and engineering. At the human level, the university mobilizes 1100 teachers and 550 staff to cope with a diverse educational offer (total of 234 courses) and a student population of 18,700 students, of which approximately 4,300 are master's degree students and 1,900 are doctoral students. University of Minho believes that its mission is based on three projects: teaching, research and the provision of specialized services to the community. Thus, the organizational structure of the University is currently organized into eight schools and three institutes and is associated with 13 interface structures comprising:

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Cristina Rodrigues and Filipa Vieira

3 structures oriented to knowledge transfer (TecMinho the IDITE Minho and SpinValor),

1 Park of Science and Technology (The Ave Park),

1 business incubator (the Spinpark),

1 binding entity encompassing the outside (Foundation Carlos Lloyd Braga) and,

7 structures aimed at applied research interaction with the business sector.

The developed work has highlighted this University as an important agent of regional development. The University of Minho has created several centers of applied research and one interface structure, TecMinho, to respond to requests from the strong existing industrial park in the area where it is inserted. Founded in 1990 as a joint initiative of the University of Minho and the Association of Municipalities of the Ave Valley, TecMinho is the interface structure of the university in the scientific and technological aspects. During its early years, TecMinho guided primarily for projects of regional development but, from 1998, it began to focus increasingly on the enhancement of university knowledge by promoting entrepreneurship, protection of intellectual property rights, licensing and the creation of spin‐offs. The mission of TecMinho is defined in three main lines of action: 1) supporting the development of new technologies / products / processes and transfer to companies, 2) the design and implementation of activities in education and training (classroom and e‐learning), organizational development and transnational mobility of human resources, 3) support for university entrepreneurship and the creation of innovative firms with particular attention to the academic spin‐offs. TecMinho provides a comprehensive set of services for managing innovations born at the University of Minho and is structured in three complementary departments. The first, the Technology Transfer Department ensures the protection of new products or processes, the development of a portfolio of technologies and the commercialization of University assets. Second, the Department of Advanced Education aims to improve business competitiveness based on the qualification of human resources, by offering various training courses for individuals. Finally, the Department of Entrepreneurship encourages the formation of technology‐based companies, by encouraging an entrepreneurial culture and support for spin‐offs in the pre‐start and start‐up. Aiming to develop the entrepreneurial skills of students at the University of Minho, TecMinho has implemented several initiatives to foster an entrepreneurial culture in academia and promote entrepreneurship as a valid alternative career. The most recent initiative was the establishment in 2009 of a laboratory of ideas, TecMinho's IdeaLab, aimed at facilitating the generation and development of innovative business ideas by students from the University of Minho.

4. The TecMinho’s IdeaLab (University of Minho) 4.1 Methodology Ongoing research aims to examine the use and impact of programs of institutional support for entrepreneurship, in order to answer the research question: "What is the impact of initiatives such as the program to support entrepreneurship at the University of Minho?". Thus, at an early stage of the investigation, it was decided that the research strategy would be a case study of the University of Minho, in the particular case of TecMinho's IdeaLab. The methodology of case study consists of detailed research, based on data collected over a period of time, one or more organizations, in order to obtain an analysis of the problem to be studied. In the particular case of this work, it can be stated that this is a case study explaining why if you want to find relationships cause‐effect relationship between certain situations.

4.2 Presentation of the TecMinho’s IdeaLab programme The TecMinho's IdeaLab emerged under an application submitted by TecMinho to the contest "Promoting Entrepreneurship in Higher Education Students Portuguese" promoted in 2007 by COTEC Portugal. Supported by the University of Minho and subsequently approved and co‐financed by COTEC, the application was designed to define an integrated strategy to encourage entrepreneurship at the University of Minho and able to develop students entrepreneurial skills and promote entrepreneurship as an attractive alternative career. TecMinho’s IdeaLab was established at the beginning of 2009 after the establishment of a cooperation agreement between TecMinho and the Mälardalen University (Sweden) where this model was originally

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Cristina Rodrigues and Filipa Vieira implemented. The TecMinho’s IdeaLab provides hands‐on training and consultancy in order to help participants generate and develop innovative business ideas and also provides them access to the laboratory for a maximum period of 5 months in order to mature their business ideas. The TecMinho’s IdeaLab of University of Minho intends to support the generation and development of business ideas with a technological and/or intensive knowledge background of students or graduates of any scientific area. With this TecMinho's IdeaLab program, the University of Minho seeks:

Provide promoters of selected ideas with knowledge, methodologies and tools related to the creation and development of innovative businesses in order to facilitate analysis, planning and implementation of marketable products or services;

Encourage entrepreneurs attitudes, behaviors and values within the academic community (particularly the student community) and raise awareness of entrepreneurship as a valid career option;

Intensify the dynamic creation of innovative firms generated from the University of Minho (i.e., spin‐offs) to contribute to the renewal of the business in the region.

Besides testing the commercial potential of ideas presented, the TecMinho's IdeaLab evaluates the entrepreneurial vocation and competencies of its participants along three phases. The first phase, the receipt of business ideas, makes the analysis and selection of ideas presented by different promoter candidates. The second phase, start‐up workshops, allows the development of skills related to business creation and business development through the frequency of training workshops on creativity and innovation management, strategic analysis, market analysis, analysis financial and elevator pitch. The third and final phase, pre‐incubation is the individualized guidance by a “Business Coach” to allow the definition and implementation of business ideas.

4.3 Analysis of TecMinho’s IdeaLab’s editions Since 2009, the TecMinho's IdeaLab concluded a total of eight editions, two editions each year (April‐July and November‐March). This article focuses on data from phase start‐up workshops with a number of participants or promoters by year ranged from 62 participants (2010) and 82 participants (year 2011). With a total of 291 participants in this initiative is spreading across the University, and has a laboratory in the School of Engineering, Campus Azurém. In editions of TecMinh's IdeaLab there is a significant majority of male participants (72.9% versus 27.1% of females). However, throughout the editions, the gender distribution has been some variations (see Figure 1). Editions 5th, 6th and 7th showed a significant increase of female participants, with a peak of 45% in the 7th Edition. However, on 8th Edition the female participation decreased to 19%. Male

Female

1st edition

79%

21%

2nd edition

77%

23%

3rd edition

81%

19%

4th edition

83%

17%

5th edition

64% 69%

6th edition 7th edition 8th edition

36% 31%

55%

45% 81%

19%

Figure 1: Participants’ gender In turn, the analysis of the training participants distinguishing the engineering background of non‐engineering shows that most participants have training in engineering (55.7% versus 40.9% non‐engineering). By analyzing the formation of non‐engineering, it was possible to identify a variety of training areas from the sciences (13.4%), social sciences and humanities (12%) or architecture (see Figure 2).

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Cristina Rodrigues and Filipa Vieira

Missing 3,4% Economy and Business 9,3%

Social and Human Sciences 12,0% No Engineering 40,9%

Engineering 55,7%

Sciencies 13,4%

Education 3,8% Arquitecture and Arts 2,4%

Figure 2: Participants’ scientific background The ages of the participants range from 19 to 55 years, with an average of 27.68 years. The analysis was done according to the edition indicators median, minimum and maximum (see Figure 3). In the different editions median age records a minimum of 25.0 years (Editions 2nd, 4th and 5th) and a maximum of 28.0 years (8th and 3rd Editions), which is a good indicator of youth promoters. Already at the level of the range of ages, the highest amplitude recorded was the 2nd Edition (35 years) and lowest in the 3rd Edition (15 years) which marks this edition as the "youngest" of TecMinho’s IdeaLab. Maximum

55,0

50,0 43,0

44,0

43,0

25,0

26,0

Median

Minimum

50,0 41,0

36,0 28,0

26,0

25,0

21,0

20,0

21,0

1st edition

2nd edition

3rd edition

4th edition

5th edition

6th edition

27,0

28,0

23,0 19,0

7th edition

8th edition

Figure 3: Participants’ age by edition In addition to the individual characteristics of each participant, the team analysis was also made. During the eight editions were accepted 126 ideas that corresponded to 126 teams. The number of elements’ team varies from a minimum of 1 member and a maximum of 5 members, with an average of 2.32 members per team. Each team was further classified into a new variable "dimension" with three different classes depending on the number of member:

One member (small team);

Two or three members (average team size);

Four or five members (large team).

The Figure 4 illustrates the results for edition. It is noted that the teams with 2 or 3 members are those that have greater percentage participation. The exceptions are the 3rd edition with the same percentage for teams with 1 member and teams with 2 or 3 members (42.9%), and the 4th edition in which teams with one member dominated (55.6%). The teams with 4 or 5 members are less significant but in the 6th edition they accounted for a maximum of 37.5% of the teams.

537

Cristina Rodrigues and Filipa Vieira 1 element

68,8%

2 or 3 elements

4 or 5 elements

62,5%

60,0%

56,3% 50,0%

55,6%

46,7% 42,9% 42,9% 31,3%

37,5% 27,8%

33,3%

25,0% 20,0% 14,3%

20,0% 20,0%

16,7%

18,8% 18,8% 0,0%

0,0%

1st edition

31,3%

2nd edition

3rd edition

4th edition

5th edition

6th edition

7th edition

8th edition

Figure 4: Team’s elements Following the analysis, we evaluated for each team the number of 1) members with engineering background, 2) female members and 3) members aged less than or equal to 25 years. Subsequently teams were classified according to three new variables:

At least one member with engineering background (by coding the "yes" answers the 1‐yes, 0‐no otherwise),

At least one member of the feminine gender (by coding the "yes" answers the 1‐yes, 0‐no otherwise),

At least one member aged less than or equal to 25 years (by coding the "yes" answers the 1‐yes, 0‐no otherwise).

The Table 1 summarizes the results obtained. Considering the team members with engineering background it is found that 62.7% of the teams have at least one member with engineering background. In the 3rd and 8th edition only half of the teams had at least one member with engineering background. If considering the feminine elements, 42.1% of teams had at least one female member and the exceptions are the 5th and 7th editions, with a majority of teams with female participation (respectively 53% and 56%). Finally, it was found that 52.3% of the teams have at least one member aged less than or equal to 25 years and that the issue of greater inequality was the 3rd edition, with 79% of the teams with all members over the age of 25 years. Table 1: Team characterization

1st edition

Eng. Elements

Fem. Elements

%No 31%

%No 56%

%Yes 69%

%Yes 44%

<=25 years Elements %No 44%

%Yes 56%

2nd edition

27%

73%

60%

40%

33%

67%

3rd edition

50%

57%

43%

79%

21%

4th edition

22%

78%

67%

33%

44%

56%

5th edition

33%

67%

47%

53%

40%

60%

6th edition

44%

56%

50%

31%

69%

7th edition

44%

56%

44%

56%

44%

56%

8th edition

50%

81%

19%

63%

38%

N_Total

% Total

37,3%

62,7%

57,9%

42,1%

46,8%

53,2%

The Table 2 summarizes the percentage of incidence in each team. In the analysis of engineering background there are 47 teams (37.3%) with zero elements and 61 teams with all elements with engineering background. In terms of females, although there are 73 teams (59.3%) with zero elements, there are 22 teams with all elements of feminine gender, a result very promising. The analysis of the elements aged less than or equal to 25 years reveals that there are 59 teams (48.2%) with zero elements. The remaining results, including the 33 teams with all elements aged less or equal to 25 years, confirm the participation of young promoters among teams.

538

Cristina Rodrigues and Filipa Vieira Table 2: Teams’ indicators Eng. Elements

Fem. Elements

Team percentages

N_teams

Team percentages

N_teams

<=25 years Elements Team percentages

N_teams

0,00%

20,00%

25,00%

33,33%

40,00%

50,00%

15 1

60,00%

66,67%

75,00%

80,00%

100,00%

total

126

total

126

total

126

The analysis also included the 126 ideas accepted in the program TecMinh's IdeaLab. When each idea was classified according to the desired output (services or product), is perceived a strong component of ideas in services (66.7% against 33.3% of ideas into products). The Figure 5 examines the evolution over time, which is perceived a major trend of services ideas, with the products representing a small part of the ideas presented. The 7th Edition is the only exception with 56% of the ideas focus on products but, the 8th Edition corrected and reversed this situation by giving priority to services (56%). Services 1st edition

Product 31%

69%

2nd edition

33%

67%

3rd edition

29%

71%

4th edition

22%

78%

5th edition

73%

27%

6th edition

75%

25%

7th edition 8th edition

56%

44%

56%

Figure 5: Ideas outputs by edition During the 8 issues, we identified nine different idea themes, with a significant amount of the information technologies ideas (35.7%) followed by the environment and energy (15.1%), consultancy (13.5%) and health care (11.9%) (see Table 3). The ideas in information technologies were most significant in the 5th, 4th and 8th edition (respectively 53.3%, 50.0% and 43.8%). Interesting to note that:

the themes with constant presence in the editions are the IT's and the Environment and Energy (E_Energy),

the environment and energy registered the highest importance in the 6th and 2nd editions (25.0% and 20.0% respectively),

the consultancy had greater importance in 1st and 6th edition (31.3% and 25.0% respectively),

the themes with less presence in the editions are the food industry (three editions), education (three editions) and Hotel & Catering (two editions).

To evaluate the incidence of dropouts, we analyzed the number of team members that dropped along the workshop phase. This enabled subsequent creation of a new variable to characterization of the teams:

At least one member quit the program (by coding the "yes" answers the 1‐yes, 0‐no otherwise)

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Cristina Rodrigues and Filipa Vieira Table 3: Ideas’ theme by edition IT'S

E_Energy Consultancy Health Care Engineering

Industry

Food Industry Education Hotel & Catering N_Total

N_Total

126

% Total

35,7%

15,1%

13,5%

11,9%

7,9%

7,1%

4,0%

2,4%

100,0%

1st edition

31,3%

18,8%

31,3%

6,3%

2nd edition

33,3%

20,0%

6,7%

13,3%

3rd edition

28,6%

14,3%

7,1%

14,3%

21,4%

4th edition

50,0%

5,6%

11,1%

5,6%

11,1%

5th edition

53,3%

13,3%

6,7%

20,0%

6,7%

6th edition

25,0%

18,8%

6,3%

7th edition

18,8%

12,5%

6,3%

18,8%

12,5%

6,3%

18,8%

6,3%

8th edition

43,8%

12,5%

18,8%

6,3%

12,5%

6,3%

During the 8 editions there were 47 teams (37.3%) with at least one member that quit the program. The results are illustrated in Figure 6. The editions that resulted in more teams with members that quit were the 2nd and 6th editions (53% for both). The editions with fewer quit teams were the last, i.e. the 8th edition with 13% and the 7th edition with 19%. % No quit 1st edition 2nd edition

53%

47%

3rd edition

5th edition 6th edition

44%

56%

64%

4th edition

% Quit

36%

61%

39%

47%

53%

56%

7th edition 8th edition

44% 81% 88%

19% 13%

Figure 6: Quit teams by edition Tests of independence were performed between the incidence of "quit the program team" and the characterization variables: edition number, size of the team (small / medium / large), team members with engineering background (yes / no), team with female members (yes / no) and team with members aged less than or equal to 25 years (yes / no). The results suggest dependency relationships between the incidence of quit and:

The edition number (χ2 (7) = 10,463, p <0.10);

The team age (Fisher’s exact test, p <0.05).

5. Conclusions The TecMinho’s IdeaLab of University of Minho test the commercial potential of the ideas presented and evaluates the vocation and entrepreneurial skills of its participants over three phases. The results analyzed in this paper are related to the start‐up and workshops phase and highlight the importance of male gender participants on the program. Female participation is still relatively low (27.1%), but when analyzed by team it is verified that 42.1% of teams had at least one female member and that 22 teams are all with female members. The evolution recorded over time may indicate a progressive increase in female participation but, as the

540

Cristina Rodrigues and Filipa Vieira selection for participation in the program is based on the ideas presented, it could be interesting in the future to create an edition fully dedicated to female entrepreneurs. In terms of training, most participants have background in engineering (55.7%) but there is a great diversity in the non‐engineering areas. Interestingly, 62.7% of teams had at least one member with engineering background and that there are 61 teams with all members from engineering. The question is whether this is a consequence of the fact that TecMinho's IdeaLab is located in the school of engineering or whether there will be greater potential entrepreneur by people with engineering background compared to non‐engineering. This should be explore in the future. It was interesting to recognize the degree of youth participants since the mean participant’s age was 27.68 years, and ranged from 19 to 55 years. The analysis of members aged less than or equal to 25 years concluded that 52.3% of the teams have at least one member aged less than or equal to 25 years and the existence of 33 teams (26.2%) with all members of age less or equal to 25. The classification of the outputs of the ideas in service or product resulted in a high incidence of the ideas of services (66.7%). Analysis over time not evidence significant changes, although it is acknowledged that the last two editions have been more balanced. Once the output is strongly dependent on the theme idea, the ideas were classified by theme. Results indicated that the themes that are present constantly in editions of TecMinho's IdeaLab are information technologies (IT's) and the Environment and Energy (respectively 35.7% and 15.1% of the ideas accepted in the program). This result may not be surprising given the high participation of background in engineering. The incidence of dropouts of the program was analyzed according to the number of team members who quit. Of the 126 teams accepted into the program, there were 47 teams with at least one member who quit (37.3%) and were confirmed relationships of dependence between incidence of quit members with the number of edition and team members age. Although preliminary, the results obtained are important to characterize and understand the evolution of the program TecMinho's IdeaLab. As it is a relatively new program, we believe that the current study may contribute to a better performance of the program (including the suggestion of an edition dedicated to the participation of females proponents) and to identify potentially critical phases for participants. Following the investigation will comprehend a phase of study of the specific reasons for leaving the program in the workshop phase, with the realization of interviews and a specific survey.

Acknowledgements The authors would like to thank the collaboration of TecMinho's IdeaLab into the research project. The authors also wish to acknowledge the support of CGIT and Algoritmi R&D Centre, two research centres at the University of Minho, Portugal. This work is supported by FEDER Funds through the Operational Programme Competitiveness Factors – COMPETE, and National Funds through FCT ‐ Foundation for Science and Technology under the Projects FCOMP‐01‐0124‐FEDER‐022674 and Pest‐OE/EME/UI0252/2012.

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Cristina Rodrigues and Filipa Vieira Raijman, R. (2001) “Determinants of entrepreneurial intentions: Mexican immigrants in Chicago”, Journal of Socio‐ Economics, Vol. 30, pp 393–411. Souitaris, V., Zerbinati, S. and Al‐Laham, A. (2007) “Do entrepreneurship programmes raise entrepreneurial intention of science and engineering students? The effect of learning, inspiration and resources”, Journal of Business Venturing, Vol 22, pp 566–591. Oosterbeek, H., van Praag, M. and Ijsselstein, A. (2010) “The impact of entrepreneurship education on entrepreneurship skills and motivation”, European Economic Review, Vol 54, pp 442‐454. Van Praag, C.M. (1999) “Some classic views on entrepreneurship”, De Economist, Vol 147, No. 3, pp 311–335. Von Graevenitz, G., Harhoff, D. and Weber, R. (2010) “The effects of entrepreneurship education”, Journal of Economic Behavior & Organization, Vol 76, pp 90–112. Wong, P. K., Ho, Y. P. and Autio, E. (2005) “Entrepreneurship, Innovation and Economic Growth: Evidence from GEM data”, Small Business Economics, Vol 24, pp 335–350. Yildirim, N. and Askun, N. (2012) “Entrepreneurship intentions of public universities in turkey: going beyond education and research?”, Procedia Social and Behavioral Sciences, Vol 58, pp 953–963.

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Factors Influencing Innovation and Competitiveness – a Comparative Analysis of Selected Economies Anna Sacio – Szymańska Institute for Sustainable Technologies – National Research Institute (ITeE – PIB), Radom, Poland anna.sacio@itee.radom.pl Abstract: The growing interdependencies between modern countries significantly influence the international competitiveness of a national economy. The impact, however, can have both a positive and a negative character. The advantages of globalisation are expressed in an easier access to international markets, capital, labour, and knowledge. Its drawbacks, on the other hand, are closely related to the issues of economics, and they can be particularly noticed when crisis hits a particular country (or region) and then spreads to other countries that are economically linked with it. This amplifies the already harsh market conditions stemming from the need to cope with global competitiveness. Taking into consideration both the dramatic intensification of integration processes all over the world and the shifting balance of power in the global economy, the ability to shape a country’s innovation policy seems to be of key importance. It is crucial to direct national innovation policy in a way that enables the exploitation of all development opportunities stemming from current and future competitive advantages of the economy. The paper analyses some of the factors influencing the creation of innovation and economic competitiveness, including the following: The level and structure of expenditure on R&D; Key national R&D priorities, which are supported by large public R&D programmes analysed in comparison to high‐ tech industries and sectors of the highest expenditures on innovation; and, The level of total entrepreneurial activity. The impact of policy measures related to science and technology for innovation is shown through the analysis of the following data: The dynamics of GDP and GDP per capita in the 2001‐2011 period, The position in Global Innovation Index ranking in the 2007 – 2012 period, The position in Global Competitiveness Index ranking in the 2007 – 2012 period and The position in Knowledge Economy Index ranking in 2012. The analyses include the following countries: Switzerland, Sweden, United States, Germany, United Kingdom, France, China, India, Russia, Czech Republic, and Poland. Keywords: innovativeness, competitiveness, public support measures, R&D, smart specialisation, foresight, knowledge economy

1. Innovativeness studies – analysis of the state‐of‐the‐art The issues of the competitiveness and innovativeness of the economy are a frequent subject of analysis. The forerunner in this field of study was Smith (1776), who analysed factors stimulating economic innovativeness. His followers were neoclassical economists, including Schumpeter (1941), Solow (1956), and Swan (1956). Contemporary analyses of innovativeness and competitiveness are conducted at numerous national and international research centres. Table 1 delineates the classification of research on innovativeness (with literature references), in which the following criteria were selected: the aim of the analysis, its subject, object, territorial scope, and means of data collection. Table 1: Classification of innovation research Classification criteria Aim of the analysis

Subject of the analysis

Type of research Analysis of the level of innovativeness and recommendations Development of research methodology Innovativeness of national economies Innovativeness of regions Innovativeness of economic entities

Object of the analysis

Innovation creation factors

Authors (selection) Sala‐i‐Martin (2004), Chen, Dahlman (2005), Hollanders, Tarantola (2010), Dutta (2011) Frascati Manual (1962‐2002), Oslo Manual (1997 – 2005) Frascati Manual (1962‐2002), Dutta (2011), Hollanders, Tarantola (2010), Archibugi, Denni, Filippetti (2008), Chen, Dahlman (2005), Sala‐i‐Martin (2004) Cooke (2001), Asheim, Coenen (2006), OECD Reviews.. (2011), Hollanders, Tarantola, Loschky (2009) Oslo Manual (1997 – 2005), Hagedoorn, Cloodt (2003), Jaruzelski et al. (2005‐2012), Baczko (2005‐2012), Chen, Sawhney (2012) M. Holland, W. Spraragen (1933), Bernal (1939), National Patterns of R&D Resources (1956 ‐ 2011), Frascati Manual (1962‐2002), McGraw‐Hill (1971), Godin (2003), Jaruzelski et al. (2005‐2012)

543

Anna Sacio – Szymańska Classification criteria

Territorial scope of the analysis

Type of research Effects of innovative activity Factors of innovative activity creation and its effects National analyses International analyses

Means of data collection

Primary data Secondary data Primary and secondary data

Authors (selection) Patent Manual (1994‐2009), Okubo (1997) Oslo Manual (1997–2005), Sala‐i‐Martin (2004), Chen, Dahlman (2005), Baczko (2005‐2012), Dutta (2011) Baczko (2005‐2012), ERAWATCH Annual Country Reports (2006‐2012) Hollanders, Tarantola (2010), Archibugi, Denni, Filippetti (2008), Chen, Dahlman (2005), Dutta (2005), Sala‐i‐Martin (2004) Oslo Manual (1997 – 2005), Baczko (2005‐2012) Hollanders, Tarantola (2010), Dutta (2005), Chen, Dahlman (2005), Jaruzelski et al. (2005‐2012) Sala‐i‐Martin (2004)

Source : Author The classification of innovation research enabled the identification of the main characteristics of analyses presented in the article, which include the following:

The aim of the study is to analyse the state of innovativeness and make recommendations,

The analyses are conducted on the macroeconomic level,

Selected factors of innovativeness creation are studied,

The analysis concerns the economies of countries selected with the use of criteria proposed in the original research methodology, and

Only secondary data were used in the analysis.

2. Selection of countries to be analysed It was assumed that OECD countries or countries cooperating with them within the Enhanced Engagement Programme (i.e. Brazil, India, China, South Africa and Russia) will be analysed, which helped to select an initial group of 39 economies. Due to a similar level of development of some of the selected countries, it was decided that the research sample would be narrowed down with the use of the following three‐stage methodology: 1) The analysis of the level of GDP and GDP per capita in the 2000‐2010 period, 2) The analysis of the dynamics of GDP and GDP per capita in the 2001‐2010 period, 3) The analysis of the position of selected countries in international innovation and competitiveness rankings in the 2007 – 2012 period including:

The Global Competitiveness Index‐GCI (Sala‐i‐Martin, Artadi 2004),

The Global Innovation Index‐GII (Dutta 2012).

As a result of the analyses, three groups of countries were singled out:

Countries with the highest level of GDP and GDP per capita,

Counties with the greatest dynamics of GDP and GDP per capita, and

Countries with the highest level of innovativeness and competitiveness.

Moreover, individual countries meeting all the above listed criteria were selected. These included the following: Sweden, Switzerland and the USA, Germany, the UK and France, China, India, Russia, the Czech Republic, and Poland.

3. Method of analyses The analysis of the dynamics of GDP and GDP per capita covering the 2007‐2010 period and the position of individual countries in the global innovation and competitiveness rankings (GCI, GII) covering the 2007‐2012 period called for an in‐depth analysis of the state and the condition of the countries’ innovation performance (see Tables. 2 and 3).

544

Anna Sacio – Szymańska Table 2: Dynamics of GDP and GDP per capita in the analysed countries in the 2001‐2010 period Country

Country

GDP per capita dynamics

Switzerland Sweden USA Germany UK France China India Russia Czech Rep. Poland

(2001‐2010) 103.0 103.7 103.0 103.2 103.1 102.8 112.2 108.2 107.7 105.3 106.3

GDP dynamics

Switzerland Sweden USA Germany UK France China India Russia Czech Rep. Poland

(2001‐2010) 103.8 104.2 104.0 103.2 103.7 103.4 112.9 109.9 107.2 105.5 106.2

Source: Author based on International Monetary Fund, World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx The greatest dynamics of GDP and GDP per capita are observed for China, India and Russia (respectively a 12%, 9% and 7% growth in the analysed period). The dynamics of GDP and GDP per capita in the case of Poland and the Czech Republic is similar and amounts to 6% and 5%, whereas in the remaining countries to ca. 3%. Concurrently, countries with the highest dynamics of GDP and GDP per capita are characterised by the lowest level of GDP per capita, which in India comes to 3000 USD, China – 7000 USD, Russia – 15000 USD, Poland – 20000 USD, and the Czech Republic – 24000 USD; whereas, in the analysed Western European countries these figures vary between 34000 USD (France) and 41000 USD (Switzerland) (IMF World Economic Outlook Database). Table 3: Position of the analysed countries in innovativeness and competitiveness rankings in the 2010‐2012 period Analysed index

Global Competitiveness Index (GCI)

GCI trend

Global Innovativeness Index (GII)

GII trend

Analysed period

SUI

SWE

USA UK

GER

FRA

CHIN

RUS

2007‐2008

2008‐2009

2009‐2010

2010‐2011

2011‐2012

2012‐2013

2007‐2012 2007

IND POL

↑

→

↓

↑

↓

↑

↓

↑

2008‐2009

2009‐2010

2011

2012 2007‐2012

1 ↑

2 ↑

10 5 ↓ ↓↑

15 ↓

24 ↓

27 ↑

34 ↓↑

51 ↑

64 ↓

44 ↑

Source: Author based on http://www.weforum.org/issues/global‐competitiveness and http://www.globalinnovationindex.org/gii The indisputable leaders in the rankings referred to in this article are Switzerland (first in both indices for 2012) and Sweden with 2nd (GII) and 4th (GCI) positions. In the analysed period, despite the negative influence of the global crisis, these countries either improved or maintained their position. Poland, the Czech Republic, and China also displayed growth tendencies in the area of economic competitiveness and innovativeness. More prone to the negative trends in a global economy were the USA, Germany, the UK, and France, which (apart from the UK) are ranked lower on both innovativeness and competitiveness. Similar downward tendencies are

545

Anna Sacio – Szymańska displayed by India and Russia, which despite the high dynamics of their economic development, are ranked among the 5th and 6th ten in the 2011‐2012 period. It needs to be noted that the greater dynamics of changes in the GII index mainly results from methodological differences in both indices. Global Innovation Index was developed in 2007 by INSEAD economists (Fr. Institut européen d'administration des affaires). The factors included in GII are classified into two basic groups of indicators: innovation input and innovation output. Within the first of them the following categories were further distinguished: institutions, human capital and infrastructure, market sophistication and business sophistication. The innovation output sub‐Index, on the other hand, includes scientific outputs and creative outputs. The GII methodology distinguishes between 60 innovation measures, which are used for the assessment of the innovation performance of 125 countries (Dutta 2012). The methodology of economic competitiveness assessment by the Global Economic Forum has been developed since 1979. The approach concerns a wide scope of factors (117 altogether) that influence economic competitiveness and productiveness. The factors are grouped into 12 pillars of competitiveness including the following: (1) Institutions, (2) Infrastructures, (3) Macroeconomic environment, (4) Health and primary education, (5) Higher education and training, (6) Goods market efficiency, (7) Labour market efficiency, (8) Financial market development, (9) Technological readiness, (10) Market size, (11) Business sophistication, (12) Innovation. Analysis of competitiveness with the use of GCI index are conducted with reference to 144 countries (Sala‐i‐Martin, Artadi 2004).

When analysing such complex indicators as GII or GCI one must be aware that the characteristics of innovation systems in developing and in catching‐up economies (such as the analysed: China, India, Poland, the Czech Republic or Russia) differ significantly from the ones that gave rise to the current statistical standard (for example: the United Kingdom, the United States, Germany). Therefore, complex indicators should be cross‐ nationally comparable, and at the same time they should reflect the characteristics of the above mentioned groups of countries (Measuring R&D...2010). These criteria are met by the WEF’s Global Competitiveness Index, the method for calculation of which (contrary to the INSEAD’s Global Innovation Index) takes into account the differences in the level of the economic development between countries. The GCI separates countries into three specific stages, i.e. factor‐driven, efficiency‐driven, and innovation‐driven (Sala‐i‐Martin 2012). The division allows to differentiate factors that mostly contribute to the competitiveness of the analysed economies (tab. 4). Table 4: The factors of highest impact on a country’s competitiveness

Source: Author based on http://www.weforum.org/issues/global‐competitiveness The two countries, i.e. Poland and Russia, are in transition from the efficiency‐driven to the innovation‐driven stage, which means that current economic conditions still allow companies to exploit economies of scale, but there must be an increase in knowledge‐intensive activities resulting in the greater share of high value added industries in order to secure a future competitive position of these countries. As shown in the table 4, the ability to create, share and use knowledge is required in order to secure a country’s innovative position.

546

Anna Sacio – Szymańska The Knowledge Assessment Methodology – KAM by the World Bank Institute (Chen, Dahlman 2005) is the metric, which is designed to measure a country’s preparedness to compete in the knowledge economy. An aggregate KEI index (based on a an average of four sub‐indexes) and the value of the four sub‐indexes by country is shown in table 5. Table 5: An aggregate KEI index and its sub‐indexes calculated for the analyzed economies in 2012 Country

Knowledge Economy Index (KEI)

Economic and institutional regime

Innovation system

Education system

ICT

Sweden

9.4

9.6

9.7

8.9

9.5

Germany

8.9

9.1

8.2

9.1

Switzerland

8.9

9.5

9.9

6.9

9.2

United States

8.8

8.4

9.5

8.7

8.5

United Kingdom

8.8

9.2

9.1

7.3

9.5

France

8.2

7.8

8.7

8.3

8.2

Czech Republic

8.1

8.5

7.9

8.2

7.9

Poland

7.4

8.1

7.2

7.6

6.7

Russia

5.8

2.2

6.9

6.8

7.2

China

4.4

3.8

6.0

4.0

3.8

India

3.1

3.6

4.5

2.3

2.0

Source: http://www.worldbank.org/kam In KAM 2012 the countries were ranked as follows: Sweden (1), Germany (8), Switzerland (10), the United States (12), the United Kingdom (14), France (24), the Czech Republic (26), Poland (38), Russia (55), China (84), India (110). The data, which resemble the ability to generate, diffuse and apply knowledge for innovation surge and economic development, are comparable in the majority of the analysed countries, except for China, Russia, and India. The main weaknesses of these countries relate to their educational systems and the economic regime. Interestingly, the education system of Switzerland might also call for improvement as its score does not differ much from the Russian one. Worth underlying is the fact that KEI reveals rather weak position of the Chinese economy compared to Poland and Russia, which were outperformed by China in GII and GCI rankings. In the light of the above stated, the factors which are associated with knowledge creation, diffusion and use need to be considered while analysing the achievements of selected countries in the area of innovativeness. 1 The following factors were analysed:

The level and the structure of expenditure on R&D;

The degree of interdependence between key national R&D priorities, industry sectors of highest expenditures on innovation, and high‐tech sectors; and,

The level of total entrepreneurial activity.

4. Results of analyses One of the most important and frequently quoted in literature innovation creation measures (Godin 2003) and (OECD Science…2011) is the level and the structure of R&D expenditure (Tab. 6) The highest R&D expenditure can be observed in Sweden (3.4% of GDP), Switzerland (3% of GDP), Germany and the USA (both 2.8% of GDP). Slightly lower spending on R&D is in France (ca. 2.3% of GDP) and the UK (ca. 1.8% of GDP). Russia, Poland and India are characterised by the lowest R&D expenditure, which is below 1% of GDP; whereas, China and the Czech Republic invest ca. 1.5% of GDP in their R&D activity. Along with the low 1

These factors were selected from more than a dozen measures covered by the analyses carried out by the author in the framework of the Innovative Systems of Technical Support for Sustainable Development of Economy Strategic Research Programme.

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Anna Sacio – Szymańska level of R&D expenditure, the structure of R&D spending is also unfavourable, which in the case of Poland (as well as India and Russia) significantly differs both from the structure characterising developed countries (e.g. Switzerland, Sweden, the USA, Germany, France and the UK) and also from the structure of R&D expenditure in the Czech Republic (which displays similar to Poland’s level of the economic development) and in China. In a vast majority of these countries, the private sector’s expenditure on R&D constitutes approximately 60‐70% of the total R&D spending, whereas in Poland (Russia and India alike), the trend is reverse. Table 6: Level and structure of R&D expenditure in the analysed countries in 2010 Analysed countries

Total R&D expenditure as % of GDP

Switzerland Sweden USA UK Germany France Czech Rep. China Russia India Poland

3.00 3.42 2.77 1.77 2.82 2.26 1.56 1.44 1.03 0.79 0.74

Private sector expenditure on R&D as % of GDP 2.21 2.35 1.86 1.08 1.90 1.38 0.97 1.04 0.30 0.23 0.20

Public sector expenditure on R&D as % of GDP 0.80 1.07 0.91 0.69 0.92 0.88 0.59 0.40 0.73 0.56 0.54

Source: http://erawatch.jrc.ec.europa.eu/erawatch/opencms/information/country_pages/ Due to the fact, that the growth of the level of innovativeness is not only dependent on the increased R&D expenditure (Jaruzelski, Dehoff 2010), the analysis also included the characteristics of key national R&D priorities in the countries selected for analysis. It should be stressed that the concept of the support of selected R&D priorities and areas (Mazurkiewicz, Poteralska, Sacio‐Szymańska 2011) with public funds is highly popular, particularly in Europe, where the policy of smart specialisation has recently been introduced (Foray, David, Hall 2011). The popularity of the smart specialisation policy has been boosted by the recent global crisis, which revealed a large asymmetry in the development of the EU economies and has caused a number of chronic problems. Good conditions facilitating the inclusion of intelligent specialisation into the Europe 2020 strategy ensured the advancement of the majority of the EU countries in the execution of foresight projects. This poses a question whether research directions indicated by foresight projects and included in the priority public support within strategic research programmes are actually connected with the branches of industry which practically apply latest technologies and actively participate in the creation of innovation in the analysed countries (Tab. 7). The analysis of data presented in Table 5 enables the conclusion that only companies operating in the area of ICT, healthcare and transportation (particularly automotive) widely apply advanced technologies and therefore contribute to the dynamic development of these sectors and, as a result, increase the level of the innovativeness of the national economy. The analysis of one of the priority areas is particularly interesting, i.e. the area of technologies of industrial production. Although the development of this area is essential in the case of only five of the analysed countries, it is included in the high‐tech sector and significantly contributes to innovation creation in these countries in a majority of economies. This mainly stems from the role of electronic technologies and precise and mechanical engineering technologies, which have an essential input in the dynamic development of the industrial production sector and facilitate the creation of innovations. In most of the analysed countries, these technologies are not incorporated into complex public support programmes, and their development is mainly triggered by intensified private investment. The influence of achievements in the remaining priority areas (i.e. nano‐ and biotechnologies, environmental protection, space, materials, defence, services) on the creation of market innovation in a majority of analysed countries is limited. On the one hand, this stems from the specificity of these areas (Tab. 8), and on the other

548

Anna Sacio – Szymańska hand, it can be the effect of the application of a improper strategy for the determination of priority research directions. Table 7: The degree of interdependence between key national R&D priorities, high‐tech sectors and industry sectors of highest expenditures on innovation by country Country

SUI

SWE

USA

High Inn High High Inno Inno High R&D priorities Tec o Tec Tech Inv Inv Tech h Inv h Nanosciences &        nanotechnolo gies 







Environment







Energy





Health Biotechnologi es

Aerospace

Transport











Materials



Security



CHIN

RUS

IND

POL





































































 







innovation Inn High Inn High Inn High Inn High High Inn High Inn High Inn Inno o Tec o Tec o Tec o Tec Tec o Tec o Tec o Inv Inv h Inv h Inv h Inv h h Inv h Inv h Inv



Manufacturin



Services

FRA

Correlation of national R&D priorities, high‐tech industries and sectors of highest expenditure on

ICT

GER





























Legend to table 7 + ‐ +

National R&D priority, which is either on the list of a country’s high‐tech industries, or it is a sector of the highest expenditure on innovation National R&D priority, but it is neither on the list of a country’s high‐tech industries, nor it is a sector of the highest expenditure on innovation Not a national R&D priority Not a national R&D priority, but it is on the list of a country’s high‐tech industries and (or) it is a sector of the highest expenditure on innovation

Source: Author based on: INNO‐Policy... 2009; ERAWATCH Annual... 2010, Innovation Union... 2011 For R&D priorities to be triggers for innovation and economic growth, it is highly important to design the process of their determination according to the context (economic, environmental, cultural, social etc.) in order to exploit the best potential of a country, region, or organisation. Foray, David, Hall (2011) provide an important voice on the means and meaning of R&D priority setting as follows: Discovering the right domains is by no means trivial and technology foresight exercises ordered by administrations tend to produce the same ranking of priorities, without any consideration of specific conditions of the “client” for whom the exercise is carried out. Too many … have selected the same technology mix – a little bit of ICT, a little bit of nano and a little bit of bio – showing a lack of imagination, creativity and strategic vision. … The authors claim that an appropriate process of priority setting should not necessarily identify the hottest domains but rather the domains where new R&D and innovation projects will complement the country’s other

549

Anna Sacio – Szymańska productive assets to create a future comparative advantage. And they add that “The main issue to be addressed by policy is not “what to do” but “how to help companies to discover what to do and how to implement the policy according to what has been discovered (stimulating entrepreneurship).” (Foray, David, Hall 2011). Table 8: Some factors that influence the limited contribution of selected research areas to the creation of market innovation

Source: Author Taking the above stated into consideration, it seems appropriate to describe the final factor that influences competitiveness and innovativeness of nations, namely, the level of entrepreneurship, which has been researched in the framework of the Global Entrepreneurship Monitor (GEM) project (Bosma, Wennekers, Amoros 2011). When comparing the level of entrepreneurship across nations, GEM, similarly to GCI, classifies countries into three groups by phases of economic development (Xavier et al 2012). In each of the three phases of economic development, the role of the country in supporting entrepreneurship and economic growth is different. In the case of factor‐oriented economies (India), the most significant is to develop institutions, infrastructure, macroeconomic stability, health, and primary education. In efficiency‐driven economies (China, Russia, Poland), the focus of governments should be on getting labour and capital markets working more efficiently, attracting foreign direct investments, and educating the workforce to successfully adopt technologies. In innovation‐driven economies (USA, Switzerland, Sweden, the United Kingdom, Germany, France, the Czech Republic), the key role of the country is to provide and commercialise knowledge (Zbierowski et al 2012). The paper analyses Total early‐stage Entrepreneurial Activity (TEA), which presents the percentage of working age population involved in establishing business activities or running a new enterprise (Fig. 1.). There are significant differences between countries worldwide in the level of early‐stage entrepreneurship. The lowest level of early‐stage entrepreneurship among countries analysed in the paper can be found in Russia (the second to last in TEA worldwide ranking). As few as 4.6% of people aged 18‐64 are involved in the establishment of business activity or the operation of young enterprises. The highest level of entrepreneurship was recorded in China (the second in TEA worldwide ranking), where 24% of the working age population establish or operate early‐stage businesses. The unweighted mean for all countries is 11.39%, and the median is 9%. The average for the factor‐driven economies is 16.14%. The average for the efficiency‐driven economies is 14.09%, and the average for the innovation‐driven countries is 6.92%. This reveals a particular correlation in the association between GDP per capita and the level and nature of entrepreneurial activity in an economy. In countries with low GDP per capita, TEA rates tend to be high. As per capita income increases, larger established firms play an increasingly important role in the economy. This provides an option for stable employment for a growing number of people, serving as a viable alternative to starting a business (Xavier et al 2012). Research on the extent to which entrepreneurship is a determinant of economic growth was done by van Stel, Carree, Thurik (2005) and others. Other researchers (Anokhin, Wincent 2012) analysed the relations between

550

Anna Sacio – Szymańska the level of entrepreneurship and a country’s innovation position. Since the role of entrepreneurship for economic and innovation growth is considered positive, the extent to which it will boost innovation highly depends on the presence of the adequate framework conditions (e.g. high investment in R&D and education), which will make it possible for entrepreneurs to exploit technological advances created by research.

Source: own figure based on Bosma, Wennekers, Amoros 2011. Figure 1: TEA index in 2011 by country (%) Note: India was not covered in 2011 GEM research (the most recent data is for 2001).

5. Summary and recommendations The undertaken analyses made it possible to characterise selected economies in terms of their innovative and competitive achievements. In particular, the analyses revealed large disparities between highly innovative and competitive economies (e.g. Switzerland, Sweden, United States) and the still developing (in terms of innovation standing) countries (e.g. China, Russia, India, Czech Republic, Poland). Even though the aforementioned group outperforms the leaders of world rankings in terms of the dynamics of economic growth, there are areas that remain a challenge for policy makers and other actors involved in managing innovation processes in these countries. This refers to the following examples:

Allocating significantly more funds in the R&D sector (Russia, India, Poland, Czech Republic),

Increasing the contribution of the private sector in the operation and funding of research and innovation activities (Russia, India, Poland),

Strengthening internationalisation of business (Russia, India, Poland) and science (China, Russia, India, Poland, Czech Republic),

Strengthening economic and social freedom (China, Russia, India),

Strengthening educational system (China, India) and

Reforming the legal system and counteracting bureaucracy and corruption (China, Russia, India).

Taking the above into consideration, it seems appropriate to point out key challenges that need to be addressed while building (or sustaining) innovation potential of the economy. These are as follows: Challenges with regard to the level and the source of expenditure on R&D:

Ensuring the relatively high level expenditure on R&D, and

Ensuring the adequate structure of R&D financing where business contribution prevails over public financial engagement.

551

Anna Sacio – Szymańska Challenges with regard to the degree of interdependence between key national R&D priorities, industry sectors of highest expenditures on innovation, and high‐tech sectors:

Directing public funds to R&D priorities, which best exploit the capabilities of a country or a region (smart specialisation);

Finding a balance between the need to determine key national (regional) R&D priorities and the need to encourage the bottom‐up approach in formulating the scope of innovation research projects;

Designing foresight projects in line with the strengths and weaknesses of beneficiaries;

Setting mechanisms and measures that would facilitate the Implementation of the results of foresight projects in the economy; and,

Invigorating the cooperation of science and industry in R&D.

Challenges with regard to the level of total entrepreneurial activity:

Creating conditions conductive to starting and operating a business,

Developing a strong entrepreneurial workforce,

Fostering an environment in which high‐tech companies can access the kinds of capital (human capital included) they need, and

Securing the effectiveness of economic, financial, or legal systems at the national level.

Challenges with regard to general innovation policy

Aligning the long‐term policies with the changing economic conditions (introducing changes to existing public measures supporting innovation and entrepreneurship); and,

Ensuring correlation between regional and national innovation, industrial, entrepreneurial and educational policies.

6. Conclusions and further research It should be underlined that it is very difficult to analyse the individual contribution of each of the analysed factors to innovation and competitiveness, as they are closely interlinked and dependent upon each other. For example (tab. 9), from the analyses presented in the paper, it is understood that in order maintain or improve its competitive position, a country needs to invest in R&D (factor 1a), but as the bulk of innovation originates from business, then the share of private sector’s expenditure on R&D should outperform the public sector contribution (factor 1b), this is where the increasing number of high‐growth entrepreneurial ventures becomes crucial (factor 3). Furthermore, as shown in the recent economic crisis that have left many countries with very few opportunities for economic recovery, and taking into account the capacity asymmetries between countries, the strategy of smart specialisation has become crucial (Foray et al 2011). The strategy implies that a country or a region should specialise in R&D and innovation related to those sectors, which complement the country’s other productive assets to create future comparative advantage (factor 2). Table 9: Selected links between the factors considered and the innovation and competitiveness

Source: Author

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Anna Sacio – Szymańska Equally, if not more challenging, is the effort to illustrate the link between the analysed factors and the innovation and competitiveness of each analysed country, as their impact varies across countries in function of their current stages of economic development. Therefore, in the light of the above, instead of direct answers, research questions could be formulated to promote further scientific discussion and research. And these include the following:

Is a country of low level of expenditure on R&D still able to innovate?

Does innovation appear in countries, where business expenditure on R&D is limited?

Is the innovation‐oriented smart specialisation policy able to bridge the “top‐down” (governmental decisions) versus “bottom‐up” (entrepreneurial decisions) dichotomy?

Acknowledgements Scientific work executed within the Strategic Programme “Innovative Systems of Technical Support for Sustainable Development of Economy, 2010‐2014” within “Innovative Economy Operational Programme”.

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Experiential Entrepreneurship Education in Canada – new Venture Creation While Earning a Masters Degree Tarek Sadek1 and Rafik Loutfy2 Xerox Centre for Engineering Entrepreneurship & Innovation, McMaster University, Hamilton, Canada tarekss@mcmaster.ca loutfyr@mcmaster.ca Abstract: In the last 20 years, there has been a shift from studying entrepreneurship as a phenomenon to learning the skills needed to become an entrepreneur. More recently, there has been a shift towards teaching the skills in the context of starting an actual real business. This paper describes the results of an experiment that implemented an industry‐proven technology‐based new‐venture‐creation methodology into the academic environment in a Canadian university. It also describes the pedagogical design of the masters program that leveraged this methodology. First of its kind in Canada, The Xerox Centre for Engineering Entrepreneurship and Innovation (XCEEi) at McMaster University offers a masters program to students who want to pursue entrepreneurship as a career option. Students practice starting up their own businesses while they pursue their Masters degree. XCEEi students participate in commercializing technologies in real life situations. McMaster masters program is compared with the two‐year masters program offered by the Entrepreneurship school at Chalmers University of Technology, which is considered one of the most successful new‐venture‐creation Masters programs in the Sweden. It is believed that top four factors, influencing the success of such programs, are: Access to seed funding, involvement of seasoned entrepreneurs in program delivery, integration with an existing university commercialization ecosystem, and finally financial sustainability of the programs. Based on interviews and surveys, the paper concludes that the first two factors are the most influential in determining the quality of experiential education and the students’ learning experience. However, the commercial success of the students’ ventures depends on the quality of the ideas and students, access to follow‐on investment, and finally integration with the university commercialization ecosystem. Venture creation masters programs could be key tools in realizing economic value from universities research. Students should be perceived as crucial filters of ideas and human feeders for the different governmental and regional innovation centers. Keywords: new venture creation, experiential learning, entrepreneurship education, commercialization of research

1. Introduction The Xerox Centre for Engineering Entrepreneurship and Innovation (XCEEi) was founded in 2005, to respond to the increasing demand of students who want to pursue entrepreneurship as a career option. Students, participating in XCEEi, start up their businesses while they are pursuing their Masters degree. In the Master's of Engineering Entrepreneurship & Innovation (MEEI) program, students participate in commercializing technologies in real life situations. One of the most successful examples of entrepreneurship experiential learning is the masters program, offered by the Entrepreneurship School (E‐School), in Chalmers (Chalmers University of Technology is referred to as Chalmers in this paper). The success of the program in spinning out start‐ups is a clear manifestation of the potential of involving students in commercializing university research (E. Berggren, 2011; S. Olllila, 2011; M. Jacob et al, 2003). The core of the masters program is to give the students the mission of creating university spin‐offs using technologies developed at Chalmers laboratories (More recently inventions from outside the university have been included). This paper presents a case study and a comparative analysis of MEEI program. We begin with a review of the literature about the status and trends of entrepreneurship education in the world. We then discuss the design, operation and results of the MEEI program and compare it with the E‐School master program; both programs are based on the same experiential model, which is the integration of actual venture creation into the academic requirements. Finally, we discuss the key differences between offering entrepreneurial education programs within the Canadian and the Swedish education systems.

2. Literature review In the last 20 years, there has been a shift from studying entrepreneurship as a phenomenon to learning the skills needed to become an entrepreneur. It was found that graduates who had acquired an entrepreneurship

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Tarek Sadek and Rafik Loutfy education are more likely to start new businesses and go through the entrepreneurial processes repeatedly in their careers (Rasmussen & Soorheim, 2006). In Canada, a research study showed a significantly higher venturing rate among engineering students who took ONE course in entrepreneurship (48%) compared to students who did not take any (26%) (Menzis & Paradi, 2003). More interesting is the finding that students who took one course and did not start a business were significantly more likely to become CEOs of companies. More recently, there has been a significant shift towards teaching the skills in the context of starting an actual real business, i.e. experiential learning. Laukkanen (2000) called this model for teaching entrepreneurship the “Business Generation Model”. Its aim is to foster the necessary conditions for starting new ventures by students. This trend ranges from involving the students in working on real business cases, to involving the students in real start‐ups, and letting the students start their own companies (Fayolle & Gailly, 2012; Erikson & Gjellan, 2003). The way to measure the success of entrepreneurial education has also been subject of debate; should success be measured by the improvement in the entrepreneurial skills and capabilities of the students or by the performance of their new ventures, or both? In 2010, Industry Canada released a survey‐based report about the ways in which entrepreneurship education 1 is delivered within Canadian Higher Education Institutions . The report identifies 12 barriers, recognized by the universities, for entrepreneurship education. The top 4 barriers were:

Education depends on the effort of a single champion

No funding to support the activities needed to teach the required entrepreneurial skills.

No strategic integration with the university system.

Limited entrepreneurial experience among academic staff.

The focus of this paper is to compare the MEEI program and the E‐School Masters program in terms of these barriers.

3. Data collection methodology There have been many calls for more qualitative research in the field of entrepreneurship (Gartner and Birley 2002; Hindle 2004). We believe that such qualitative research may add new perspectives to the field of entrepreneurship education and may contribute to the advancement of the field. The data collected for this paper derive from qualitative research aimed at developing concepts/models that enhance our understanding of the entrepreneurial learning phenomenon, with emphasis on the experiences and views of involved stakeholders. A survey of 50 students’ perceptions of the MEEI program was carried out, by an independent third party, and is used in our analysis. In addition, face‐to‐face interviews were held with the different stakeholders of the Masters program including administrative leaders, faculty members, director, and McMaster university technology transfer officers. The interviews were semi‐structured. Each interview lasted between 60‐90 minutes. Information, about E‐School masters program, was collected from available online sources and the numerous papers that discussed the program (Jacob et al, 2003; Dahlstrand et al, 2003; Berggren, 2011; Olllila, 2011; Wallmark 1997).

4. McMaster Masters Program MEEI The MEEI program consists of three critical components:

The Engineering Enterprise Project: From their first day in the program, the students start working on their new venture ‘The Enterprise Project’. The students select their projects either from the opportunities scouted and mined by the XCEEi team or based on their own ideas.

Entrepreneurial & Innovation Skills Development Modules: Five compulsory enterprise modules focus on providing the student with the basic skills needed to select an idea with good potential, manage the innovation process, then create and manage the business outcome. The skills cover all the business life cycle from start to growth and sustainability. The modules develop an understanding of both the innovation and the entrepreneurial processes through lectures, workshops and hands‐on work.

http://www.ic.gc.ca/eic/site/061.nsf/eng/h_rd02541.html. Accessed 3rd July, 2013

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Tarek Sadek and Rafik Loutfy

Advanced Engineering Studies: The candidate is required to complete two graduate level engineering courses. The objective is to let the students acquire engineering skills and apply them to the enterprise project.

The MEEI program uses a 20‐month phase & gate commercialization. This process links the three critical components mentioned earlier. As shown in Figure 1, there are four primary phases in the new business creation process used by the MEEI program: Opportunity Scan, Technology & Market Development, Business Development, and the Start‐Up & Entry to Market Stage.

Figure 1: MEEI Tollgate Process The essence of this commercialization process is setting deliverables for each phase, and testing them at the three tollgates shown in the Figure. These deliverables describe what the student needs to know, master, and produce at each tollgate. At each of the three tollgates, the advisory committee evaluates the quality of the student’s analysis and his/her ability to achieve the deliverables for the phase. The Advisory Committee assesses whether or not the information describing the business case has been thoroughly researched, and whether or not the tools taught have been satisfactorily executed. The Advisory Committee consists of the student's business and technical mentors, an academic advisor who is assigned to the student at the beginning 2 of the program, and finally the business development manager . As the MEEI student moves his/her venture through the process, assumptions are tested for validity so that the information for each set of deliverables is refined and enhanced. Phase 1 (Opportunity Scan) establishes the value creation potential for the product or service under consideration. The student addresses the issue of the knowledge basis of the product, its value proposition and the market that he/she might enter. The student considers the demand issue: why the new product is in demand, what is its competition, how demand can be gauged objectively, and what price will the market bear and why. Then, the student addresses the intellectual property (IP) issues such as: IP uniqueness and IP protection. Finally, the student describes the technology development plan with a focus on the critical technological advances that need to be demonstrated to prove the core concept. At the end of the first phase, the student goes through he Concept Initiation Tollgate (Tollgate #1). Phase II (Technology & Market Development) is the formal commencement of both the R&D and market development phases. The budding entrepreneurs have to validate the assumptions they made at the first tollgate. On the market development side, it is expected that thorough primary market research will be carried out to explore different willing‐to‐pay customer groups, determine what the market size is, and who the main competitors are. From the technical perspective, the student is expected to prove that the core technology 2

The BDM helps all the teams in the program in their daily business activities

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Tarek Sadek and Rafik Loutfy works and that there is no further invention required. Moreover, using the voice of customer, customer requirements are mapped into technical specifications for the product/service. When the market development and the technical proof‐of‐concept (POC) activities are accomplished, a financial projection is developed. At the end of this phase the student goes through the Business Initiation Tollgate (Tollgate #2). Phase III (Business Development): The knowledge accumulated in the second phase provides the context for an analysis of potential business models and a selection of a business start‐up strategy. The remaining project assumptions are tested to formulate the tactical go‐to‐market approach. This enterprise investigation culminates in proposing a business strategy for the venture, specifying the path for the venture implementation and examining funding implications. The strategic decision process should lead to the development of a fully articulated business plan, the masters’ thesis. The expectation is that the business is ready for the fourth phase (Business Start‐Up), or the venture is terminated (Outside the program scope). At the conclusion of this phase, the student goes through the Business Startup Tollgate.

5. Program eesults Since its inception in 2005 till June 2013, the program graduated 100 students, and resulted in 32 start‐up companies and 14 patent applications. Table 1: MEEI program results Number of Graduates

100

HQP Retained in Ontario

Businesses & Services Created

Jobs Created in Ontario

Patents Applied

Patents Granted

XCEEi actively campaigns to raise capital for the MEEI students’ proof‐of‐concept activities. The introduction of the MEEI program was embraced by the federal and provincial government agencies and was successful in receiving in excess of $3.26 million in ‘seed’ funding to support the academic projects/business of the students. Students’ companies raised close to $30M in capital. XCEEi generated more than $4.5M in revenue from student’s fees over 8 years period.

6. The Chalmers University Masters of Entrepreneurship program The essence of the Masters program offered, by the E‐school at Chalmers, is to pair high‐quality students with inventions from Chalmers’ laboratories to create spin‐offs. Initially, the E‐school was designed to combine formal coursework with assigning students the task of creating real companies in a one‐year program; it was converted into a two‐year international master program in 2007. At Chalmers, students select projects and inventors select students. A contract is signed where the owner of the IP is left with one third ownership rights, students obtain one third conditional on continuing the project after graduation, and Chalmers obtains the remaining third. Each project has a seed fund of around $15,300 in cash (for patenting, legal and other costs), which is raised by the university from public sources. The inventor agrees in writing to provide support to the students’ commercialization efforts (T. Astebro et al.). The business ideas are scouted and recruited by Encubator. Encubator (Education + Incubator) is a Chalmers subsidiary. The main rationales behind Encubator were to professionalize the venture creation process linked to Chalmers E‐ School and attract more financial support and investments, while also improving the entrepreneurial learning. In 2005, the structure of Encubator changed from annual investment funds to a holding company and an incubation company in attempt to reach a balance between public grants and investment money. Encubator facilitates and supports business development by providing infrastructure, network, seed financing, and business advice. The E‐school produced two start‐ups in its first year of operations, which increased to six in 2007. These companies together had raised more than US$ 10 million, and created 136 new jobs (Jacob et al., 2003). The 2007 annual report from the E‐school claimed an accumulation of 32 started firms with 26 still operating and employing 220 (Chalmers School of Entrepreneurship, 2007). In 2012, when the program

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Tarek Sadek and Rafik Loutfy celebrated its 15th anniversary, 350 students had been trained, spinning off 51 companies. 42 companies are still running, raising more than 350 MSEK (around $53.5 millions) with 340 full‐time employees 3 .

7. Chalmers Masters of Entrepreneurship vs. McMaster MEEI program The focus of the comparison is on the key challenges facing entrepreneurship education as identified earlier. The basis of comparison will be:

Access to seed funding and follow‐on investment

Access and involvement of seasoned practitioners

Strategic integration with the university

Financial sustainability of the Masters program

8. Access to seed‐funding and follow‐on investment Both programs have managed to secure seed funding to support their students' venture creation. The key difference is that in the case of E‐School, the project is allocated the seed funding once the student/team starts working on the project. In the case of XCEEi, XCEEi manages the seed funding. Students have to apply for the seed funding after passing their first tollgate. The process of accessing seed funding is competitive; there is no guarantee that the student will obtain any funds. However, the MEEI program lacks an access to follow‐on investment, whereas E‐school has managed to secure an investment fund through Chalmersinvest. MEEI graduates go and seek investments through the connections they built through the entrepreneurship center and through other governmental funds such as the Market Readiness Program administered and offered by the Ontario Centre of Excellence OCE. In the last two years, XCEEi has managed to secure additional seed‐funding and incubation space for their graduates.

9. Access and involvement of entrepreneurial mentors/faculty Both programs clearly recognize the importance of involving seasoned entrepreneurs and experienced management in their offerings. In XCEEi, each student/team is assigned a business mentor and enterprise advisor as part of their advisory board. The business mentor is either in an executive position in a relevant existing company, an entrepreneur or a recognized market expert. The mentors are not compensated for their time and are usually alumni of McMaster University. As for the enterprise advisor, he/she is an XCEEi full‐time faculty member. All XCEEi faculty members have either significant new‐product‐development industrial or entrepreneurial experience. On the other hand, at Chalmers, the Encubator team provides the business and management support needed. Team Encubator shares office space with the faculty of the E‐School. Team Encubator consists of eight paid employees. All team members have considerable industrial/entrepreneurial experience. The team comprises experts in marketing, IP issues, sales, business strategists,.etc. There is a clear separation between theory and application. In the first year, the students acquire the needed tools through 4 the courses offered by the E‐School. In the second year, the students embark on starting their new ventures .

10. Strategic integration with the university There is evidence that both the E‐School and XCEEi have tried to integrate their programs with the overall university strategy. At McMaster University, in case the student decides to work on university‐owned IP, an IP policy was established to guide the relationship between the university (the owner of the IP), the inventor and the student. There is no mandate to formalize the relationship before the student starts working on the project. In the case of Chalmers University, a contract is signed between the three stakeholders (in this case, the university is an investor not the owner of the IP). It governs the relationships during the program and after the student’s graduation.

11. Financial sustainability of the Masters program Both McMaster and Chalmers are considered two of the top universities in their respective countries as well as worldwide. Swedish students do NOT have to pay tuition to attend the Masters program at Chalmers University, as the government covers the costs of the program. In Canada, students have to pay for both their 3

http://www.encubator.com/about/venture‐creation/. Accessed 3rd July, 2013 New venture creation is one track among four tracks offered after the first year. One of the other tracks focuses only on bioscience venture track creation.

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Tarek Sadek and Rafik Loutfy undergraduate and graduate studies. McMaster considers MEEI a professional degree. MEEI tuition is the highest among all Engineering programs, which provides for financial sustainability for XCEEi as a stand‐alone cost center.

12. Discussion and analysis In the previous section, a comparison between the entrepreneurship programs at Chalmers and McMaster Universities was carried out. The anchor of both programs is their dual focus on developing students' entrepreneurial skills and starting new ventures. In this section, the ways in which the previously identified factors impacted the commercialization success of the students’ ventures and the quality of education will be discussed.

13. Commercialization success of students’ ventures One of the most important factors in the success of this breed of programs is access to follow‐on investment. Even though Chalmers University is considered one of the top performing universities financially in Sweden, the university recognized that it could not rely solely on its revenues to support such programs. In their paper, Jacob et al. listed the entities that cover both the operational costs of the programs as well as the costs of the students’ commercialization activities. Chalmersinvest, a wholly Chalmers‐owned seed venture, provides funding for the early stage. Then, Innovationkapital, a venture capital company, partially owned by Chalmers, helps in funding the later stages of commercialization. The entrepreneurship program is treated as part of the university commercialization ecosystem not only as a revenue‐generating program. However, in the case of MEEI program, there are no secured funds to support students’ commercialization activities. The program depends on the availability of governmental funds programs focused on students’ professional training. Initially the MEEI program depended on the Talent Program delivered by Ontario Centre of Excellence OCE. After this program was terminated in 2009, the MEEI did not have any source of funds to support students’ commercialization activities. Luckily, in 2011, the Ontario government started a new two‐ years program called the Experiential Learning Program to replace the Talent Program. Currently, the only source of Governmental funds is the Scientists and Engineers program offered by the Federal Economic Development Agency for Southern Ontario (FedDev). However, this program requires securing matching funds for every dollar spent. XCEEi also has access to an endowment by one of McMaster alumni. However, the endowment is not under the discretion of the center. Another important factor is access to the university's high quality, high potential ideas/technologies. According to the Times Higher Education rankings of 56 2012/2013 McMaster ranks 88th while Chalmers University falls between 226th and 250th. The two universities score very close in research (McMaster scores 47.9 and Chalmers scores 41.5). However, in spite of having an IP agreement that governs the relationship between the university (as the owner of the IP) and the students, few McMaster students pursued that option. Several factors may account for this situation:

In Chalmers University, between 2009‐2012, only 37% of the Masters students admitted in the program were coming from outside the university. Clearly, there is an already established relationship between Chalmers faculty members and the students. Meanwhile, in the same period, at McMaster University, less than 5 % of the students are actually graduates of the university. Moreover, around 40% of the students are international students, funded by their governments, and required to go back home when they have completed their studies. According to the interviews conducted, McMaster faculty members stated that they feel more comfortable formalizing a relationship with their former graduate students. They are in a good position to estimate both the business and technical potential of the students. Under these conditions, it is very hard to effectively build a relationship or an agreement between the faculty members and the students during the program.

Contrary to McMaster, which has a university‐own policy, Chalmers adopts inventor‐own policy when it comes to IP. The E‐school requires all its students to sign contracts that govern the relationship with the inventors from the beginning. In the case of McMaster, which actually owns the IP, putting into effect formal agreements has not been an easy task. The students have to negotiate, case by case, a license agreement with both the inventors and the technology transfer officers of the university. The student has

http://www.timeshighereducation.co.uk/world‐university‐rankings/2012‐13/world‐ranking/institution/mcmaster‐university. Accessed 3rd July, 2013 6 http://www.timeshighereducation.co.uk/world‐university‐rankings/2012‐13/world‐ranking/institution/mcmaster‐university. Accessed 3rd July, 2013

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Tarek Sadek and Rafik Loutfy to convince the inventor and the technology transfer officers of his/her technical and entrepreneurial capabilities

In McMaster University, there is a strong focus on fundamental research rather than applied research. Even though McMaster has only 900 scholars (including faculty from the non‐technical departments), compared to Chalmers which has 1600 scientific and technological academics, McMaster's citations score is 81.7 compared to Chalmers' 47.7. Until 2009/2010, there was a joint tenure and promotion committee for both engineering and science faculties. The whole incentive systems for faculty members (research funds from the Federal Government and incentives at the university level) are based on the number of published peer‐reviewed papers and research grants raised from the industry to carry out fundamental research. These factors have affected the number of technologies ready to be commercialized and the entrepreneurial inclination of the faculty members themselves.

One of the key factors is the ability to attract talented students to work on high potential ideas. At Chalmers University, students do not have to pay university tuition, there is no financial burden associated with entering the program. On its part, E‐School does not need to increase enrollment to support its operating expenses. The number of students is capped to around 20 to guarantee the quality of both the students and the business ideas. In Canada, students have to pay for both their undergraduate and graduate studies. Even though there are usually scholarships available for students pursuing traditional research‐based Masters degrees, such support is almost non‐existent for the MEEI program. The Centre itself cannot offer scholarships unless the operating budget allows it (which draws from the tuition fee income). In addition, the university treats XCEEi as a cost recovery unit. The Centre has to cover all its salaries, marketing and operating costs from students’ tuition.

14. Quality of education/training In August 2011, XCEEI engaged a private company to conduct a comprehensive research survey to measure the effectiveness of the Centre’s programs in relation to its founding objectives. Fifty XCEEI graduates responded to the written survey (out of a total pool of 52). Twenty graduates made themselves available for 15‐20 minute telephone interviews. Summary of findings:

The experiential and hands‐on approach of the course was highly valued by all and was the big draw to the program.

90% of graduates would recommend the program to those interested in pursuing a business career.

Many felt that the XCEEI experience gave them a business advantage ahead of their peers (37%).

Most agreed that Mentorship was a key to success.

The survey also assessed graduates’ perceptions of the change in their abilities/skill level in essential program learning outcomes and how critical was this change in their preparedness for full‐time engagement in the business world. As an example, the change in the graduates’ ability to identify and assess business before and after the program is shown below as well as how essential this change was to their careers:

Figure 2: Students feedback about their abilities to identify business opportunities before and after the program

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Tarek Sadek and Rafik Loutfy As an example of the impact of the program, soft skills development and its importance to the graduates’ career, as reported in their answers, are shown below:

Figure 3: Students feedback about their interactive abilities before and after the program In the case of Chalmers, the Swedish National agency for higher education ranked Chalmers E‐School the best entrepreneurship education program in Sweden. We do not have access to the same detailed data from E‐ School's students’ perspective. However, the fact that approximately 80 percent of the businesses remain in the region, providing research contracts to the university, and the rate at which alumni return as guest speakers (T. Astebro et al., 2012) allow us to assume that the quality of the program is well perceived by the students. Also, the impressive survival rate of 82% of the start‐ups is a proof of the quality of the education offered.

15. Conclusion This case study of MEEI new‐venture creation masters program confirms that, regardless of the commercialization success of the ventures, students develop the set of skills required to start their own businesses and/or act as a growth catalyst in new or existing companies. However, the study confirms that achieving commercialization success cannot happen without the support and integration with the whole university system. The ability to attract governmental and private funds depends on the university commercialization ecosystem. Chalmers founded its own venture capital company Innovationskapital in 1994, its seed venture capital company in 1998, the Chalmers School of Entrepreneurship in 1997, an incubator in 1999, before starting the two‐years masters program in 2007. Venture creation masters programs could be key tools in realizing economic value from universities research. Students should be perceived as crucial filters of ideas and human feeders for the different governmental and regional innovation centers. In Canada, the Ontario Government realized the importance of such new venture‐ creation programs. Because of its notable success over the previous two years, in May 2013, the Ontario Government approved around $ 25 million to renew the OCE‐ELP program. The main objective is to help refine and polish the entrepreneurial skills of students, by supporting their early stage commercialization activities. In terms of their educational potential, they blur the line between formal and non‐formal learning environments, adding new sets of skills to their graduates, thus meeting the ever‐increasing demands of the labor market. Finally, one of the key factors in attracting entrepreneurially talented students, lies in alleviating the financial burden of joining the program. Canadian Universities should find their own balance of private and governmental funding to support the operational expenses of such programs, instead of depending on tuition funds.

References Åstebro, T., Bazzazian, N. And Braguinsky, S., 2012. Startups By Recent University Graduates And Their Faculty: Implications For University Entrepreneurship Policy. Research Policy, 41(4), Pp. 663‐677. Berggren, E., 2011. The Entrepreneurial University's Influence On Commercialisation Of Academic Research – The Illustrative Case Of Chalmers University Of Technology. Int.J.Of Entrepreneurship And Small Business, 12(4), Pp. 429; 429‐444; 444.

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Tarek Sadek and Rafik Loutfy Berggren, E. And Dahlstrand, A.L., 2009. Creating An Entrepreneurial Region: Two Waves Of Academic Spin‐Offs From Halmstad University. European Planning Studies, 17(8), Pp. 1171‐1189. Dahlstrand, Asa L. And Jacobsson, Staffan. Universities And Technology‐Based Entrepreneurship In The Gothenburg 2003. Local Economy,2003 18, 1, 89‐90 Erikson, T. And Gjellan, A., 2003. Training Programmes As Incubators. Journal Of European Industrial Training, 27(1), Pp. 36‐ 40. Fayolle, A. And Gailly, B., 2008. From Craft To Science. Journal Of European Industrial Training, 32(7), Pp. 569‐593. Gartner, W.B. And Birley, S., 2002. Introduction To The Special Issue On Qualitative Methods In Entrepreneurship Research. Journal Of Business Venturing, 17(5), Pp. 387‐395. Hindle, K., 2004. Choosing Qualitative Methods For Entrepreneurial Cognition Research: A Canonical Development Approach. Entrepreneurship Theory And Practice, 28(6), Pp. 575‐607. Jacob, M., Lundqvist, M. And Hellsmark, H., 2003. Entrepreneurial Transformations In The Swedish University System: The Case Of Chalmers University Of Technology. Research Policy, 32(9), Pp. 1555‐1568. Laukkanen, M., 2000. Exploring Alternative Approaches In High‐Level Entrepreneurship Education: Creating Micromechanisms For Endogenous Regional Growth. Entrepreneurship & Regional Development, 12(1), Pp. 25‐47. Menzies, T.V. And Paradi, J.C., 2003. Entrepreneurship Education And Engineering Students ‐ Career Path And Business Performance. International Journal Of Entrepreneurship & Innovation, 4(2), Pp. 121. Ollila, S., 2011. The Venture Creation Approach: Integrating Entrepreneurial Education And Incubation At The University. Int.J.Of Entrepreneurship And Innovation Management, 13(2), Pp. 161; 161‐178; 178. Rasmussen, E.A. And Sørheim, R., 2006. Action‐Based Entrepreneurship Education. Technovation, 26(2), Pp. 185‐194. Wallmark, J.T., 1997. Inventions And Patents At Universities: The Case Of Chalmers University Of Technology. Technovation, 17(3), Pp. 127‐164.

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Knowledge Sharing, Innovation Networks, and Innovation Capability: The Case of Uruguayan Software Firms Josune Sáenz1 and Andrea Pérez‐Bouvier2 1 Deusto Business School, University of Deusto, San Sebastián, Spain 2 Universidad Católica del Uruguay, Montevideo, Uruguay josune.saenz@deusto.es acperezbouvier@gmail.com Abstract: Knowledge sharing both within the firm and with external agents is considered a key ingredient for innovation to happen. In this paper, the focus will be on knowledge sharing with external agents. In particular, we argue that nurturing interaction with external agents (by means of participation in different events that allow face‐to‐face interaction, or through collaborative technology) positively affects the innovation capability of firms by allowing the development of innovation networks and making them run smoothly. In other words, we suggest that innovation networks (both their existence and operational performance) partially mediate the relationship between interaction with external agents and innovation capability (i.e. new idea generation, effective organization of innovation projects, and efficient use of resources). For this to be tested, an analysis has been carried out in Uruguayan software firms. A questionnaire was designed and addressed to the managers of the firms making up the target population (those companies belonging to the Uruguayan Chamber of Information Technologies). 105 firms out of 319 answered the questionnaire, which means a response rate of 33%. Structural equation modeling (SEM) based on partial least squares (PLS) was then applied in order to test the hypotheses drawn from the research. The results obtained show that nurturing interaction with external agents has a positive and significant influence both on the formation of innovation networks and on their operational performance. This influence is much stronger when it comes to ensuring the smooth operation of the network than when it comes to facilitating its formation. Moreover, innovation networks and their operational performance clearly mediate the relationship between interaction with external agents and innovation capability. Total mediation exists in the case of the generation of new ideas and efficient project management (i.e. fitting to costs and deadlines), whereas partial mediation applies in the case of effective organization of innovation projects (i.e. resource allocation, coordination, and knowledge leverage). Actually, additional analyses suggest that organizing innovation projects effectively fully mediates the relationship between interaction and network‐related constructs on the one hand, and the efficient use of resources (i.e. fitting to costs and deadlines) on the other hand. Keywords: knowledge sharing; interaction; innovation networks; innovation capability; software companies; Uruguay

1. Introduction and research purpose Increasingly, knowledge flows between firms are becoming crucial for many innovations (Simard and West, 2006; Bessant and Tidd, 2007). The increasing costs and complexity of R&D, the shortening of technology life cycles, the presence of increasingly knowledgeable suppliers and clients, the growth of venture capital, and the growing dissemination of cutting‐edge knowledge in universities and research laboratories call inevitably for inter‐organizational cooperation and the development of innovation networks (Vanhaberveke, 2006). Thus, there is a growing recognition of the importance of collaborative networks for innovation (Allen, 1977; Freeman, 1991; Burt, 1992; Hargadon and Sutton, 1997; Ahuja and Lampert, 2001; Schilling, 2011). This is especially important in high technology sectors (as is the case with the software industry), where it is unlikely that a single individual or organization will possess all of the resources and capabilities necessary to develop and implement a significant innovation (Hagedoorn, 2002; Schilling, 2011). As Henry Chesbrough (2006) points out, even the most capable and sophisticated R&D organizations need to be well connected to external sources of knowledge. Innovation networks involve partners sharing their respective knowledge resources, resulting in innovation and joint product development (Parise and Prusak, 2006). For knowledge to be shared, nurturing interaction with external agents is a key aspect. First of all, frequency of interaction can influence a firm’s willingness to exchange knowledge. When firms interact frequently, they develop greater knowledge of each other that could help them to build trust (Parise and Prusak, 2006; Schilling, 2011). Trust enables partners to collaborate, share critical knowledge, and debate without fear of opportunism or misappropriation (Parise and Prusak, 2006). Moreover, knowledge that is complex or tacit may require frequent and close interaction in order to be meaningfully exchanged (Bourdieu, 1986; Granovetter, 1992; Almeida and Kogut, 1999; Hansen, 1999; Schilling, 2011). Frequent interaction could help to develop common ways of understanding and articulating knowledge before partners are able to transfer it (Zander and Kogut, 1995; Szulanski, 1996; Schilling, 2011).

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Josune Sáenz and Andrea Pérez‐Bouvier Considering this, the aim of this paper is to analyze the influence of nurturing interaction with external agents on the formation of innovation networks and on their operational performance, as well as the influence of the latter two elements on the innovation capability of firms. The direct influence of interaction with external agents on innovation capability will also be tested, since it is believed that such interaction could have additional benefits for the innovation capability of companies. For instance, interacting with external agents (even though this interaction does not give rise to the establishment of cooperation agreements) could help to enhance the knowledge, skills, and experience of the company’s employees and, therefore, to increase the possibilities of innovating (Bessant and Tidd, 2007; Kaplan, 2007). In this paper, innovation will be conceptualized as a “dynamic capability”. This refers to the particular capacity business enterprises possess to shape, reshape, configure and reconfigure assets so as to respond to changing technologies and markets and escape the zero‐profit condition (i.e. a situation that occurs when there are no points of differentiation amongst firms with respect to technology, markets, information or skills, and which involves companies only making just enough to cover their cost of capital) (Teece and Augier, 2009). In particular, innovation allows the resource base of an organization to be shaped or reshaped by the addition of new knowledge embedded in new products, services, processes, technologies or business models. According to Teece (2007, 2009), this “dynamic capability” concept encompasses three first‐level (i.e. more simple) capacities. The first one is the capacity to sense and shape opportunities and threats. This can be related to the ideation stage of innovation processes (i.e. the generation of new ideas). The second one is the capacity to seize opportunities. This refers to the selection of the new ideas to be addressed and to their subsequent development and fulfillment (i.e. implementation of new ideas or innovation project management). Finally, the last first level capacity is the capacity to maintain competitiveness through enhancing, combining, protecting, and where necessary, reconfiguring the business enterprise’s tangible and intangible assets. This refers to the company’s capacity to reinvent/transform itself and not die because of unfavorable path dependencies generated by past success. In the case of this paper, the focus will be on the first two first‐level capacities – that is, on ideation and on innovation project management. As far as the latter is concerned, project management involves the process of leading and controlling a specific ongoing work program to ensure that it results in the creation of new or improved products or services (Jones, 2013). This requires allocating the right resources to each project; coordinating efforts between different organizational units, agents, and projects; and leveraging knowledge generated or acquired in the past (in other words, it involves organizing innovation projects effectively). It also requires launching products and services on time and within budget (i.e. efficient use of resources). As Jones (2013) points out, “In the race to produce advanced technological products, the issues of managing a project both to reduce the time it takes to bring a new product to market and to reduce the high costs of innovation are becoming increasingly important” (p. 396). Actually, organizing innovation projects effectively should facilitate fitting in with costs and deadlines, and launching products and services at the right time. Therefore, it could be expected that the benefits of interacting with external agents and those related to innovation networks would affect this second dimension of innovation project management mainly via the influence they exert on the first dimension (i.e. by means of their contribution to organizing innovation projects effectively). Consequently, this mediating effect will also be tested.

2. Conceptual framework and hypothesis development 2.1 Innovation, knowledge creation, knowledge sharing, and interaction According to Nonaka and Takeuchi (1995), “Knowledge creation fuels innovation” (p. 235). In other words, the process through which knowledge is created is the cornerstone of innovative activities. This process of knowledge creation involves both an epistemological and ontological dimension. From an epistemological perspective, knowledge creation involves the interaction between tacit and explicit knowledge. This interaction is called “knowledge conversion”. In the view of Nonaka and Takeuchi, tacit knowledge is the type of knowledge which is personal, context‐specific and, therefore, hard to formalize and communicate, whereas explicit or “codified” knowledge is the one that is transmittable in formal, systematic language. This tacit/explicit interaction is continuous and dynamic, and is shaped by shifts between the different modes of knowledge conversion (socialization, externalization, combination, and internalization),

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Josune Sáenz and Andrea Pérez‐Bouvier which gives rise to a “knowledge creation spiral”. More precisely, socialization involves the conversion of tacit knowledge into a tacit one. This can only be achieved by a process involving experience sharing. As a result of this, a set of shared mental models and technical skills will be obtained. In externalization, tacit knowledge is articulated into explicit concepts, using metaphors, analogies, hypotheses or models. This is triggered by dialogue or collective reflection. On the other hand, combination involves systemizing concepts into a knowledge system, which implies using different bodies of explicit knowledge. Documents, meetings, conversations or computerized communication networks could be used for this purpose. Lastly, internalization is closely related to the idea of “learning by doing”, and it means embodying explicit knowledge into a tacit one. “For explicit knowledge to become tacit, it helps if the knowledge is verbalized or diagrammed into documents, manuals or oral stories” (Nonaka and Takeuchi, 1995: 69). From an ontological perspective, knowledge creation involves a progressive move from knowledge created on an individual level, to knowledge amplified and crystallized on group, organizational, and inter‐organizational levels. Along these lines, knowledge creation involves a continuous process via which one overcomes the individual boundaries and constraints imposed by information and past learning by acquiring a new context, a new view of the world, and new knowledge. By interacting and sharing tacit and explicit knowledge with others, the individual enhances the capacity to define a situation or problem, and apply his or her knowledge so as to act and specifically solve the problem. In the case of organizational knowledge creation, this means making available and amplifying the knowledge created by individuals as well as crystallizing and connecting it with the organization’s knowledge system (Nonaka and Takeuchi 1995; Nonaka, et. al., 2006). Therefore, interacting and sharing ideas and experiences with other people is a key aspect to ensure that knowledge creation and subsequent innovation take place. This is even more relevant if we consider that innovation often involves a “recombinant search” (Fleming and Sorenson, 2001, 2004). As Fleming (2001) notes, inventions are fundamentally composed of combinations of prior existing components into new syntheses, or the recombining of existing combinations. In other words, a recombinant search involves combining specialized, differentiated, yet complementary knowledge (Tell, 2011). Such recombinations may result in completely new products and services, or in the application of existing products to new markets and uses (Fleming and Sorenson, 2004; Ahuja and Novelly, 2011). Interacting and sharing ideas and experiences may take place among individuals from the same organization or among individuals from different organizations. In this paper, the inter‐organizational perspective will be adopted. Thus, the following hypothesis has been formulated: H1: Nurturing interaction with external agents positively affects the innovation capability of firms and, more precisely:

The generation of new ideas.

The effective organization of innovation projects.

The efficient use of resources.

As we have argued in the Introduction section, this positive influence will partly take place through the beneficial effects of interaction on the formation of innovation networks and on their operational performance.

2.2 Interaction with external agents and innovation networks Firms often form alliances with different agents in order to cooperate on innovation projects. “Collaborators can pool resources such as knowledge and capital, and they can share the risk of a new product development project” (Schilling, 2011: 26). By providing access to a wider range of information and other resources than individual firms possess, inter‐organizational networks can enable firms to achieve much more than they could achieve individually (Liebeskind et al., 1996; Rosenkopf and Almeida, 2003; Schilling, 2011). In particular, collaboration can enable a firm to obtain necessary skills and resources more quickly than developing them in house, and reduce asset commitment and enhance flexibility, which may be of particular relevance in markets characterized by rapid technological change, as is the case with the software industry (Schilling, 2011). Along these lines, Simard and West (2006) argue that companies have to build ties that are both wide and deep. Deep ties (which strongly depend on trust between partners and require frequent interaction) enable a

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Josune Sáenz and Andrea Pérez‐Bouvier company to capitalize on its existing knowledge and resources (“exploitative innovation”), whereas wide ties (based on occasional rather than frequent interactions) enable a firm to find yet untapped technologies and markets (“exploratory search”). Of course, building ties is not enough. For innovation to succeed, ensuring the proper functioning of the network (i.e. operational performance) is also a necessary condition. Thus, seeing the potential benefits of collaborative networks for innovation, the following hypothesis has been formulated: H2: Innovation networks, both in terms of their (a) breadth and depth, and (b) operational performance have a positive influence on innovation capability, and more precisely on:

The generation of new ideas.

The effective organization of innovation projects.

The efficient use of resources.

As previously mentioned, and as recalled by Simard and West (2006), for innovation networks to emerge and function properly, nurturing interaction with external agents is a crucial issue. On the one hand, frequent interaction can influence a firm’s willingness to exchange knowledge by contributing to the generation of trust (Parise and Prusak, 2006; Schilling, 2011) and, on the other hand, it could develop common ways of understanding and articulating knowledge (Zander and Kogut, 1995; Szulanski, 1996; Schilling, 2011), something especially relevant when it comes to complex and tacit knowledge (Bourdieu, 1986; Granovetter, 1992; Almeida and Kogut, 1999; Hansen, 1999; Schilling, 2011). This interaction could take place both through face‐to‐face conversations and meetings (Wiig, 2004), and through collaborative technology (Cross et al., 2006). Nevertheless, knowing what someone else knows is a necessary precursor to seeking a specific person or agent out when we are faced with a problem or opportunity (Cross et al., 2006). In this respect, warning systems and mechanisms could be very helpful. Therefore, the following hypothesis has been formulated: H3: Nurturing interaction with external agents positively affects:

The generation of innovation networks.

Their operational performance.

This hypothesis together with hypothesis H1 means that innovation networks (both their breadth and depth, and their operational performance) mediate the relationship between the promotion of interaction with external agents and innovation capability. In particular, partial mediation applies, since it is believed that such interaction could have additional benefits for the innovation capability of companies beyond the promotion of collaborative networks. As Nonaka et al., (2006) point out, interaction (and, therefore, interaction with external agents as well) could help to enhance the knowledge, skills, and experience of the company’s employees and, therefore, to increase the possibilities of innovating (Bessant and Tidd, 2007; Kaplan, 2007). Finally, given that organizing innovation projects effectively (i.e. allocating the right resources to each project; coordinating efforts between different organizational units, agents, and projects; and leveraging knowledge generated or acquired in the past) should facilitate fitting in with costs and deadlines, and launching products and services at the right time, it is assumed that the benefits of interacting with external agents and those related to innovation networks would affect this second dimension of innovation project management mainly via the influence they exert on the first dimension (i.e. by means of their contribution to organizing innovation projects effectively). Consequently, the following hypothesis has been formulated: H4: Organizing innovation projects effectively totally mediates the relationship between (a) external interaction, (b) the generation of innovation networks, and (c) their operational performance on the one hand, and efficient project management on the other hand.

3. Research methods The population subject to study is made up of Uruguayan software firms. The software industry in Uruguay has reached a remarkable degree of development and is one of the strategic sectors in the country. A

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Josune Sáenz and Andrea Pérez‐Bouvier questionnaire was designed and addressed to the managers of the firms making up the target population (those companies belonging to the Uruguayan Chamber of Information Technologies). 105 firms out of 319 answered the questionnaire, which means a response rate of 33%. Structural equation modeling (SEM) based on partial least squares (PLS) was then applied in order to test the hypotheses drawn from the research. The PLS approach works in two stages:

The assessment of the reliability and validity of the measurement model.

The assessment of the structural model.

This sequence ensures that the constructs’ measures are valid and reliable before attempting to draw conclusions regarding relationships among constructs (Barclay et al., 1995). The sample size obtained is large enough to carry out a statistical study based on PLS structural equation modeling approach (Chin and Frye, 2003). According to the complexity level of the model to be tested, the minimum sample size required was calculated, and this was made up of 70 firms. As previously outlined, the research model encompasses several mediation relationships. For these to be checked, the following conditions must hold (Baron and Kenny, 1986):

First, independent variables must have a significant effect on the dependent ones in the absence of the mediators.

Second, independent variables must affect mediating variables significantly.

Third, in the full model (the one that encompasses all variables), mediators must have a significant effect on the dependent variables. If these conditions all hold in the predicted direction, then the effect of the independent variables on the dependent ones must be less than in the first model (the one in which mediating variables were omitted). Perfect mediation exists where in the final model the relationship between the independent variables and the dependent ones becomes non‐significant, whereas partial mediation applies when these relationships remain still significant, albeit less strong.

To verify such conditions, two models should be run: one which excludes mediating variables and that allows the first condition explained to be tested, and another one that includes all variables and that allows the second and third conditions to be tested. In our particular case, as two staggered sets of mediation relationships have been proposed, a third model will be necessary.

4. Research findings Following the sequence of analysis previously described, the main findings of the multivariate analysis carried out are as follows: As far as the measurement model evaluation is concerned, this differs depending on the nature of the construct being analyzed (reflective or formative). In the case of constructs made up of reflective indicators, individual item reliability, construct reliability, convergent validity, and discriminant validity should be checked. In the case of formative constructs, however, multicolinearity problems should be explored. In both cases, all the tests carried out have shown satisfactory results. Once the quality of the measurement model has been guaranteed, the quality of the structural model should then be assessed. This refers to the strength of the research hypotheses and to the amount of variance 2 explained (R ). In order to assess the research hypotheses, path coefficient levels should be examined, as well as their degree of significance, by means of bootstrapping techniques. Tables 1, 2, and 3 summarize the results obtained. In these tables, we can also see the contribution of each exogenous construct to the amount of variance explained. This has been obtained by multiplying the path coefficient and the correlation coefficient corresponding to each relationship. In the first model, given that each endogenous construct is explained by a single variable, path coefficients are equal to correlation coefficients. Model 1 shows that nurturing interaction with external agents has a positive and significant direct influence on each innovation capability dimension. Therefore, hypothesis H1 is fully supported, and the first condition for the first set of mediation effects to exist is also satisfied. In particular, organizing innovation projects effectively is the innovation capability dimension most benefited by the interaction with external agents

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Josune Sáenz and Andrea Pérez‐Bouvier (amount of variance explained: 18.92%). In the case of the other dimensions (new idea generation and efficient use of resources), the amount of variance explained is slightly lower: 11.36% and 10.05%, respectively. Table 1: Structural model evaluation – model 1

Endogenous constructs

Interaction with external agents Path Correlation 2 R Path Correlation 2 R Path Correlation R2

New idea generation Effective organization of innovation projects Efficient use of resources

0.337*** 0.337 11.36% 0.435*** 0.435 18.92% 0.317** 0.317 10.05%

Notes: ***p<0.001, **p<0.01, *p<0.05 (based on t499, one‐tailed test). Table 2: Structural model evaluation – model 2

Exogenous constructs Breadth and Interaction depth of the with external innovation agents network Breadth and depth of the innovation network

Path Correlation

Endogenous constructs

Total amount of variance explained

0.285

Contrib. to R 8.12%

8.12%

32.95%

Path

0.099

0.208

0.311*

Correlation

0.337

0.321

0.424

2 Contrib. to R 3.34%

6.68%

13.19%

23.20%

0.324*

Path 0.189 Effective organization of Correlation 0.424 innovation projects Contrib. to R2 8.01% Efficient use of resources

Operational performance of the network

0.285***

Path 0.574*** Operational performance of the Correlation 0.574 network Contrib. to R2 32.95% New idea generation

0.172 0.314

0.479

5.40%

15.52%

28.93%

0.119

0.199Ϯ

0.240Ϯ

0.313

0.298

0.362

Contrib. to R 3.72%

5.93%

8.69%

18.34%

Path Correlation 2

Notes: ***p<0.001, **p<0.01, *p<0.05 (based on t499, one‐tailed test). Table 3: Structural model evaluation – extract of model 3 Exogenous constructs Breadth and depth of the innovation network

Path

0.004

0.091

0.027

0.636***

Correlation

0.313

0.298

0.359

0.679

0.13%

2.71%

0.97%

43.18%

Efficient use of resources

Operational Effective Total amount performance organization of variance of the of innovation explained network projects

Interaction with external agents

Contrib. to R

Notes: ***p<.001, **p<0.01, *p<0.05 (based on t499, one‐tailed test).

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46.99%

Josune Sáenz and Andrea Pérez‐Bouvier The first part of the second model shows that nurturing interaction with external agents exerts a positive and significant influence both on the formation of innovation networks and on their operational performance. Actually, this influence is much stronger when it comes to contributing to the operational performance of the network (amount of variance explained: 32.95%) than when it comes to contributing to its formation (amount of variance explained: 8.12%). Hence, hypothesis H3 is fully supported, and the second condition for the first set of mediation effects to exist is also satisfied. Moving on now to innovation capability, in all cases, the breadth and depth of innovation networks and their operational performance exert a positive and significant influence on each first‐level capacity. Therefore, hypothesis H2 is fully supported and the third condition for mediation to exist is also verified. In particular, the operational performance of innovation networks accounts for the highest portion of variance explained in each dimension. On the other hand, it can be noticed that, when mediators are included in Model 2, the direct influence of nurturing interaction with external agents on innovation capability dimensions diminishes considerably (i.e. path coefficients are noticeably lower). More precisely, the direct effect on the generation of new ideas and on the efficient use of resources becomes non‐significant (thus, total mediation applies), whereas in the case of effective organization of innovation projects, it still remains significant (therefore, partial mediation applies). If the total amount of variance explained in Model 1 and Model 2 are compared, it could be observed that the inclusion of mediating variables significantly increases the amount of variance explained of each first‐level capacity. In the case of the generation of new ideas, the amount of variance explained increases from 11.36% in Model 1 to 23.20% in Model 2; in the case of the effective organization of innovation projects, from 18.92% to 28.93%; and in the case of the efficient use of resources (i.e. fitting to costs and deadlines), from 10.05% to 18.34%. Finally, Model 3 allows us to verify the last mediation effect. Table 3 only shows the relevant part for this purpose, as the rest is similar to Model 2. In Model 1 and Model 2, it was verified that nurturing interaction with external agents and innovation networks had a positive and significant effect on the efficient use of resources (i.e. the first condition for mediation to exist). Moreover, in the second model it could be seen that interaction with external agents and innovation networks had a significant a positive influence on the effective organization of innovation projects (i.e. the second condition for accepting mediation). Now, Table 3 shows that organizing innovation projects effectively plays an extremely important role when it comes to ensuring the efficient use of resources (i.e. the third condition for mediation to exist). Actually, when this mediating relationship is included, the direct influence of interaction with external agents and innovation networks becomes non‐significant and the total amount of variance explained rises from 18.34% in Model 2 to 46.99% in Model 3. Therefore, total mediation applies, which confirms hypothesis H4.

5. Conclusions The research carried out has helped to disentangle the interplay between nurturing interaction with external agents, innovation networks, and innovation capability in Uruguayan software firms. In particular, it has been demonstrated that, in the set of companies analyzed, fostering interaction with external agents by means of face‐to‐face meetings and conversations, and by means of collaborative technology is a crucial aspect in enhancing the innovation capability of firms. Moreover, it has been shown that, to a great extent, this positive influence is due to the role that interaction with external agents plays in the formation of innovation networks and in their operational performance. In the case of the generation of new ideas, the fact that innovation networks (both their breadth and depth, and their operational performance) fully mediate the relationship between interaction with external agents and this first level capacity means that all beneficial effects derived from the exchange of ideas and experiences with other people outside the company only take place through innovation networks. However, in the case of the effective organization of innovation projects (i.e. resource allocation, coordination, and knowledge leverage), nurturing interaction with external agents has additional benefits beyond those related to the formation of innovation networks and to guaranteeing their operational performance. Actually, this interaction with people outside the organization may improve employees’ knowledge, skills, and

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Josune Sáenz and Andrea Pérez‐Bouvier experience in a way that positively affects the management of innovation projects, even though cooperation agreements may have not been established. Finally, fitting in with costs and deadlines (i.e. the last dimension of innovation capability considered in this research) has proved to be completely dependent on the effective organization of innovation projects. Thus, everything that contributes to the latter will pay off in terms of guaranteeing an efficient use of resources. In particular, the research carried out shows that operational performance of innovation networks plays a substantial role in this respect. Consequently, efforts should be made in terms of planning, design of work methods, monitoring, and evaluation of network activities, as well as in terms of fostering continuous interaction with external agents. The study presented in this paper has some limitations that should be highlighted. The main one is that this is a cross‐sectional study and time lag effects are not considered. This could be especially relevant for the relationship between nurturing interaction with external agents and innovation networks, as the influence of the former on the generation of such networks may not be immediate. Similarly, the fact of having developed an innovation network may not have an instant influence on the identification of new opportunities for innovation. Therefore, future work should consider carrying out longitudinal studies, as well as expanding this research to different sectors and settings. In particular, it would be of particular interest to see whether nurturing interaction with external agents and innovation networks are equally relevant in low‐technology industries. Moreover, this study looked at only two of the three first‐level capacities that make up innovation capability (ideation – i.e. sensing and shaping opportunities and threats – and innovation project management – i.e. seizing opportunities, both in terms of effective organization and efficient use of resources). Therefore, it would be very interesting to analyze the influence of knowledge sharing on the third first‐level innovation capacity: the capacity of the firm to reinvent/transform itself rather than die because of unfavorable path dependencies generated by past success.

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Josune Sáenz and Andrea Pérez‐Bouvier Granovetter, M.S. (1992) “Problems of Explanation in Economics Sociology”, in Nohria, N., and Eccles, R. (Eds.), Networks and Organizations: Structure, Form, and Acction, pp. 25‐56, Harvard Business School Press, Boston, MA. Hagedoorn, J. (2002) “Inter‐Firm R&D Partnerships – An Overview of Major Trends and Patterns since 1960”, Research Policy, Vol. 31, pp. 477‐492. Hansen, M.T. (1999) “The Search‐Transfer Problem: The Role of Weak Ties in Sharing Knowledge across Organizational Subunits”, Administrative Science Quarterly, Vol. 44, pp. 82‐112. Hargadon, A.B., and Sutton, R.I. (1997) “Technology Brokering and Innovation in a Product Development Firm”, Administrative Science Quarterly, Vol. 42, pp. 716‐749. Jones, G. (2013) Organizational Theory, Design, and Change, Seventh edition, Pearson, Harlow, Essex, England. Kaplan, J.M. (2007) Patterns of Entrepreneurship, Second edition, John Wiley & Sons, Hoboken, NJ. Liebeskind, J.P., Oliver, A.L., Zucker, L., and Brewer, M. (1996), “Social Networks, Learning, and Flexibility: Sourcing Scientific Knowledge in New Biotechnology Firms”, Organization Science, Vol. 7, pp. 428‐443. Nonaka I., and Takeuchi H. (1995) The Knowledge‐Creating Company, Oxford University Press, New York. Nonaka I., Von Krogh G., and Voelpel S. (2006) “Organizational Knowledge Creation Theory: Evolutionary Paths and Future Advances”, Organization Studies, Vol. 27, No. 8, pp 1179‐1208. Parise, S., and Prusak, L. (2006) “Partnerships for Knowledge Creation”, in Prusak, L., and Matson, E. (Eds.), Knowledge Management and Organizational Learning, pp. 125‐135, Oxford Management Readers, New York. Rosenkopf, L., and Almeida, P. (2003) “Overcoming Local Search through Alliances and Mobility”, Management Science, Vol. 49, pp. 751‐766. Schilling, M.A. (2011) Strategic Management of Technological Innovation, Third edition, McGraw‐Hill International Edition, Singapore. Simard, C., and West, J. (2006) “Knowledge Networks and the Geographical Locus of Innovation”, in Chesbrough, H., Vanhaverbeke, W., and West, J. (Eds.), Open Innovation – Researching a New Paradigm, pp. 220‐240, Oxford University Press, New York. Szulanski, G. (1996) “Exploring Internal Stickiness: Impediments to the Transfer of Best Practice within the Firm”, Strategic Management Journal, winter special issue, pp. 27‐43. Teece, D.J. (2007) “Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance”, Strategic Management Journal, Vol. 28, No. 13, pp 1319‐1350. Teece, D.J. (2009) “The Nature and Microfoundations of (Sustainable) Enterprise Performance”, in Teece, D.J. (Ed.), Dynamic Capabilities & Strategic Management – Organizing for Innovation and Growth, pp 3‐64, Oxford University Press, New York. Tell, F. (2011) “Knowledge Integration and Innovation: A Survey of the Field”, in Berggren, C., Bergek, A., Bengtsson, L., Hobday, M., and Söderlund, J. (Eds.), Knowledge Integration and Innovation – Critical Challenges Facing International Technology‐based Firms, pp. 20‐58, Oxford University Press, New York. Vanhaverbeke, W. (2006) “The Interorganizational Context of Open Innovation”, in Chesbrough, H., Vanhaverbeke, W., and West, J. (Eds.), Open Innovation – Researching a New Paradigm, pp. 205‐219, Oxford University Press, New York. Wiig K. (2004) People‐Focused Knowledge Management, Elsevier, Oxford. Zander, U., and Kogut, B. (1995) “Knowledge and the Speed of the Transfer and Imitation of Organizational Capabilities: An Empirical Test”, Organization Science, Vol. 6, pp. 76‐92.

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IS Resilience in SMEs in Post‐Earthquake Christchurch Amitrajit Sarkar1 and Stephen Wingreen2 1 Department of Computing, Christchurch Polytechnic Institute of Technology, Christchurch, New Zealand 2 Department of Accounting and Information Systems, University of Canterbury, Christchurch, New Zealand Amitrajit.Sarkar@cpit.ac.nz stephen.wingreen@canterbury.ac.nz Abstract: Over recent years, the concept of resilience has gained increasing support within the academic community. Given the potentially devastating implications of disruptions, understanding the dynamics of successful adaption of Information Systems (IS) within organisations yields an important avenue for future research. Our business world is in need of adventurous thinkers and dynamic leaders to identify and follow through on the best methods of managing commercial challenges. This paper is an initial attempt to develop a conceptual framework for IS resilience, with regard to the factors that affect the decision‐making of IS managers and planners. Through this, a conceptual framework of an Information Systems resilient organisational response is presented. We adopt Agency theory to develop a conceptual framework, which supports decision making and planning for IS resilience. Concourse Theory and Q‐methodology are adopted to develop a Q‐sort questionnaire, which is refined by interviews with researchers, IS managers, and IS planners. The result is a 34‐item Q‐sample regarding IS resilience in SMEs. This research makes a methodological contribution by the development of a Q‐ sort questionnaire that may be used to study decision making and planning in the context of IS resilience. This methodological contribution will eventually enable theoretical contributions by establishing a framework that may be used to characterize planning and decision making in the context of IS resilience. Finally, conclusions are presented and attention is drawn to the implications of this instrument development for future research on IS resilience and planning. Keywords: information systems resilience; innovative decision making; uncertainty; disaster preparedness; business continuity; small medium enterprises

1. Introduction and background There is a longstanding worldwide recognition that Small and Medium Sized Enterprises (SMEs) make a significant contribution to employment generation and economic growth of a nation (Storey, 1994; OECD, 2010; Ministry of Economic Development, 2012). There are 474,415 small‐ and medium‐sized enterprises (SMEs) in New Zealand, representing 99 per cent of the business population (Ministry of Economic Development, 2012). It is therefore understandable that why the SME sector is often referred to as the backbone of the economy of a nation. Countries, communities, organisations and individuals are all subject to a diverse and ever changing environment. This occasionally tempestuous environment postures threats which can vary in severity, impact and frequency. An event in one area can often have disastrous effects in another in the current globally connected world. These events can take many forms including the 2010‐2011 Christchurch Earthquakes, the 2011 Japan Tsunami, the 2010 Haiti and Chile Earthquakes, the 2010 eruption of Icelandic volcano and the most recent Hurricane Sandy in East coast of US. Natural disasters, pandemic disease, terrorist attacks, Information Systems failure and human error can all pose both a potentially unpredictable and severe threat to the continuity of an organisation’s operation. Traditionally, SMEs have several advantages over a large company due to its size and flexibility in adapting to change. Despite their prominence and flexibility, SMEs are the most vulnerable and very susceptible to disasters. Disasters can cause challenges to organisations and it is essential that sufficient effort is directed into making small and medium enterprises (SMEs) robust and resilient to withstand these uncertainties and challenges. It is often only through hindsight that disasters look like the events that individuals, communities, organisations and countries should have prepared for. Agency theory predicts differences in management structure, leadership style, organisational culture, and the emphases placed on different dimensions of the strategy making process, barriers to the implementation of strategy and performance between SMEs and Large Organisations. An IBM study that investigates how

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Amitrajit Sarkar and Stephen Wingreen organizations are increasingly adopting integrated business resilience strategies in an uncertain environment narrates that large organisations lead the way in business and IS resilience and most studies of the IS resilience has been made in the context of big business, to best of our knowledge no attempts have been made to study small business in this regard (IBM, 2011). However, given the specificities of SMEs as organizations, research results obtained from the study of large enterprise IS cannot necessarily be generalized and transferred to SMEs (Thong, 1999).It is important to remember that a small firm is “not a little big business,” according to Welsh and White (1981), and there is a need to take off the big organization glasses when studying technology issues in small firms (Thong, 1999). In this paper the emphasis is on a relatively overlooked area of research; that is the people who own and operate these firms – the entrepreneurs or owner‐managers – and their effort to make their business resilient in terms of Information Systems. Much of the research to date has focused on identifying characteristics of the firm (e.g. size, sector, performance and practices, etc.), in an attempt to understand their survival, growth and failure (Massey, 2005). Yet the characteristics of the entrepreneur and owner/manager and how they make decision in time of crisis to ensure resilience of Information Systems of their business have attracted far less attention, which is surprising given that one of the defining characteristics of SMEs is their dependence on the entrepreneur or owner/manager as a leader, decision maker, manager and day‐to‐day operator of the firm (Storey and Greene, 2010) and IS plays a major role in SMEs today. As such, this article will focus on establishing a solid conceptual base for IS resilience upon which future empirical studies can be based. This article outlines the background literature relating to resilience and in particular focuses on Information Systems (IS) resilience and presents a working definition for Information Systems resilience. Our review of the literature suggests a paucity of empirical research on the relationship between ownership structure and culture, leadership, decision‐making skills attached to factors influencing strategy, barriers to implementation of strategy, and their effort to make their business resilient in terms of Information Systems. The purpose of this article is twofold: first, it seeks to fill the void in research on determinants of IS resilience in SMEs, and second, it seeks to understand the determinants of IS resilience in SMEs. One research question is proposed to better understand the Information Systems resilience in SMEs, as well as the factors that affect the Information Systems resilience in SMEs: What characterises resilient SMEs from non‐resilient SMEs within the context of Information Systems?

2. Literature review SMEs in the Context of Agency Theory Research and literature have highlighted that there is no precise definition of SMEs (Bhamra, Dani, and Burnard, 2011) (Storey D. J., 1994). As SMEs differ in size, location, business, financial performance, maturity and management style, the definition of SMEs varies from country to country. Government bodies and official statistics most commonly define SMEs as those having fewer than 20 full time equivalent employees (Ministry of Economic Development, 2012). Generalised characteristics of these firms are that they have limited access to resources, personalised management styles and little formal structure (Battisti, Lee, and Cameron, 2009). SMEs employ 30% of New Zealand’s working population and contribute an estimated 40% of the economy’s total value added output (Ministry of Economic Development, 2012). New Zealand has the highest number of businesses per head of population in the OECD (Ministry of Economic Development, 2012). More than 50% of these enterprises are family or owner‐operated businesses (Ministry for Economic Development, 2012). Even with this definition SMEs are diverse. Some firms are dynamic and flexible with a great power to innovate and a vast range of diversity. Some are based on family involvement and embedded in local business environments. Others may fall under the category of start‐ups: fragile organisations striving for survival. Due to lack of universally accepted definition of SME, in our research we will define SME as “privately owned, have personalised management styles, little formal structures and employ less than 50 full time staff members.”

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Amitrajit Sarkar and Stephen Wingreen It is well known that SMEs are different from large organisation in many respects, and organizational theories applicable to large firms may not be applicable to them (Bharati and Chaudhury, 2006; Dandridge, 1979; Senn and Gibson, 1981; Blili and Raymond, 1993). It is important to remember that a small firm is “not a little big business,” according to Welsh and White (1981), and there is a need to take off the big organization glasses when studying technology issues in small firms (Thong, 1999). There are significant differences between the large organisations and SMEs. We will elaborate and explain these differences using Agency Theory. Agency Theory Effects in SMEs Agency theory has its roots in economic theory and is based on the following principles. Agency theory is a contract under which one or more persons (the principals) engage another person (the agent) to perform some service on their behalf which includes delegating some decision making authority to the agent. “If both parties to the relationship are utility maximisers then there is good reason to believe the agent will not always act in the best interests of the princip al” (Jensen and Meckling, 1976). Agency theory predicts that the agency conflict may be reduced when the owner is involved in management (Fama and Jensen, 1983) (Jensen and Meckling, 1976). This theory is likely to hold more dominance in the case of smaller organisations where it is more likely for the principal and agent to develop a close relationship or even principal and agent is the same person. On the other hand, it is also true that managers in small firms may be more isolated from the market discipline due to a closer relationship with their principals. Such isolation may result in entrenchment. Entrenchment is in turn likely to have a negative impact on performance. Furthermore, isolation from market disciplines and entrenchment‐induced inertia is likely to encourage a weak culture and weak leadership as well as a myopic strategy (Ghobadian and O'Regan, 2006). However, in SMEs the CEO is usually the owner‐manager. Since CEO is the main decision maker hence personal traits of the CEO could potentially influence the culture, leadership and strategic planning processes of an SME (Ghobadian and O'Regan, 2006). Owner‐manager’s desire for autonomy and possible disposition towards social aspects of relationships should not be ignored when trying to better understand the dynamics of power within SMEs. Implementing change can be particularly problematic for organisations where power and authority are highly centralised (Paton, 2007). Competitor power is also of concern to SMEs, especially when buyers can at short notice switch suppliers. In this position dominant buyers are able to make demands, not only on the deliveries and quality of the product, but may in addition force weaker suppliers to manufacture unprofitable products (Saunders, 1997). In summary, based on the arguments and predictions of agency theory, SMEs and large organisations are likely to behave differently. Moreover, agency theory predicted differences in leadership style, culture, the emphases placed on different dimensions of the strategy making process, barriers to the implementation of strategy and performance between SMEs and Large Organisations. Transformational leadership style was more prevalent in SMEs, while transactional leadership style was more prevalent in large organisations. SMEs and large organisations also differed across a number of culture constructs. Literature reviews illustrate that large organisations are more likely to have formal strategic plans than SMEs. In addition, SMEs and large organisations place differing emphases on the attributes of strategic planning. Overall, large organisations place greater emphases on most dimensions of strategic planning. Also literature reviews suggested the differences in barriers to strategy implementation. SMEs would experience difficulties to a greater extent compared large organisations. Literatures also suggested that strategic planning for SMEs must be further developed and refined and SMEs should be encouraged to deploy it. Literature review findings suggest personal traits could potentially influence the culture, leadership and strategic planning processes of an SME. Thus, from the above discussions it is evident that research findings related to large organisations may not be directly applicable to the SMEs. However, these findings may provide useful insights towards SMEs. Roles and Impact of Information Systems in SMEs Carr (2003) was the first among many other researchers to turn the research focus by questioning the value gained from investments in IT, and now there is considerable literature on the IT productivity paradox that

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Amitrajit Sarkar and Stephen Wingreen examines “IT investment” and its relationship with firm performance. In the years of the dotcom hype many believed that IT would enable SMEs to compete with large companies. However a lack of readiness for networking with other enterprises and reluctance to use advanced IT proved otherwise. SMEs perceive little incentive to change business models when returns are unclear (OECD, 2004). Research also showed that SMEs do not excel in knowledge retention and obtaining a sustainable competitive advantage. There is a slower adoption of IT in SMEs than in large enterprises. The methodologies that lead to successful IS implementations in large organisations can therefore not be extrapolated to SMEs, since we are dealing with a completely different economic, cultural and managerial environment. Due to their small scale and hence a lack of in house IT‐skills, SMEs depend more on vendors than large companies (Thong, 1999). This does not mean that outsourcing is without risks or problems. Resilience of Organisations Resilience is the ability of an organisation to not only survives but to thrive, both in good times and in the face of adversity (Seville 2009). Vargo and Stephenson (2010) proposed that for organisations to invest in resilience, the business case for resilience investments has to go beyond insurance, and must be as good as the case for new equipment or new staff (Vargo and Stephenson, 2010). Gibson and Tarrant (2010) presented the integrated functions model which suggests that organisational resilience is a goal that results from a combination of other activities such as risk management and business continuity. Gibson and Tarrant (2010) also presented the herringbone resilience model shown as Figure 1. This model suggests that resilience is enhanced by a combination of organisations’ characteristics or attributes and their activities and capabilities, or who they are and what they do (Gibson and Tarrant, 2010). The herringbone model incorporates many of the factors considered as possible indicators of IS resilience in this article.

Figure 1: Herringbone resilience model (Gibson and Tarrant, 2010) Planning vs. Resilience Discussion on resilience is incomplete unless we explore planning. A central theme of resilience research is the question of anticipation vs. resilience, planning vs. adaptation. This section defines anticipation and resilience and discusses how these two approaches can be combined within organisations to address IS resilience in organisations. Anticipation involves predicting possible sources of failure or causes of crisis or disaster, so that they can be planned for, mitigated or avoided altogether. Weick and Sutcliffe (2007) refer to this as avoiding error by design whereby a system of controls, processes and checks is put in place to prevent possible crises from occurring. Valle (1999) further added that an anticipatory approach is more suited to environments characterised by stability and predictable outcomes.

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Amitrajit Sarkar and Stephen Wingreen In contrast resilience, involves adaptation to changing environments. Weick and Sutcliffe (2007) discuss the resilience approach and note that resilient organisations recognise that it is impossible to prevent all crises and disasters all of the time. Instead they monitor their organisation as a system with inputs and outputs, the characteristics of which can provide information about the health of the system. Researchers propose a balance between anticipation and resilience. Comfort (2001) argues that disaster management practices are moving towards a combination of anticipation and resilience strategies. She explained that “While we agree that resilience is the key to coping, it is necessary to organise for resilience”. Researchers suggest that the anticipatory approach, including planning, is used to enable organisations to be resilient. Planning and formalising response arrangements in advance means that the organisation is free, at the time of crisis, to be much more adaptive and resilient in its response (Hurley‐Hanson, 2006). Importance of IS Resilience in Organisations For most businesses today, a lot of business is done with vendors and customers on the Internet; they rely heavily on IT and data and operate 24/7. For this reason the line between business and information system is blurred (Sayana, 2005). In such cases, continued availability of information systems is a sine qua non for business. Such businesses do not have any other alternate means of recording transactions and other data, hence cannot afford to be without information systems for long. All businesses that use information systems and data in their operations have a need for business continuity and disaster recovery plan. Most large organisations, particularly all Fortune 1000 enterprises, conduct regular information systems audit to ensure confidentiality, integrity and continuous availability of information systems (Singleton, 2011). Hence, availability of information systems is one of the major criteria for IS resilience. However, a small enterprise that uses IT and whose business processes are reliant on IT is also at a high risk (Singleton, 2011). Studies have found that after London bombing incidence SMEs failed to plan for unexpected disruptions to their business (Goodwin, 2005). Goodwin (2005) mentioned that SMEs are particularly weak to demonstrate that they have planned about the business continuity of their IT systems. Goodwin (2005) predicted that SMEs will be under‐pressure from large businesses, regulators, investors, insurers and their suppliers and it will be hard for them to ignore business continuity in future. Unfortunately SMEs are much less likely to carry out such planning processes than larger organisations, and when they do, the planning is likely to be less disciplined (Berman et al. 1997). However, the good news is that when they do carry out structured planning processes, it is good for business (Cragg and King 1988). A review of literature on IT management in large organisations and SMEs identifies significant differences in the IT management processes between these two types of organisations. Literatures have acknowledged the involvement of top management in IT planning and decision making as an important factor that leads to success of information systems in organisations.

3. Research method Essentially, we are studying decision process of stakeholder decision priority in context to IS resilience. This involves the prioritisation of different decisions. Q‐methodology is capable of capturing the priorities. Therefore Q‐methodology was employed in accordance with the goals of this study to identify IS resilience planning priorities in SMEs. Utilizing the Q‐methodology entails the adoption of its guiding philosophy of preserving operant subjectivity, the guidelines for instrument development and measurement using the q‐sort, and a specialized centroid factor extraction technique known as “q‐factor analysis” (Brown, 1980). The preservation of operant subjectivity may be best described as the principle of allowing the subjects to speak for themselves in their own voice (Brown, 1980). In the context of this study the idiographic nature of the Q‐ methodology makes it appropriate for the identification and interpretation of the existing perspectives about IS resilience in SMES. The basic steps of the Q sorting procedure are as follows. A heterogeneous set of items (called a Q sample) is drawn from the concourse. A group of respondents (P set) is instructed to rank‐order (Q sort) the Q sample along a standardized continuum according to a specified condition of instruction. Participants do this according to their own 'psychological significance'. The resulting Q sorts are submitted to correlation and factor analysis. Interpreted results are factors of 'operant subjectivity' (Brown, 1980).

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Amitrajit Sarkar and Stephen Wingreen The definition of a concourse, development of the set of Q‐statements for IS resilience priorities, instrument development followed the recommendations of previous research on the subject (Brown, 1980). In order to achieve the highest probability of a representative sample of the concourse we have conducted extensive literature review, conversation with people who participate in the concourse, and input from the domain experts about the content of the sample of Q‐statements. The development process includes a series of deliberate steps to ensure content validity of the Q‐sort statements. The procedure of instrument development includes literature review, discussion with experts, and refinement of sample q‐statements with the help of domain experts and IS decision makers and planners. Feedback from the evaluators was then incorporated into the Q‐statement and Q‐Sort instrumentation. After several iterations the experts confirmed that the instrument is ready and should function as intended, and now the study could proceed to primary data collection. The result is a 34‐item Q‐sample regarding IS resilience in SMEs. This research makes a methodological contribution by the development of a Q‐sort questionnaire that may be used to study decision making and planning in the context of IS resilience.

4. Research model As mentioned before, the purpose of this article is twofold: first, it seeks to fill the void in research on determinants of IS resilience in SMEs, and second, it seeks to understand the determinants of IS resilience in SMEs. A conceptual framework of determinants of IS resilience is shown in Figure 2. After an extensive literature review we have not been able to find a definition of IS resilience. However, organisational resilience has been studied extensively by researchers (Vargo and Seville, 2011); (Hatton, Seville, and Vargo, 2012). A definition of Information Systems resilience is introduced for the purpose of our study, it is defined as: Information Systems resilience is a function of an organization’s overall situation awareness related to Information Systems, management of Information Systems vulnerabilities, and adaptive capacity of Information Systems in a complex, dynamic, and interconnected environment. A conceptual framework of IS resilience has also been developed.

Internal Factors

Information Systems Resilience External Factor

• • • • • • • •

IS-Business Continuity Plan IS-Disaster Recovery Plan Leadership Top Management Support CEO Characteristics CEO’s IS Knowledge Organisational Culture Decision Making

• • • •

Customer Pressure Supplier Pressure Competitor Pressure Situation Awareness

Figure 2: IS resilience conceptual framework

5. Conclusion Although SMEs are regarded as key drivers for economic growth, there is a lack of work on this subject matter. There is especially the need for empirical studies analysing key issues of Information Systems resilience in SMEs. Accordingly, an extensive literature review is conducted to identify differences between large‐scale enterprises and SMEs with respect to Information Systems resilience. We have used agency theory to establish the decision priority differences between the SMEs and large organisations. Also we have identified the gap in research related to information systems resilience in SMEs. To best of our knowledge this is the first attempt to create an IS resilience framework for SMEs. In particular, this paper examines Information Systems vulnerability; Information Systems risk management and propose a conceptual model for Information Systems resilience in SMEs. To test the conceptual model we have also created a valid and reliable instrument. It was

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Amitrajit Sarkar and Stephen Wingreen necessary to develop and validate an instrument to measure IS resilience priorities and factors. In this study, we have taken the first step towards fulfilling this objective. The individual prioritizes the Q‐Statements by sorting them into categories that approximate a normal distribution, with fewer statements sorted into the extreme categories and more in the central categories. Since all statements are sorted relative to one another, any given Q‐sort represents the person’s coherent point‐of‐view on the concourse. Every study has its limitations, and this one is no exception. The instrument we have developed as part of this research need to be tested with primary data. There are a number of avenues of future research. Future empirical research should attempt to understand the IS resilience priorities and characteristics of resilient organisations. Finally, results have implications both for researchers who are looking for theories that explain the importance of Information System resilience and business managers and owners who are challenged with decisions about how to design resilient Information System framework for their organisation.

Acknowledgements We are grateful to the anonymous reviewers for their insightful feedbacks.

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Amitrajit Sarkar and Stephen Wingreen Ingirige, B., and Wedawatta, G. (2011). Impacts of flood hazards on small and medium companies: strategies for property level protection and business continuity. Flood Hazards, Impacts and Responses for the, 269‐280. Jensen, M. C., and Meckling, W. H. (1976, October). Theory of the firm : managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 305‐360. Kim, B. G., and Lee, S. (2007). Factors affecting the implementation of electronic data interchange in Korea. Computers in Human Behaviour, 1‐21. Massey, C. (2005). Entrepreneurship and small business management in New Zealand. Auckland: Pearson Education. McManus, S., Seville, E., Vargo, J., and Brunsdon, D. (2008). Facilitated Process for Improving Organizational Resilience. Natural Hazards Review, 81‐90. Meade, P. (1993). Taking the risk out of disaster recovery services. Risk Management, 6‐20. Ministry of Economic Development. (2012). SMEs in New Zealand: Structure and Dynamics. Wellington, New Zealand: Ministry of Economic Development. OECD. (2010). SMEs, Entrepreneurship and Innovation. Paris: Organisation for Economic Co‐operation and Development. Paton, D. (2007). Measuring and Monitoring Resilience in Auckland. GNS Science, 33‐39. Penn, Schohen, Berland. (2011). 2011 CRISIS PREPAREDNESS STUDY. Burson and Marsteller. Penrose, J. M. (2000). The Role of Perception in Crisis Planning. Public Relations Review, 155‐165. Poon, S., and Swatman, P. M. (1999). An exploratory study of small business Internet commerce issues. Information and Management, 9–18. Sayana, S. A. (2005). Auditing Business Continuity. Information Systems Control Journal, 37‐39. Singleton, T. W. (2011). What Every IT Auditor Should Know About Backup and Recovery. ISACA Journal, 1‐2. Statistics New Zealand. (2010). Business Operations Survey 2010. Wellington: Statistics New Zealand. Storey, D. J. (1994). Understanding the Small Business Sector. London: Thomson Business Press. Storey, D., and Greene, F. (2010). Small Business and Entrepreneurship. Harlow, UK: Pearsons Education. Thong, J. Y. (1999). An Integrated Model of Information Systems Adoptation in Small Businesses. Journal of Management Information Systems, 187‐214. Thun, H., Drüke, M., and Hoenig, D. (2011). Managing uncertainty – an empirical analysis of supply chain risk management in small and medium sized enterprises. International Journal of Production Research, 5511‐5525. Vargo, J., and Seville, E. (2011). Crisis strategic planning for SMEs: finding the silver lining. International Journal of Production Research, 5619‐5635. Vargo, J., and Stephenson, A. V. (2010). Measuring Organizational Resilience. World Conference on Disaster Management (pp. 44‐51). Toronto, Canada: World Conference on Disaster Management. Vijayraman, B. S., and Ramakrishna, H. V. (1993). Disasterpreparedness of small businesses with microcomputer based information systems. Journal of Systems Management, 28‐33. Webster, J., and Watson, R. T. (2002). Analyzing the past to prepare for the future : writing a literature review. MISQ, 1‐26. Wedawatta, G., and Ingirige, B. (2012). Resilience and adaptation of small and medium‐sized enterprises to flood risk. Disaster Prevention and Management, 474‐488. Weick, K. E., and Sutcliffe, K. M. (2007). Mindfulness and the quality of organizational attention. Organization Science, 514‐ 531. Woodword, J. (1965). Industrial Organisation : Theory and Practice. New York, USA: Oxford University Press.

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The Institutional Support as a Factor for Technology Internationalization From Developing Countries Viktor Stojmanovski1, Velimir Stojkovski2, Mijalce Santa3 and Beti Kostadinovska Dimitrovska2 1 Faculty of Mechanical Engineering, Ss. Cyril and Methodius University in Skopje, Skopje, Macedonia 2 Ss. Cyril and Methodius University in Skopje, Skopje, Macedonia 3 Faculty of Economics – Skopje, Ss. Cyril and Methodius University in Skopje, Skopje, Macedonia viktor.stojmanovski@mf.edu.mk velimir@ukim.edu.mk mijalce@eccf.ukim.edu.mk beti.kostadinovska@ukim.edu.mk Abstract: In the current global market economy, companies need to continuously innovate and create new products that satisfy unmet market needs. A major aspect of the innovation process is to market the new technologies on local and international markets. The internationalization of the technology and its distribution to larger number of partners and customers will ensure long‐term success of the company that invented the technology. However, the innovative entrepreneurs and SMEs face challenges in achieving internationalization of their technologies especially those from the developing countries. The obstacles that the SMEs are facing range from lack of information about the market opportunities, lack of knowledge of the process of commercialization of the innovative technology and lack of knowledge of the potential international customers and partners. Due to limited resources the SMEs and innovative entrepreneurs are not in a position to quickly and in appropriate way manage these internationalization barriers. This paper’s aim is through a case study research, to identify whether an institutional support facilitates the SMEs and entrepreneurs in developing countries to successfully overcome the obstacles for technology internationalization. In particular, the following obstacles are analyzed: access to information, access to foreign partners and markets, lack of matchmaking and networking and technology transfer promotion. The case study is performed on the European Information and Innovation Centre in Macedonia, an Enterprise Europe Network partner organization. EIICM is an appropriate subject for this case study because of: its relations and experience with large number of innovative SMEs and entrepreneurs from developed and developing countries; it is a Consortium of University, Foundation and Chambers of Commerce; it provides its services for free of charge to the SMEs and; it is co‐financed by the European Union and the Macedonian Government. In our case study, we have analyzed the work of EIICM since its establishment in 2008, through its documentation and annual reports. The outcome is that the SMEs mainly request information for potential partners for technology internationalisation and transfer. Furthermore, the internationalisation is supported through exchange of SMEs technology profiles, direct contacts established with EIICM assistance, networking with foreign companies and promotion of innovative technologies. The conclusion is that the support provided to the SMEs and entrepreneurs by institutions such as EIICM positively influences on the ability of the SMEs to internationalize their technology and innovative solutions. The limitation of this paper is that the research is performed on only one case study and there is a need to extend the cases on which the research will be performed. Furthermore, the results of the research can be supplemented by a quantitative research through surveys in order to generalize the findings. Keywords: SMEs, entrepreneurs, technology internationalization, institutional support, innovation

1. Introduction Managing organizations today is difficult. Organizations today operate in a complex external and internal environment. Vital planning assumptions continuously change due to dynamic developments and events in organizations’ external and internal environments (Karp 2006), such as technological discontinuities (Romanelli & Tushman 1994) and turbulence (Lant & Mezias 1992). Creating and sustaining competitiveness is harder due the challenges of globalisation, changing customer and investor demands and increasing product‐market competition (Jashapara 2004). Furthermore, the pressure on responsiveness, emphasis on product and service quality, diversity and customization increases the level of, ever changing, complexity companies have to manage.

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Viktor Stojmanovski et al. In the current global market economy, the companies, in order to successfully respond to these challenges, need to continuously innovate and create new products that satisfy unmet market needs. Small and Medium Enterprises (SMEs) play a key role for innovations and technology development that are major for creating economy based on knowledge, as well as to produce economic benefits and job creation. The global competitiveness requires development of new innovative products and services that are present on the market. The need for networking of the enterprises and increasing their international activities made a significant initiative on European level to launch a network to help SMEs to develop their innovative capacities and full potential. That is the Enterprise Europe Network which aim was to create a single network that will offer more effective and high‐quality integrated services to make SMEs more competitive. The existence of such network that will gain all services and support for the SMEs was an ideal solution for the national enterprises and organizations to increase their business and technology activities and to help them to expand internationally. Enterprise Europe Network in Macedonia was launched in the year 2008 by the European Commission as a largest network of contact points to help companies enlarge their business, technology and R&D activities, as a nature continues of the previous support networks – Euro Info Centers and Innovation Relay Centers. From the first set up until now, the Network has increased institutionally and regionally connecting more than 600 organizations in more than 50 counties, as well as covering regions beyond European level. The Network also provided chance to the developing countries to show their interest for participation and to join the Enterprise Europe Network. This participation brought higher benefits to the SMEs in these countries that would one expected: firstly, they always have access to information about business and technology development; secondly, they are provided with activities and services offered free of charge for networking and matchmaking by experienced experts; thirdly, because of their exceptional chance to meet foreign business and technology developers and providers and conclude cooperation; and the last but not the least because of the opportunity to be present on international markets and access to finance. The internationalisation of the technology and its distribution to larger number of partners and customers will ensure long‐term success of the company that invented the technology. Prior studies have advanced our understanding how companies can commercially exploit their invention by exploring the factors and the relations that support innovation in the companies. However, the innovative entrepreneurs and SMEs, due to their limited resources face challenges in achieving internationalisation of their technologies, especially those from the developing countries. This paper’s aim is through a case study research, to identify whether an institutional support facilitates the SMEs and entrepreneurs in developing countries to successfully overcome the obstacles for technology internationalization. In the first part of the paper we present a short overview of innovation and technology transfer aspects, and then we provide a glance of the Macedonian context. At the end we present the results from the case study followed with a conclusion.

2. Innovation Innovation can be defined as the management of all the activities involved in the process of idea generation, technology development, manufacturing and marketing of a new (or improved) product or manufacturing process or equipment (Trott 2011). Innovations can range from fairly small‐scale changes to more radical ground breaking innovations. There are three levels of innovations (Andriopoulos & Dawson 2008), as follows:

Incremental innovations: these refer to small changes that are generally based on established knowledge and existing organizational capabilities

Modular innovations: middle‐range innovations that are more significant than simple product improvements

Radical innovations: these typically occur when the current knowledge and capabilities become obsolete and new knowledge is required to exploit uncharted opportunities.

Innovation can also take many different forms, including the following (Andriopoulos & Dawson 2008):

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Product innovations: refer to innovations in the development of a new or improved product

Service innovations: development of new or improved services

Process innovations: these innovations center on improving processes rather than end products or services

Management innovations: creation of new or improvement of management techniques and practices

Market or position innovations: this refers to the creation of new markets and generally overlaps with products and process innovations

Although the innovation has been treated as an organizational issue, it should be noted that the capability of the organizations in initiating and sustaining innovation is to greater extend determined by the wider local and national context within which they operate (Trott 2011). This implicates that innovation is an institutional process (Edquist 2001). The entrepreneur who is responsible for innovation is embedded in a system of institutions that can support him (Kubeczko et al. 2006). According to Heydebreck et al. (2000) the SMEs have four needs bundles for innovation support services:

Technology related services. This bundle consists of technology‐related services for companies that experience a discrepancy between their strategic goals and their actual technological standing. Services that the SMEs need are: realization and management of R&D, technological consultancy, and search for R&D cooperation partners.

Finance related services. The bundle of finance‐related assistance services includes direct financial support as well as support in detecting and accessing external sources of financial means. Support consists of assistance with topics regarding EU, mediation of contacts to financiers, and assistance with the financing of innovation projects.

Soft services. A more general type of support service comprising of seminars and information events, education and training programmes, and consulting and mentoring

Market related services. Services that the company needs are assistance in the marketing of products or technologies, search for customers and suppliers, and assistance with new product launches. This bundle is the one for which the companies express the greatest need.

An important element to the innovation system is the innovation support organizations or innovation intermediaries that can provide services that the SMEs need. Dalziel (2010) defines innovation intermediaries as organizations or groups within organizations that work to enable innovation, either directly by enabling the innovativeness of one or more firms, or indirectly by enhancing the innovative capacity of regions, nations, or sectors. The functions of innovation‐support organizations within innovation systems are directed primarily toward assisting individual firms or groups of firms in the innovation process (Doloreux & Melançon 2009). They achieve this through three categories of activities (Dalziel 2010):

interorganizational networking activities,

technology development and related activities, and

other activities.

Howells (2006) identifies the importance of innovation‐support organizations in scanning and diffusing information related not only to technological development and commercial opportunities, but also to governmental programs, market development, and regulations (Doloreux & Melançon 2009). On the other hand according to Todtling and Kaufmann (2002 through Inkinen & Suorsa 2010), main barriers for using intermediaries are:

lack of information about the support opportunities

costly application procedures and project documentation;

support mechanisms to aid the innovative and successful enterprises and not to encourage other firms to innovate;

support mechanisms often do not consider the regional conditions, i.e. industrial structure.

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3. Technology transfer Technology transfer is the managed process of conveying a technology from one party to its adoption by another party (Souder et al. 1990). In the terms of the Enterprise Europe Network, technology transfer can be best described as the successful application and/or adaptation of a technology developed in one organization to meet the needs of one or more other organizations. The transferred technology shall be innovative for the recipient. A technology transfer not only includes transfer between organizations but also between different industrial sectors. A technology transfer is deemed to have been achieved once a licensing agreement, a joint venture agreement, a manufacturing agreement, and/or a commercial agreement with technical assistance has been signed. The object of the agreement should focus on bringing a competitive advantage to the recipient. The innovative character should be assessed in the context of the recipient, not that of the developer. In terms of the EEN, innovative character of technology can be understood as: new to the recipient’s country, to the recipient’s region, to another industrial or business sector, and a new use for an existing technology. Technology transfer plays an important role in developing countries (Inkpen & Dinur 1998). However transferring technology across borders is a process influenced by a large number of factors such as (Liu et al. 2008):

complexity, specificity, and tacitness

time involvement, organizational structure, organizational culture, and technology and knowledge strategy orientations

trust level between the transferring and accepting parties

cross‐cultural differences and institutional profiles.

4. The setting: Innovation system in Macedonia In the past two decades Macedonia has undergone considerable economic reform and has developed an open economy with trade accounting for more than 90% of GDP in recent years. The key industries in Macedonia are manufacturing, trade and agriculture and the top trading partners for exports (for 2011, in percent of total) according to the National Bank of the Republic of Macedonia (NBRM, 2011) are:

Germany = 27.7%

Kosovo = 12.3%

Serbia = 7.5%

Bulgaria = 6.9%

Italy = 6.5%

Greece = 4.9%

Croatia = 3.1%

Important feature of Macedonian export is that its structure has been practically unchanged within the observed period and it was dominated by low value added products. Textiles, metal and non‐metal minerals have constantly accounted for more than half of all exports from Macedonia. Nearly 99% of the companies in Macedonia are registered as small enterprises, employing nearly 55% of the employees in the private sector. According to the main activity registered, the majority of businesses are in the wholesale and retail trade sector (47%), manufacturing sector (13.1%), and the transportation, storage, and communications sectors (approximately 10%). The largest employer is the manufacturing sector, with 35.6% of the total number of employees in the private sector (Invest in Macedonia, 2011). Furthermore the Macedonian economy is characterized by a continuous high rate of unemployment 31.3% in 2012 (World Fact Book).

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Viktor Stojmanovski et al. According to the World Competitiveness Report 2012‐13 Macedonia is efficiency driven economy and ranks 80 out of 144 economies. Regarding the innovation aspects, Macedonia ranks 110 out of 144 countries. Very low values Macedonia receives for company spending on R&D, 123 out of 144 (Schwab, 2012).

5. EIICM as innovation‐support organization ‐ case study As stated before, Republic of Macedonia joined the Enterprise Europe Network in 2008, connecting the business, technology and R&D community, creating synergy with the academic organizations in cooperation for development, research and transfer of technology and innovation. The Enterprise Europe Network in Macedonia is represented by the European Information and Innovation Centre in Macedonia (EIICM). EIICM now compose of the two largest business communities in Macedonia, the Macedonian Chambers of Commerce and the Economic Chamber of Macedonia, and with the two technology transfer providers and R&D supporters ‐ the Foundation for Management and Industrial Research and the Ss. Cyril and Methodius University in Skopje. The EIICM Consortium comprises 4 partners completely different according to their fundamental activities: public university, foundation and two chambers of commerce. The conjunction of these partners in single consortium results with mixture of completely different cultures of acting as well as different methodologies and approaches to the work itself. Although, all partner organizations in EIICM have different backgrounds in business, technology and research industry they have extensive experience in providing services and helping SMEs. EIICM is the appropriate subject for this study because it is a representation of the triple helix concept. As such EIICM represents new institutional and social format for transfer of knowledge. EIICM provides assistance to clients that are developing a technology or an innovation and are interested to make it available to end‐users abroad in order to carry out a technology request. The process is starting with information about the client that is interested in creation of technology profile and publishing in the EEN database. Exchange of profiles within the Network is also part of this process, i.e. publishing and sending as well as disseminating profiles at the same time. The profiles have quality content as well as information about the client and IPR issues. At the beginning, the Centre was focused on the promotion of the Network and its services offered to SMEs which were fairly unknown to the Macedonian SMEs, and in that period, there was a high interest of the foreign companies for cooperation with Macedonian companies and vice‐versa low interest for cooperation (EIICM 2010). The low interest of the Macedonian companies for cooperation with the foreign ones was due to the fact of the Network’s first occurrence in the area and to the fact that Macedonian companies were in the phase of the trust building with EIICM. Macedonian SMEs did not know how the Enterprise Europe Network functions and how much time is needed for attaining trust for open cooperation. The results show relatively weak output effects achieved considering the fact that it was a start‐up period. Also, as the country is not a part of the EU, consequently the Macedonian SMEs were yet unacquainted with many spheres from the European problems. In terms of the technology internationalization, the Centre in that period show very low results due to the weak response of the Macedonian SMEs to promote new innovations. These services were completely unknown for the Macedonian SMEs, and therefore EIICM has worked intensively on the Network promotion and on its identification and visibility in the Macedonian area. After two years of implementation, EIICM expressed interest to carry on with its support to national SMEs to go international. It proposed new Work Program for the period 2011‐2012 with new targets that express real positioning of EIICM to assist SMEs in their internationalization. The goal was EIICM to increase institutionally, to boost up the linkages between the staff that would ensure implementation of effective mechanisms towards the complementary services, both in the Network and the region, for the benefit of all clients. EIICM set up project management mechanisms at consortium as well as at the activity level and for each partner in the hierarchy of the management is considered a team leader. They are responsible for the activities within the institution and are in close cooperation with the project manager. One of the main characteristics of the project management was establishment of the Working Group concept. These groups were of permanent character and their main task was to make activity level coordination on promotion, event organization, training planning, quality control, follow‐up procedures, etc. Special attention was given to quality control

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Viktor Stojmanovski et al. check and for development of feedback No wrong door principle was considered. Consortium Intranet, a tool for project management, communication and monitoring was already developed and it was the key tool for tracking the realization of the results. Common client database and system for archiving the documents regarding the project on the consortia and partner level was established. Compared to the previous project period from 2008 to 2010 there is an evident progress in all of the segments of the work of EIICM. The communication with SMEs and Network partners went well and there is a better performance. Consortium partners communicated well and intra‐consortium assistance of clients was evident. The Consortium gave good contribution to networking activities on national and international level. Project management developed good tools for tracking the project results (EIICM 2013). The institutional set up, as well as the good management tools made significant approach that brought to positive results comparing to the first period. In this paper, several successful stories will be presented. With regards to the technology transfer, EIICM successfully helped to nine companies to conclude Partnership Agreements with foreign partners. EIICM has reached its targets and has made a significant success supporting the companies and entrepreneurs to internationalize their technology and innovative solutions. Based on the analysis of the partnership agreements we have identified that there are two specific PAs that required EIICM to use it full potential and resources in order to facilitate the process of reaching Partnership agreement. The first one is between individual researcher and University and the second one is between a SME and University. By presenting these examples we show how the process can be facilitated between three different types of stakeholders. The first partner agreement is about a production of new types seed germination products and fertilizers for agricultural products in liquid and/or soil form. A Macedonian individual researcher has brought to develop a technology on utilization of biomass waste and its transformation into new valuable products. The limited ability for promotion of the newly developed technology by the researcher abroad made him to contact EIICM to ask for assistance. The technology provides expertise, problem‐solving, performance measurement and evaluation, but not a support to promote the new products to foreign markets. EIICM provided an ad hoc advice for preparation of technology profile that was promoted in the Network. Very soon, EIICM received Expression of Interest from a University from Italy to establish technological cooperation in order to adopt products from biomass waste for new application in agriculture. This matchmaking done by EIICM, was one of the successful solutions to provide assistance to an individual researcher and author who never knew how to expand its knowledge and inventions in the foreign markets and to get real benefits. The second story is about assisting an SME to expand its own developed technology for production of hard cheese type Gauda. A Macedonian SME has developed a technology for production of specific type of hard cheese and asked for assistance to promote this technology abroad. One Croatian University expressed interest to cooperate with this SME. With the assistance of Enterprise Europe Network, we managed to find partner with expertise in modern cheese technologies and particularly technology for hard cheese production. “The cooperation with EIICM enabled us to adopt new technology (know‐how), develop new product and approach regional markets”‐ says the Macedonian researcher. Through the cooperation with EIICM the company got chance to introduce its new high‐added value product on the foreign market and approach regional markets.

6. Discussion and conclusion For the benefits of increasing innovation and competitiveness among the SMEs in developing countries and technology internationalization the institutional support is crucial to build strong relationships among services providers and clients. The visibility of the institution should also be on high level and should be insured to guarantee that SMEs are aware of its activities and services. An internal integrated structure within the institution and developed tools for management system are also essential to ensure delivering and tracking of results. To enable the successful transfer the supporting institution should have competent personnel. The personnel should have clear understanding about the role and how they can assist in the process of technology transfer. A strong factor that has influence on the start and successful realization of the technology transfer is the trust between the innovation support organization and technology giving and receiving party and the trust between

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Viktor Stojmanovski et al. the technology giving and receiving party. This triangle of trust provides a strong ground for technology transfer. Also the wider context has influence on the opportunities for technology transfer. Based on the Global Competitiveness Report 2012 the companies do not invest in R&D and these results in low number of innovation. Furthermore this undermines the opportunity for out‐bound technology transfer from Macedonia to other markets. To overcome this position and increase the number of out‐bound technology transfers it is needed to develop and strengthen innovation support organizations that will work on with the companies on development of new technologies.

References Andriopoulos, C. & Dawson, P.M.B., 2008. Managing Change, Creativity and Innovation, SAGE Publications Ltd. Dalziel, M., 2010. Why do innovation intermediaries exist. In 2010 DRUID Conference, London, UK. http://www2. druid. dk/conferences/viewabstract. php. Available at: http://www2.druid.dk/conferences/viewpaper.php?id=500976&cf=43 [Accessed April 10, 2013]. Doloreux, D. & Melançon, Y., 2009. Innovation‐support organizations in the marine science and technology industry: The case of Quebec’s coastal region in Canada. Marine Policy, 33(1), pp.90–100. Edquist, C., 2001. The Systems of Innovation Approach and Innovation Policy: An account of the state of the art. In DRUID Conference, Aalborg. pp. 12–15. Available at: http://folk.uio.no/ivai/ESST/Outline%20V05/edquist02.pdf [Accessed April 10, 2013]. EIICM, 2010. Technical Implementation Report (1/1/2008 to 30/6/2009) EIICM, 2012. Technical Implementation Report (2011‐2012) Heydebreck, P., Klofsten, M. & Maier, J., 2000. Innovation support for new technology‐based firms: the Swedish Teknopol approach. R and D Management, 30(1), pp.89–100. Howells, J., 2006. Intermediation and the role of intermediaries in innovation. Research Policy, 35(5), pp.715–728. Inkinen, T. & Suorsa, K., 2010. Intermediaries in Regional Innovation Systems: High‐Technology Enterprise Survey from Northern Finland. European Planning Studies, 18(2), pp.169–187. Invest in Macedonia, 2011. Small and medium size enterprises in Macedonia. http://www.investinmacedonia.com/ [Accessed August 10, 2011] Jashapara, A., 2004. Knowledge Management: An Integrated Approach, Essex: Pearson Education Limited. Karp, T., 2006. Transforming organisations for organic growth: The DNA of change leadership. Journal of Change Management, 6(1), pp.3–20. Kubeczko, K., Rametsteiner, E. & Weiss, G., 2006. The role of sectoral and regional innovation systems in supporting innovations in forestry. Forest Policy and Economics, 8(7), pp.704–715. Lant, T.K. & Mezias, S.J., 1992. An Organizational Learning Model of Convergence and Reorientation. Organization Science, 3(1), pp.47–71. NBRM. 2011. Foreign trade. http://www.nbrm.mk/?ItemID=EA9313A61C028F44B00B681EF302F59D [Accessed August 10, 2011] Romanelli, E. & Tushman, M.L., 1994. Organizational Transformation as Punctuated Equilibrium: An Empirical Test. The Academy of Management Journal, 37(5), pp.1141–1166. Schwab, K. (2012), The Global Competitiveness Report 2012 – 2013, World Economic Forum, Geneva, Switzerland Trott, P., 2011. Innovation Management and New Product Development 5th ed., Prentice Hall. The World Factbook. https://www.cia.gov/library/publications/the‐world‐factbook/geos/mk.html [Accessed April 10, 2013]

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How SMEs Mitigate Risks When Embarking in Open Innovation Projects Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) Academy of Economic Studies, Bucharest, Romania ad_tantau@yahoo.com eliza.paicu@yahoo.com Abstract: SMEs are the engine of economies but slightly overlooked in the open innovation literature, which provides a scarcity of studies on the risks residing in open innovation projects involving SMEs and even fewer attempts to assess the mitigation potential of these dangers Moreover, there is a limited amount of research on the innovation practices of SMEs located in Eastern European countries. In Romania, we were not able to identify one single study reflecting the extent of open innovation projects in SMEs and the risks they face, which led us to attempt to cover this gap. What allures SMEs to embrace open innovation is their resource deficiency, insufficient abilities to explore and exploit technology, major knowledge gaps and the objective of minimizing the risks of innovation. The limited literature written on SMEs and open innovation highlights the motives, the benefits and the barriers these engines of economy confront when embarking in open innovation projects. However, no particular attempt to further the research into managing and mitigating the effective risks triggered by open innovation in SMEs was found. Based on a survey conducted on 211 Romanian SMEs in the Romanian financial services and consultancy sector, this paper both explores the risks affecting the innovation performance of SMEs in collaborative relationships, and seeks to provide a conceptual model for overcoming these threats. Within the survey, our work highlights that open innovation in Romanian SMEs is impeded by risks related to insufficient financial resources, inexperienced, unmotivated and unwilling to cooperate people, poor adaptation to technological advances in the industry, knowledge sharing risks, weak social capital and noteworthy regulation risks. All the risks identified through our research were mapped down in seven categories of risk drivers, with internal and external origin: workforce, collaboration itself, organizational culture / social capital, regulations and market barriers, clients, access to finance, technology advances. The risk mitigation model is centred on the SMEs key strategic advantages: high flexibility, ability for adaptation, people empowerment. The research results support the potential of mitigating risks SMEs face in open innovation projects, and indicate six factors as main risk mitigators: transparent communication among innovators, trust building, people empowerment, organizational learning and investment in knowledge, leadership, vision and convictions, proactiveness towards unethical behaviour. The results of our study can guide an SME to competitive advantage, parting both from the essence of collaboration in the scope of innovation, as well as from the challenge of efficiently managing the risks the process involves. Our model is appropriate to benchmark a financial sector SME. By undertaking this study we aim to contribute to the scarce literature on open innovation practices in Romanian SMEs and to shed light on the factors that a firm needs to approach in order to foster a culture for innovation and, in the same time, reduce the open innovation risks. Keywords: open innovation, SME, risks, innovation performance, collaboration

1. Introduction According to Chesbrough (2003), open innovation highlights the innovative potential of external factors, since valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well (Chesbrough, 2003). Although the phenomenon of open innovation has increasingly captured the attention of many researchers, we found few studies addressing open innovation from the SMEs perspective and even fewer which deal with this innovation strategy from the risk management point of view. SMEs concentrate the majority of employees and revenues both at European level as at country level, respectively in Romania. The Romanian SME sector consists in 5 million employees (67% of total people employed in enterprises), 100 billion EUR revenues and almost 500.000 companies. The figures suggest a strong innovation potential for SMEs, which hasn’t been yet studied in accordance to their power to mitigate risks encountered in the innovation process itself. According to the Innovation Union Scoreboard 2011, Romania is a modest innovator with a below average performance and one of its majors weaknesses are SMEs introducing product or process innovations and SMEs collaborating with each other, scoring half on EU27 average. This low innovation performance of Romanian SMEs is also correlated with the scarce literature written on the impact of external cooperation on the innovation of Romanian SMEs and especially on their potential of efficiently managing the risks this cooperation involves. To our knowledge, studies focusing on external sources of knowledge as “innovation gateways” for SMEs are relatively scant. Moreover, there is a limited amount of empirical research on the

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) innovation practices of SMEs located in Eastern and Western European countries (Lasagni, 2012). This paper aims to address these research gaps. Given the overall sparse attention given to the dark side of SMEs open innovation form the risk management perspective, we consider worth addressing this deficiency through the challenge of defining first a framework of risks encountered by SMEs in external partnerships and then by defining a theoretical risk mitigation model, moulded on the risks framework we have built.

2. Main purpose of the research Gassmann et al. (2010) emphasizes that SMEs are the largest number of companies in an economy, but they are under researched in the open innovation literature. This article focuses on open innovation risks in SMEs, first seeking to place the concepts of open innovation and risk management in the context of SME, secondly to define a comprehensive structure of internal and external risks residing in open innovation and which are more weighty for SMEs than for larger companies, and thirdly to raise awareness on the factors that help mitigate the risks met by SMEs in their innovation process. Finally, it builds up a theoretical risk mitigation model on the feedback of 211 SMEs which answered to our cross‐sectional survey. The research results support the importance of risk management in open innovation in SMEs, by proposing transparent communication among innovators, trust building, people empowerment, organizational learning and investment in knowledge, leadership, vision and convictions, proactiveness towards unethical behaviour as main factors that need to be addressed in external partnerships involving SMEs in order to avoid the imminent risks. Using a structured questionnaire survey, this paper examines the innovation activities of 211 Romanian SMEs and their awareness of the importance of risk management in the innovation process. We intend our study to make the path for future researches in the risk management area of open innovation in SMEs, analyzed on the background of the developing countries.

3. Theoretical background 3.1 Open innovation risks for SMEs Advocates of open innovation tend to stress benefits, implying that we currently have a limited understanding of the costs of openness (Dahlander and Gann, 2010). As extensive the field of open innovation research is, as diverse are the threats that reside in this open innovation context. Inter‐firm collaboration can thus lead to new risks and threats as well as transaction cost (Lee at al., 2010). The scarce literature written about involvement of SMEs in open innovation projects is more focused on highlighting the barriers for a firm to approach open innovation rather than on depicting the risks which accompany such collaborative arrangements. Then, while generally scholars have focused their research of risks in open innovation on large companies rather than SMEs, there is little knowledge on how the magnitude and impact of open innovation threats are distinct for smaller firms than for larger companies. In our review of literature, we show what impedes a company to perform while involved in external collaborations, regardless of its size. Afterwards, in our practical research, we have specifically addressed these open innovation risks from the SMEs point of view, through our cross‐sectional survey, creating a risk framework designed with the input of SMEs managers. Researchers argue that the following disadvantages can make open innovation less attractive for innovators: secrecy concerns (Thomas and Trevino, 1993); problems in division of contributions and outcomes of cooperation (Keupp and Gassmann, 2009); outsourcing critical dimensions of business (Dahlander and Gann, 2010); developing dependency on partners, loosing technological competence, slowing down self‐ development of innovation (Brockhoff and Brockhoff, 1992); dealing with many sources and ideas at any given moment of time (Laursen and Salter, 2006); difficulty in choosing and combining between numerous alternatives (Laursen and Salter, 2006); difficult to maintain large number of partnerships with different actors (Ahuja, 2000); risk of selecting wrong partners (de Vrande et al., 2009); difficulty in balancing innovation with daily tasks, communication, aligning of partners, organisation of innovation (de Vrande et al., 2009); bureaucracy and conflicting rules (de Vrande et al., 2009); not invented here (NIH) syndrome (Katz and Allen, 1982); organisational resistance and fear of losing control over proprietary technologies (Keupp and

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) Gassmann, 2009); conflicting interests that may alter the message shared‐ a relational risk (Lichtenthaler, 2011); knowledge sharing risks (Islam, 2012); workforce concerns, lack of trust, opportunism. There are a few studies addressing specifically open innovation risks for small firms. Recent empirical evidence on SMEs is provided by Enkel et al. (2009) in a study with 107 companies, equally European SMEs and large enterprises. The study, undertaken in 2008, showed that risks such as loss of knowledge (48%), higher coordination costs (48%), as well as loss of control and higher complexity (both 41%) are mentioned as frequent risks connected to open innovation activities. In addition, there are significant internal barriers, such as the difficulty in finding the right partner (43%), imbalance between open innovation activities and daily business (36%), and insufficient time and financial resources for open innovation activities.

4. Research methodology In order to build the structural risk framework of open innovation risks as well as the theoretical mitigation model, we used a survey which targeted 500 SMEs from the region of Bucharest. In Romania, according to the standard definition of the European Commission, SMEs are firms that hire less than 250 employees and have an annual turnover under 50 million EUR or hold total assets valuing under 43 million EUR. The SME’s targeted in our survey belong in proportion of over 70% percent to the financial sector (non‐banking financial institutions, consultancy firms, insurance firms, money transport companies, IT suppliers). The data were collected via a cross‐sectional survey approach and analyses were done based on 211 questionnaire responses received. The survey was implemented by means of online questionnaire. In this investigation, first respondents were asked to indicate to what extent their firms collaborate with different partners (customers, suppliers, competitors, government agencies, intermediary institutions, and research organizations) in order to boost their innovation potential. The respondents were enquired about their reasons for involving in open innovation projects and barriers to enter such agreements. Furthermore, they were asked to record the main risks encountered during the external partnership and best ways to handle those risks, from their experience. Given the scarce research on the subject approached, we employed open‐ ended questions in our questionnaire. In the second round of our survey, we used the cross‐impact analysis to determine the magnitude and the likelihood of impact of six mitigation variables we asked the respondents about, in correspondence to the main risks identified. The six mitigation factors were assessed with a 5‐point Likert scale, from “1” being “very low” magnitude / possibility of impact upon the structured seven risks to “5” being “very high”. We have chosen the Cross‐Impact Analysis since is a powerful tool for taking a set of events and examining the potential causal impacts that each event may have on others in the set.

5. Research experiences 5.1 Open innovation risks framework for SMEs The open innovation literature shows that the paramount benefit for firms entering collaboration projects with innovative purposes is risk sharing. At the same time, collaboration inherently brings along risks and costs. Our research distinctly points out to a paradox: even if the major motive for SMEs to embark in open innovation projects is risk sharing, in these collaborations may also reside threats that distort the initial objective of pursuing innovations and competitive advantage. An open innovation strategy aims at decreasing the risk inherent to the innovation process but at the same time it may increase the risk inherent to collaboration with different partners. The results of our survey show that that open innovation in Romanian SMEs is impeded mainly by risks related to insufficient financial resources, inexperienced, unmotivated and unwilling to cooperate people, poor adaptation to technological advances in the industry, knowledge sharing risks, weak social capital and noteworthy regulation risks. In order to build a structured risk framework, we mapped down all the risks identified throughout our research into seven broad categories of risk drivers, with both internal and external origin: workforce, collaboration among partners, technology advances, regulations and market barriers, clients, access to finance, organizational culture / social capital. Table 1 depicts the major internal risk drivers for a small company collaborating.

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) Table 1: Internal open innovation risk drivers for SMEs

People related risks are regarded as highest threats by our respondents, since they are the major actors and assets in collaboration projects. Romanian SMEs that innovate are characterized by a shortage of skilled employees who don’t possess critical knowledge in order to manage an open partnership and the new knowledge acquired. Their safety mentality, reluctant to change and innovation, acts as a major risk and its impact is even greater when it is a translation of the top management’s attitude, which shows little support for innovation and low awareness of risks. Under‐trained workforce is a threat for a small firm since it builds up a knowledge barrier from the firms it collaborates with. Lack of trust and adversity to change is often accompanied by internal poor work ethic, which creates an environment which is poorly prepared to absorb and integrate external ideas and technologies, translated into what is very common for SMEs, low absorptive capacity. Our survey revealed that many SMEs have a poor organizational culture, insufficiently oriented towards collaboration and innovation, marked by fear of losing control over its own technologies or knowledge, a sign of poor social capital. SMEs also claim inadequate distributive skills when entering external partnerships, since they find it highly difficult to manage the external innovation process with the daily, routinely tasks, a deficiency which often has a great impact on how they rapidly address the needs of the customers. Table 2 illustrates what external risk drivers are considered most noteworthy for the small companies we surveyed. The external risk drivers can be mapped down to five categories: regulations in the industry and market barriers, clients constantly changing demands, collaboration with partners, difficult access to finance and adaptation to technology advances. Table 2: External open innovation risk drivers for SMEs

A significant part of the questioned SMEs are from the financial sector, which bears a high dependency on national regulations in the field, often burdens for smaller firms unable to cope with the costs entailing volatile regulations, It is also the general case of ambiguous regulations which affects the efficient activity of open agreements, resulting in higher transaction costs. Highly specific to emergent countries, unethical behaviour is common and acts a major business risk, as highlighted by the firms interviewed, facing several corruption issues in regards to their partners collaboration and as well related to state administration bodies. Open innovation is also impeded by a high level of bureaucracy and SMEs find it harder to cover the administrative costs entailed in the external partnerships. The respondents also blamed they couldn’t access key market information properly which generates high

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) commercialization risks. The constant changing needs of the clients require developing strong customer‐ oriented capabilities and a customized offer, which imposes equal constraints on costs and possibility of fast adaptation to the market. One of the major concerns of SMEs involved in collaboration with competitors is related to knowledge sharing: possibility of information leaks regarding valuable internal technologies, key knowledge spilling over to the partner, insufficient protection of intellectual property. This attitude is strictly correlated with the lack of trust in the partner and poor communication among collaborators about common goals and strategies, which finally impedes the innovation process and the performance of the alliance. Opportunism is regarded as high threat for the surveyed SMEs. Even if SMEs partner in order to reduce costs and gain access to a larger pool of resources, they state than even the partnership lacks sufficient financial resources to fund the innovation process. Lack of financial capital is high on SMEs concerns.

5.2 Open innovation risks mitigation model The factors which determine a SME to reduce the threats residing in opening the innovation process are derived from the SMEs structural advantages over large firms, which allow them to cope better with the risks of collaboration: size, speed and flexibility, power of adaptation, entrepreneurial orientation, business specialization, focus, transparency, people empowerment. Small firms are more flexible which enhances rapid adaptation to market shifts, technological advances or to partner requirements. SMEs can specialize their businesses in niche markets and focus on innovative activities on those markets. This is correlated to the entrepreneurial potential of SMEs, which holds both innovation and risk taking as strategic drivers. SMEs have strong and close relationships with their customers, permanently meeting their interests by customizing their offer. Usually, small firms are perceived as having little bureaucracy but this was not cohesive with our research findings. They communicate rapidly with their business partners and have a dynamic management style, more open to innovation. Once more, the results of our survey didn’t validate this general perception since most of SMEs depicted closed mentality management styles, reluctant to change and open communication.

Figure 1: Open innovation risk mitigation model Parting from these advantages SMEs have over larger companies, based on the practical input offered by the 211 respondent SMEs we have further built a theoretical risk mitigation model for SMEs involved in open innovation partnerships, as depicted in Figure 2. This conceptual model shows the key environments

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) important for SMEs in the innovation process, respectively how the main proposed factors address different type of risks, creating a web of risk management in order to increase open innovation performance. There are multiple interactions among the seven proposed risk mitigation factors and the main risk groups identified, further explained. During our research we found that increased entrepreneurial orientation limits the risk of open innovation. Fostering an organizational culture focused on people empowerment and development of workforce skills can boost the SMEs potential for innovation while involved in external partnerships and, in the same time, limit the risks encountered. Highly skilled entrepreneurs reduce the knowledge sharing risks. If people understand the impact of their work on the innovation partnership, the innovation performance will improve and risks better managed. Open innovation equals transparent communication among partners, which enables them to reduce knowledge risks, collaboration risks and misinterpretations of information inside the firm. SMEs questioned were little aware of the importance of this variable but acknowledged the fact that communication stands as a powerful tool to transfer risk information among members of a project team. Hence, communication enhances the risk knowledge sharing among innovation partners, thus improving the risk management process with the knowledge component. Collaboration with innovation partners is based on trust principles and strong personal relationships among partners. A key factor contributing to reducing the risks residing in open innovation is trust built among partners. It is all reduced to how much people choose to open when partnering, or how they use the knowledge gained. In order to avoid risk, they may have to embrace the risk of investing trust in their partners, in order to be successful. Trust translates as a key success factor for competitiveness and building a climate of trust inside the partnership mitigates the knowledge sharing risks. By adopting a customer‐centric approach, SMEs can significantly shift towards involving the client in the process of open innovation by tailoring the products and services on their individual needs and feedback. Continuous learning also ensures rapid adaptation to the changes in regulations affecting the open innovation agreements and a more speedy orientation towards sources of financing. It has also a direct effect on knowledge protection: by obtaining, assimilating, transforming and utilizing external knowledge to innovate, through constant learning, SMEs are better able to protect their intellectual property and to reap the rewards from partnering for innovation purposes. An increase of training costs should also lead to lower transaction costs. Our survey revealed that organizational learning is the only variable that addresses all type of risk in our structural framework, highlighting the importance of investment in knowledge SMEs should place. Clear leadership is needed in order to ensure the pursuit of the partnership’s strategic objectives by providing clear rules, strong vision and ensuring discipline of the collaboration agreement. Strong leadership defines the roadmap and sets attitudes examples for the workforce involved in open innovation. Even if financing the open project remains a constant concern, guidance is essential for making sure the partners use their professional advantages to increase the financial sources. Because of widespread unethical business practices, SMEs refrain from co‐operation. Fostering a social capital which supports ethic behaviour among partners or among the actors in the open innovation process and the state administrative bodies ensures the development of a culture that excludes corruption. Since in Romania corruption is listed as the most important problematic factor for doing business, cultivating work ethic acts upon workforce quality, collaboration performance and upon building a culture based on trust among partners. Through the proposed model we assert that workforce, collaboration and organizational culture risks are more addressed to than the other open innovation threats and show a highest mitigation potential, while access to finance is much harder to be mitigated in the Romanian background. Furthermore, few tools to reduce the threats imposed by technology advances are within reach for small firms.

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5.3 Validation of the open innovation risk mitigation model In our second round of surveying, we have defined six variables that we considered as having major influence in reducing open innovation risks and we asked our 211 respondents about the magnitude and impact of mitigation of these factors on the structured seven main risks. We thus enquired how people empowerment, trust, communication, leadership, learning and ethic behaviour determine a decrease in risks brought about by workforce, organizational culture, collaboration itself, regulations and market barriers, clients, access to finance and technology advances. The six mitigation factors were assessed with a 5‐point Likert scale, from “1” being “very low” magnitude / possibility of impact upon the structured seven risks to “5” being “very high”. Our goal was to assess which of the six factors might have the greatest mitigation impact upon the main threats identified, and which of these risks present the highest potential to be reduced. In order to assign initial probabilities of these risks being mitigated, but also to provide the scale of impact of the six variables and their conditional probabilities, we used the integrated results of the questionnaires. As shown in Figure 3, the first step in our cross‐impact analysis was to estimate initial probabilities of mitigation for the seven types of risks, considered to be independent of one another. These initial probabilities range from 0.10 to 0.85. The six column variables consist in the factors considered to help mitigate the risks identified. Thus, we analyze what is the magnitude of impact of the proposed mitigators towards the seven risk groups.

Figure 3: Trend value matrix For the trend value cross impact matrix we used a scale of 1 to 5 to indicate the level and direction of impact of the six variables. Conditional probabilities, as presented in Figure 4, range from 0.05 to 0.90. The conditional probabilities matrix must be interpreted as such: "if the column events were to occur, then what would be the probability of impact of risk mitigators on the seven types of risk?” The conditional probabilities are assessed by integrating questionnaire results.

Figure 4: Conditional probability matrix The likely cross‐impact matrix represents a multiplication of the trend value matrix and conditional probabilities matrix, as presented in Figure 5. Then, by multiplying this resulted matrix with the initial probability vector, we obtain the expected mitigation impact of each of the six critical variables: people

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) empowerment, communication, trust, learning, leadership, ethic behaviour, as well as the main probabilities of occurrence of the seven risks.

Figure 5: The likely cross‐impact matrix The results emphasize that the risks with the highest potential to be addressed to are collaboration risks, workforce deficiencies and organizational culture risks, considering the highest three impact scores in the matrix: 14,9, 19,2, 13,8. SMEs perceive people related problems to impede the most the innovation potential; additionally our findings support the idea that the human resources deficiencies are the first to be addressed in a risk management strategy. On the other hand, access to finance is a subject hard to be tackled in the Romanian business landscape, SMEs considering this risk the hardest to overcome. We have also empirically tested which of the six risk mitigation factors proposed have the greatest power to diminish external innovation problems. We found that organizational learning and a continuous investment in knowledge diversity results in fewer people related risks, collaboration deficiencies and organizational culture risks. Learning has the greatest impact on workforce deficiencies and it results to be less efficient in trying to overcome insufficient financial resources problems. Alternatively, people empowerment was found to have the lesser power of open innovation risks, especially those related to regulations, technology advances and access to finance. Our research on collaboration risks encountered by firms innovating together highlights the pressure on personnel quality and innovation proneness, top management’s attitude towards risks and innovation, work ethic and string leadership and vision. These findings centred around organizational culture risks are cohesive with the significant work of De Vrande et al. (2009), who asserts that organization and corporate culture‐ related issues that typically emerge when two or more companies are working together are clearly the most important barriers/ that firms face when they engage in open innovation.

6. Conclusion The use of external relationships is increasingly interpreted as a key factor in enhancing the innovation performance of modern enterprises (Lasgani, 2012). Therefore, it can be argued that the ability to access external knowledge resources efficiently and overcoming the risks encountered in the process can become a huge competitive factor for SMEs. On the basis of a sample of 211 SMEs, this paper has empirically explored the risk agenda SMEs encounter in the process of open innovation, specifically pointing to some factors which help decrease the threats. Our findings provide important implications for managers concerned with the risk management of innovation cooperation. Within the survey, our work highlights that open innovation in Romanian SMEs is impeded by risks related to insufficient financial resources, inexperienced, unmotivated and unwilling to cooperate people, poor adaptation to technological advances in the industry, knowledge sharing risks, weak social capital and noteworthy regulation risks. The research results support the potential or organizational learning and investment in knowledge, of solid leadership and ethical behaviour to help cope with the risks smaller firms encounter in external partnerships. On the other hand, access to financing is fund to be difficult even in collaboration agreement. None of the six mitigation factors were proven to have significant impact on reducing the financing risk. Also, SMEs don’t possess enough tools to overcome the market changes risks, the regulations burden or the technology advances which need rapid adaptation to.

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Adrian Dumitru Tanțău and Eliza Laura Paicu (Coraş) The limitations of our study were given by the relatively small sample of SMEs surveyed, in a specific region of Romania. Moreover, the risk mitigation model was defined based on six factor we have provided through the questionnaire, which may have biased the respondents since other influential mitigators could have been identified. As a consequence, we cannot claim that our survey data capture the full domain of external innovation risks. We thus recommend further research on risk management in the case of SMEs open innovation, by expanding the number of firms investigated and furthermore examining the findings in different emerging markets in order to adapt the risk framework.

References Brockhoff, K. and Brockhoff, K. (1992) „R&D Cooperation between Firms‐A Perceived Transaction Cost Perspective”, Management Science, 38(4), pp.514‐524 Chesbrough, H. (2003) “Open Innovation”, Harvard Business School Press, Boston, pp. 43‐62 Dahlander, L., and D. M. Gann (2010) “How Open Is Innovation?”, Research Policy 39 (6), pp. 699–709. De Vrande, V. et al. (2009) “Open innovation in SMEs: Trends, motives and management challenges”, Technovation, No 29, pp. 423–437 Enkel, E., Gassmann, O., & Chesbrough, H. W. (2009) „Open R&D and open innovation: Exploring the phenomenon” R & D Management, 39(4), pp. 311–316. European Commission (2008) The New SME Definition: User Guide and Model Declaration. Enterprise and Industry Publications, European Union Publications Office Gassmann, O., Enkel, E., and Chesbrough, H. (2010) ‘The Future of Open Innovation’, R&D Management, Vol. 40 No. 3, pp. 213‐221. Innovation Union Scoreboard 2011 (2012), European Commision, http://ec.europa.eu/enterprise/policies/innovation/files/ius‐2011_en.pdf Islam, A. (2012) “Methods of Open Innovation Knowledge Sharing Risk Reduction: A Case Study”, International Journal of e‐ Education, e‐Business, e‐Management and e‐Learning, Vol. 2, No. 4 R.Katz, T.Allen, (1982) “Investigating the Not Invented Here (NIH) Syndrome: a look at the performance, tenure and communication patterns of 50 R&D project groups”, R&D Management, Vol.12, No. 1, pp.7‐19 Keupp, M.M. and Gassmann, O. (2009) „Determinants and archetype users of open innovation” R&D Management, 39(4), pp.331‐341. Lasagni, A. (2012) “How can external relationships enhance innovation in SMEs? New evidence for Europe”, Journal of Small Business Management 50 (2), pp. 310–339. Laursen, K, and Salter, A. (2006) “Open for innovation: The role of openness in explaining innovation performance among U.K. manufacturing firms”, Strategic Management Journal 27, no. 2, pp. 131–150. Lee et al. (2010) “Open innovation in SMEs ‐ An intermediated network model”, Research Policy, No 39, pp. 290 – 300 Lichtenthaler, U. (2011) “Open innovation: Past research, current debates, and future directions,” Academy Of Management Perspectives, vol. 25, no. 1, pp. 75‐93 Markman, G., Phillip, P., Balkan, D., and Ganoids, P. (2005) “Entrepreneurship and university‐based technology transfer”, Journal of Business Venturing, 20 (2): 241‐263. Thomas, J.B. and L.K. Trevino (1993) „Information‐Processing in Strategic Alliance Building: A Multiple‐Case Approach” Journal of Management Studies, 30, 779–814

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How Planguage Measurement Metrics: Shapes System Quality Man‐Chie Tse1,2 and Ravinder Singh Kahlon 1,2 1 dkode Limited, London, UK 2 University of Ulster, Ulster Business School, Northern Ireland, UK Man‐Chie@dkode.co Ravi@dkode.co Abstract: It is known for innovative IT projects in the public sector healthcare within the UK to fail and disappoint. The announcement of National Programme for IT (NPfIT) is an example, at a cost of £12.7 billion that ended. The problem of IT projects failing have a destructive impact on wasting resources and at the socio‐economic cost to the tax payers. The aim of this paper is to improve the understanding and inter‐relationship qualities between people, process and technology. A quality healthcare innovation project was to consign new improved services and processes to be more efficient and to deliver value to the stakeholders in a competitive sector. The starting point for quality healthcare innovation to take place, two key elements are required, (1) ideas and (2) the implementations of those ideas that bring the innovation process to fruition and gain benefits to the healthcare organisations. The architect ideas need to be implemented into practice to become a practical reality for innovation to transpire and thrive. The underlying problem within the literature review, of introducing new innovative IT systems implemented, focus on functionality and fail to acknowledge measuring production, efficiency and linking to performance. The challenges are cultural changes, expertise of knowledge, technological advances and practice methods. Furthermore, the poor state of challenges is hindered by inadequate understanding and clarification of requirements analysis in IT projects. An innovative public sector healthcare IT project was successfully delivered using the software engineering management methods by Tom Gilb. The empirical use of Planguage a formal, natural language modelling notation, a quantifiable measurement metrics, addressed the problem area of system innovation within the software engineering discipline. The paper establishes how the technique could integrate towards the risk concepts of introducing a new software system including building quality of performance and design within, as often, aftermath, system innovation quality is ‘designed on top’ rather than ‘designed within. The quantified approach is illustrated by describing Planguage concepts and Impact Estimation method that is fundamental towards evaluation of system management – design, people and control processes to analyse and transform. This method enables addressing stakeholder value and viewpoints more visually and explicitly. Further recommendation is subsequently addressed for future exploration works. Keywords: healthcare innovation, public sector, stakeholder, planguage, measurement metrics performance

1. Introduction The notion of system quality is not as simple as it may seem. Engineering system solutions and delivering successful IT projects have been challenging for the UK public sector healthcare. To engineer a system which delivers the performance expectation, several characteristic qualities are desired, relevant to the perspective of the system value. However, many system designs struggle in handling of quality attributes designed into the system. The concept of quality has been contemplated throughout and still remains an intense topic today. Quality has been addressed in numerous academic and organisation reports and various definitions are yielded. For example, conformance to requirements (Crosby, 1979), fitness for use (Juran, 1989), or “a set of inherent characteristics fulfils requirements” (ISO.org, 2013). The aim of this paper sets to address the importance of designing system quality to support both a process and conceptual innovation to deliver radical change in streamlining performance. The objective of this paper explores the role and application of Planguage, a measurement metric technique. The structure of the paper begins with an overview of digitalising healthcare followed by a case study definition. The case approach is then applied by describing Planguage and Impact Estimation method highlighting design of system performance behaviour to better support the project strategy and shape system quality. The last section concludes with evaluation analysis recommendation on how the technique of the model could play further.

2. The digitalisation of healthcare Digitalisation is utilised in vast volume areas within the healthcare, for example, archiving electronic medical records and medical images, CT Scanners and MRIs to initiate exploratory surgery. An early background review of the digitalisation era and the profound impact analysis in higher education context can be found in Kahlon & Tse (2009) paper.

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Man‐Chie Tse and Ravinder Singh Kahlon With the current economic situation, resources are going to be limited for some time. This brings more challenges to the UK public sector healthcare which means the need to find better innovative ways of delivering services as well as to ensure change will happen. With the advances in technologies, digitalisation provides many opportunities and will continue to drive information in a more sophisticated manner. However, this has generated considerable and useful debate about capability, pace, ambition and inevitably, affordability into question.

3. Case application and methodology This section provides an overview of a healthcare case application and methodology undertaken alongside the process, design and scope.

3.1 Problem background and case definition The nature of today’s environment endures rivalry to be more condensed. The demand for service over the years are dramatically increasing year on year. At present, a fragmented process of manual completion of request forms and transmission of information from one location point to another exists. The process, very time constrained, is no longer a sustainable for the modern age. In addition, instead of utilising employees empowered skills and expertise domain knowledge, providing information, counselling advice to ensure optimal treatment, a mundane process utilised over the past 20 years is still in place, causing obstruction to the workflow. This type of model exists in many other UK public sector healthcares and the model limits clinical activities to one centralised area rather than enabling direct delivery care. 3.1.1 Economical analysis The UK public sector healthcare organisation(s) must find ways to increase productivity. The Quality, Innovation, Productivity and Prevention (QIPP) programme requires England’s healthcare trusts to find efficiency savings of £20 billion by 2014‐2015 and innovation is vital for economic growth. Moreover, local commissioners are placing financial pressure, requiring healthcares to deliver effective services (National Audit Office, 2011; NHS, nd; NICE, 2013; Gov.UK, 2013). There is now a critical mass challenge set by the UK Government to enable digital and go paperless by 2018 to save billions, improve services and obtain efficiency gains. Furthermore, digital information can be used to support various levels of professional stakeholders, in the work environment. If healthcare organisations wish to remain competitive to cover the cost of existing processes and utilise new technology, each will have to offer imperatively, a unique innovative and personalised service.

3.2 Process of study and design scope The objectives of the research were to determine how shaping and designing quality into a new innovative system could improve performance and cost savings for the workforce. Innovation was essential to survive and improve the organisation service by enabling an effective and efficient process. In order to manage and introduce a new system and facilitate innovation to happen, understanding the different ways in which the existing work flow in place operated was important. The process flow was broken down into 3 levels, efforts and measurements were concentrated upon and obtained. Planguage and IE table, which is described in more detail in the next section, was adopted in supporting to quantifying the work flow problem. Exploratory research such as information flow, observation’s, time measures, effects of process delay and interviews was obtained through action research. A systematic review was also conducted on past records to determine the eradication of inefficiency in errors categorised by type and severity over two month duration. Also, a review of practices was conducted to coordinate efforts to share experience and know‐how to harmonise best practices. This enabled understanding people perspective between the type of innovation important and the level of learning required to manage training. The existing process and workflow mainstream activity in the organisation was relatively high risk in volume.

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4. Using planguage in healthcare Planguage (Planning Language) developed by Tom Gilb, was designed to quantify qualitative statements. The use of Planguage arranges qualitative statement into a decomposed hierarchy format. Three fundamental performance types are derived from Planguage, (1) potential resource saving, (2) workload capacity and (3) precision of quality (Gilb & Graham, 1994; Gilb & Finzi, 1998; Gilb 2005). Figure 1 illustrates a selection of system performance requirements in specific to the case study, from a top abstract level broken down to aid more clarity. These three rudiments recognises the expression of a stakeholder’s working practice perspective which are reflected and designed as objective value measures into the system. Planguage comprises 7 stages (Figure 2) to facilitate in specifying the performance attributes. Using the established 7 steps, an impact estimation was formulated which is described in the next section.

Figure 1: System performance characteristics

4.1 Evolving an impact estimation table An Impact Estimation (IE) table encompasses 5 elements (Figure 3), presented in a matrix tabular form. Objective requirements are analysed against impact designs of a system at a particular point in time, but also conforming to costs and duration. The matrix highlights a risk overview of alternative design ideas, either part of system architecture or a whole in comparison to system requirements. An IE provides a two‐fold interrelationship. Firstly, in order to understand and express system quality, the three primary questions required are (a) Who are the stakeholders of the system? (b) What are their objectives or requirements and (c) What resources are available? By establishing and providing responses, a system quality criterion is premeditated to determine the level of improvements in supporting the organisation, people, processes and policy. Secondly, target levels provide a representation in realistic terms of the past, present and future benchmarks. The levels are set on the basis of a collaborative stakeholder agreement to ensure the performance levels strived for are achievable. The information collected, indicated where the impact was the most important and to which stakeholder(s). Using collated information, the performance requirements were allocated down the left hand side column outlining the past level and goal target level. This facilitated comparative measures utilising present information based on facts and compare alternatives. Weaknesses were also discovered to determine the level of contribution the part played.

4.2 Shaping the system The goal of introducing a new system is a major ambition for faster, safer and better delivery of services. The system was engineered and designed to mobilise the workforce, be intuitive, user friendly as well as easy to

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Man‐Chie Tse and Ravinder Singh Kahlon learn. After applying the principle of Planguage and IE table, the quantified results were associated as impact relationships to design in (see Appendix A). The modelling language incorporated performance of the operational processes more effectively, tailoring components to new goal circumstances successfully. Figure 4 shows an IE table of the healthcare system based on captured measurements during action research.

Figure 2: 7 Stages of planguage The three core system architecture objectives were derived (Automate rules, Web self‐service and Decision support) with design requirements (Figure 4). These determined in terms of probable impact alongside which objective provided benefit advantage and where the budget were constrained towards. In this system design, the objective of a web self‐service required 25% of the budget and provided a higher benefit to cost ratio of 6.44. Decision support came second with ratio of 3.51 to enable greater reaction in decision making, whilst

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Man‐Chie Tse and Ravinder Singh Kahlon automating rules came last, required a higher budget allocation and time, but returned a benefit cost of only 2.5.

Figure 3: Impact estimation

Figure 4: Healthcare system impact estimation table

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5. The outcome of the research The existing process efficiency rate effect was running at capacity of 28%, conversely, the implementation led to a level change impact increase between 47% ‐ 50%. Adding innovation to the process has been a multi‐ player game. This involved the need to marry political, technological, environment and legal into creating new services and processes, reducing waste, and changing service delivery, switching from paper to digital correspondence. The study has shown the designed system for the organisation increased productivity of transition of workflow to improve quality and make better use of the skills and expertise knowledge of staff. The incidences of errors were significantly reduced as these were designed into the system rather on top. Fostering new technologies contributed to achieve operational efficiencies, avoiding bottlenecks and streamline work flow to enable more fully interaction with patients. This cohesive system acts as a standardised engine driver of innovation and changing the way employees create, and collaborate with patients at ward level, and most importantly, utilise collective productive resources at a mobility level more effectively and efficiently.

5.1 Limitations of findings The study has limitations; firstly, it was conducted in only one healthcare, which could reduce the generalisation of the findings to other healthcares. However, because the work flow process and findings of errors is of similarity occurrence to other healthcares, it is highly probably that comparable beneficial effects will be achieved when applied to other healthcare settings. In acknowledgement, this study is the first that has investigated the effect of a system into phase one of the three interrelated process levels.

5.2 Evaluation of planguage and impact estimation The value of Planguage technique provided strong identification between the distinction of natural language (people) and system (technology) which enabled a correspondence between process (cause) and system (effect). Analysing the current process produced a dimensional representation of people, process, technology and policy. These four elements are central to system innovation in a healthcare orientated environment as well as modelling static domain knowledge. Planguage technique also stimulated predictability where existing process and bureaucracy fails or may stifle innovation. The method contributed towards evaluating the design, shaping system quality. The IE table defined a set of transition criteria to assess the strengths and weaknesses of potential design ideas. These were correlated to quantified requirements through introducing appropriate direct estimation measures. This helped to determine the percentage efficacy, through factor analysis, of how viable each impact analysis according to each design from current existing level to target goal – the residual gap. The modelled benchmark spectrum contributed a better understanding in addressing and taking into account credibility and uncertainties on the elected design choices. This contributed to support in avoiding failures from happening and pinpointing neglected areas. Further identification of the strengths and limitations of using the technique is shown in Table 1.

6. Conclusion Introducing of a new innovative system is fundamental to service transformation and a degree of risk is involved in any innovation project. Creating an innovative system requires careful design involving various professional stakeholders working together to create a viable system to deliver truly holistic benefit. However, it is important to undertake innovation as they are just as critical for driving long term success. This paper outlined an approach towards designing quality value, in system analysis, operational and system development, recognising the boundaries and accountability. Table 1: Advantages and disadvantages of planguage & impact estimation Strengths Delivers the qualities required for a system Provides a cost effective analysis conforming towards budget costs Illustrates the value relationship between stakeholders and system requirements Enables comparison measure of gap existence

Limitations Can only account for observed Reflects only a snapshot specific in time Requires large sample of data

Depicts the instance impact areas for vital improvement and areas of weaknesses

Does not reflect causal relationships between observed and unobserved Lower information exposure

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Man‐Chie Tse and Ravinder Singh Kahlon Strengths Pinpoints where potential goal may not be met Strong method to measure value Transforms vague requirements into measured and planned format

Limitations Lack of representation in visual format

The IE demonstrated the tangible value of where investment is up taken most and least in the new innovative system. Both Planguage and IE provided greater clarity on shaping when, how, where and what towards the aspiration of system quality. Also, the context of problems, challenges and the realm reality of existing process were ameliorated to make better decisions. The technique illustrated a measurement metrics and its volatility traces to reach that route, providing to offer a rich base robustness for both informal and formal system quality assurance. As for future works, visualisation of Planguage should be an aspect considered for evolvement.

Appendix A Table 2: Design impact relationships

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References Crosby, P. (1979) Quality is Free. McGraw Hill, New York, USA. Gilb, T. & Graham, D. (1994) Software Inspection. Addison Wesley, USA. Gilb, T. & Finzi, S. (1998) Principles of Software Engineering Management. Addison Wesley, USA. Gilb, T. (2005) Competitive Engineering: A Handbook For Systems Engineering, Requirements Engineering, and Software Engineering Using Planguage. Butterworth‐Heinemann, Oxford, UK. Gov.UK, (2013) Making the NHS more efficient and less bureaucratic [Online]. Available from: https://www.gov.uk/government/policies/making‐the‐nhs‐more‐efficient‐and‐less‐bureaucratic [Accessed: 28/03/2013]. ISO.org (2013) ISO 9000 quality management ‐ ISO. [Online] ISO. Available from: http://www.iso.org/iso/home/standards/management‐standards/iso_9000.htm [Accessed: 25/02/2013]. Juran, J. M. (1989) Juran on Leadership For Quality. Free Press, USA. Kahlon, R. S. & Tse, MC. (2009) The Impact of Digitalisation in Higher Education Libraries. In: Proceedings of the 2009 International Conference on the Current Trends in Information Technology ‐ 15 &16 December 2009, Dubai Womans College, Dubai, U.A.E, Volume 1, No. 1, Pp. 184‐189. National Audit Office (2011) National Health Service Landscape Review [Online]. Available from: http://www.nao.org.uk/wp‐content/uploads/2011/01/1011708.pdf [Accessed: 28/01/2013]. NHS (nd). Everyone Counts: Planning for Patients 2013/14 [Online]. Available: http://www.commissioningboard.nhs.uk/wp‐content/uploads/2012/12/everyonecounts‐planning.pdf [Accessed: 28/03/2013]. NICE, (2013) Quality, Innovation, Productivity and Prevention (QIPP) [Online]. Available from: http://www.evidence.nhs.uk/qipp [Accessed: 28/01/2013].

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A Study of Customer Feedback and Employee Driven Innovation Jiro Usugami School of Business, Aoyama Gakuin University, Tokyo, Japan usugamij@busi.aoyama.ac.jp Abstract: This study examined the practical relationship between customer feedback and implementation of service improvements, the problem solving processes and the way of employee participation in customer feedback, the effects of customer feedback on customer service improvement and firm competitiveness, as well as the bottlenecks for employee driven innovation, in the Japanese hospitality industry, based on three case studies: an airport terminal company; an airline company; and a railway company. Firstly, this study has revealed that the majority of the customers’ opinions gathered in our case studies were related to the desires for richer service and easier transfer, and comments on the perceived inconvenience at the facilities. In response to those opinions, various kinds of service improvements have been fulfilled. Our case studies have established similar and systematic customer feedback consisting of three or four steps of problem solving processes from data gathering to implementation including feedback, and related employees have participated in the entire processes. At the implementation step, the participation of cross‐functional employees is significant. Secondly, this study verified the recognition that customer feedback strongly contributed to customer service improvement and firm competitiveness in the Japanese hospitality industry. Thirdly, we investigated which process to be driven by employees was regarded as the hardest one in the four steps of customer feedback: data gathering; data sharing; implementation; feedback, and what was the important issue in customer feedback. Our case studies evidenced that the hardest step to be driven by employees was implementation or data gathering followed by data sharing. This study observed that the bottlenecks for employee driven innovation included conflicts in the cross‐functional implementation and difficulties in the analyses of any opinions concerning customer services. Keywords: customer feedback, customer service improvement, employee driven innovation, hospitality industry

1. Introduction This study discusses whether customer feedback has contributed to practical customer service improvement as well as firm competitiveness, how employees participate in the problem solving processes, and which process to be driven by employees is regarded as the hardest one in customer feedback of the Japanese hospitality industry (e.g. air business), based on case studies. Customer feedback in this study refers to the various organizational activities performed in response to specific desires, complaints or other various comments received from customers as regards the firm’s products, services and facilities. Customer service improvement in this study is identified as a part of employee driven innovation (EDI) of umbrella concept. EDI refers to “the generation and implementation of significant new ideas, products and processes, including the everyday remaking of job‐related and organizational practices originating from the interactions of employees who are not assigned to a particular task. The processes are unfolded in an organization and may be integrated in cooperative and managerial efforts of the organization. Employees are active and may initiate, support or even drive/lead the process (Høyrup, 2012).” There are numerous previous studies on customer feedback and service improvement. Most of them have been conducted in the field of Customer Relationship Management (CRM) and have shown statistical relationships between customer feedback and its outcomes. A few of them reported the three factor interplay of practical customers’ opinions, employee participation and any service improvement in hospitality industry. The first purpose of this study is to reveal the practical relationship between customers’ opinions and customer service improvement in the Japanese hospitality industry. For this purpose, we examined what specific desires, complaints or other comments received from customers in our case studies had resulted in what kinds of real service or facility improvement. The second purpose is to verify whether CRM has contributed to customer service improvement and firm competitiveness in the Japanese hospitality industry through a questionnaire survey for our case studies. The third purpose is to identify which process to be driven by employees of the Japanese hospitality industry is regarded as the hardest one in the four steps of customer feedback: data gathering; data sharing; implementation; feedback.

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Jiro Usugami One of the features of this study is detailing the relationship between real customers’ opinions and service improvement practically fulfilled in response to them. Many of the previous studies have discussed customer feedback from the business performance aspect. This study has evidenced the incremental innovation processes in the Japanese hospitality industry where specific desires, complaints or other comments gathered in our case studies have systematically contributed to concrete implementation of service or facility improvement. Another feature is the analysis of customer feedback by means of the problem solving process approach. The majority of the previous studies have utilized the cause and effect approach. This study examined how employees participated in each step of the problem solving processes of customer feedback in the Japanese hospitality industry. The remainder of the paper is structured as follows: a literature review, the methodology, the results of our case studies, and conclusions.

2. Literature review The literature review for this study is divided into three research streams: CRM and service improvement; employee driven innovation; service innovation in the hospitality industry. The first stream refers to the research discussing how the relationships with customers contribute to service improvement in the hospitality industry. Ngo and O’Cass (2012) explored the interrelationships of service innovation capability, customer participation and service quality, based on the data drawn from services firms in Australia. Their empirical study showed that the customer participation enabled the conversion of technical and non‐technical innovation capabilities into superior service quality. It reported that service quality positively enhanced the firm’s performance. This study did not question the role of employees. Peltier et al (2013) examined the interrelationships of customer data quality, organizational learning processes, and customer and business performance. Their survey results for financial services in the United States indicated that success factors for CRM depended on the organizational culture, cross‐ functional incorporation and customer data quality. This study showed the positive effect of cross‐functional corporation and data sharing across the organization on business performance. These two factors verified the importance of the employee involvement. The second stream concerns EDI. There are some representative papers. The Danish Confederation of Trade Unions (LO) conducted a questionnaire survey for Danish companies targeting both the management and the shop stewards from the same workplace. The results reported that EDI had positive impact on the business performance and job satisfaction. Peter Kesting et al (2010) said, “EDI refers to generation and implementation of significant new ideas, products and processes originating from a single employee or the joint efforts of two or more employees who are not assigned to a task.” This study identified the drivers of employee participation including management support, the environment for idea generation, decision structure, as well as the corporate environment and culture/climate. Teglborg (2012) discussed the advantages and disadvantages of EDI based on case studies. EDI is supposed to encourage employee motivation and competitiveness. However, the results revealed the negative effects of EDI such as a vector of inextricable tensions. Song Chang et al (2011) defined that hiring multi‐skilled core customer‐contact employees and training core customer‐contact employees for multiple skills both had significant positive effects on incremental and radical innovation for hotels and restaurants. This study questioned how hospitality companies promoted incremental and radical innovation through human resource management.

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Jiro Usugami Meng‐Lei Monica Hu (2001) investigated the relationship between hospitality team and service performance. Their employee survey for international tourist hotels found that in order to achieve a high level of service innovation, an organization needed to develop knowledge‐sharing behaviors and a better team culture. Their study pointed out that the studies at that time had focused not on the effects of team work but of individual work. The third stream includes the research on service innovation in the hospitality industry. Halpern (2010) identified the sources of marketing innovation at the airport, based on a questionnaire survey. The results showed that three sources (modifying facilities or service, using strategic marketing partnerships, and targeting airlines for new or existing routes) were more evaluated than others (e.g. improving the management process, promoting a recognized brand). The results also indicated that marketing innovation had a significant positive effect on the marketing performance of airports. Although the author did not question the employee participation, he mentioned the importance of customer related service and support. Grissemann et al (2012) analyzed the interplay of innovation, customer orientation, and business performance in the hotel industry. Their empirical findings evidenced that both customer orientation and innovativeness influenced a hotel’s innovation behaviors. Customer orientation further affects a hotel’s innovativeness, financial performance and customer retention, as well as reputation. In the context of employees in hospitality industry, consumer‐contact staff plays an important role on generating the ideas for innovation. To summarize, major recent studies have reported the positive effects of CRM and/or EDI on service innovation/business performance in the hospitality industry. However, only few researchers showed the practical interplay of customers’ opinions and service innovation, or the bottlenecks in the problem solving processes of customer feedback driven by employees.

3. Methodologies Firstly, we explored the website information and official reports of three case studies in the Japanese hospitality industry in order to research the examples and systems of their customer feedback. We investigated the desires, complaints or other comments gathered from customers and specified in our case studies, as well as the service and facility improvements which they implemented in practice in response to customers’ opinions. We also examined what practical steps were utilized in the problem solving processes of customer feedback by our case studies, from data gathering to feedback, and how employees participated in them (Table 1). Table 1: Problem solving processes and participants Step Process Participants

1st step Data gathering Customers Employees Managers

2nd step Data sharing Employees Managers Specialists

3rd step Implementation Employees Managers Specialists Affiliated organizations

4th step Feedback Employees Customers Managers Specialists Affiliated organizations

Secondly, we conducted a questionnaire survey for our case studies and asked whether customer feedback had contributed to customer service improvement and firm competitiveness, which step of problem solving processes was regarded as the hardest to be driven by employees, and inquired about the important issue in customer feedback.

4. Results of case studies We conducted a research and a questionnaire survey for three case studies in order to examine the practical relationship between customer feedback and service improvement, the role of employees in customer feedback, the recognition concerning the effects of customer feedback, and the important issues of customer feedback including the bottlenecks for EDI in the Japanese hospitality industry. First of all, the exploration of our three case studies in the websites showed that they had established similar and systematic customer feedback. Two out of them have three steps and the remainder has four steps of problem solving processes from data gathering to feedback. However, for the comparative analyses of our

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Jiro Usugami questionnaire survey, the problem solving processes are divided into four steps: data gathering, data sharing, implementation and feedback. At the data gathering step, any desires, complaints or other comments from customers are received by the customer relationship center through the customer feedback box, direct comments submitted to the frontline employees, telephone, email, etc. At the next step, the opinions concerning customer services are analyzed and shared by employees. The third step, or the third and forth step, starts with the project team or customer satisfaction (CS) meeting which consists of team members or cross‐functional employees, including the manager’s commitment, specialist’s participation and cooperation of the affiliated organizations. They discuss the specific desire, complaint or comment from customers and implement a service or facility improvement in response to it, with the result that the customers receive a richer service or use a more convenient facility. The fulfillment of customer feedback is introduced and published in the website and official report of the firm. In each result of our case studies, they detailed a few examples of customers’ opinions and service or facility improvements in response to them, presented the steps of problem solving processes in their customer feedback system as well as the way of employee participation, and reported the answers to our questionnaire survey including the following questions. Q1. Do you think that customer feedback contributes to your customer service improvement? Q2. Do you think that customer feedback contributes to your firm competitiveness? Q3. Which is regarded as the hardest process to be driven by employees in the four steps: data gathering, data sharing, implementation and feedback? Q4. What are the important issues of your customer feedback? Case 1: Company A ‐ an airport terminal company – A is a local airport terminal company in Japan. They say, “We value customer feedback and reflect it in our improvement measures.” Table 2 shows the examples of their practical service improvements fulfilled in response to customers’ opinions. Table 2: Customers’ opinions and service improvements Data gathering Customers’ opinions It is hard to find the local line departure counter without the sign indicating the directions for getting there. It is hard to find the special assistance vehicle stop. The number of baby cars is low. Hoping that the airport has a place to rest and relax, and to take a shower.

Implementation/Feedback Service improvements A new sign indicating the directions for the local line counter has been added. A bigger sign informing the special assistance vehicle stop has been fixed. 16 more baby cars have been added, amounting to the total of 32 baby cars. The country’s first airport relaxation facility to feature natural hot springs has been established.

Company A has three steps of problem solving processes in their customer feedback: data gathering, data sharing and implementation including feedback. At the first step, for the purpose of gathering any desires, complaints or comments from customers, the customer relationship center has fixed a ‘customer feedback box’ with an indication in multiple languages at twelve places at the airport terminal, in addition to their website. At the second step, the customers’ opinions are analyzed and specified in order to be shared by employees. At the third step, the CS meetings driven by appropriate employees, including cross‐functional employees, discuss the implementation of service or facility improvement in response to a specific desire, complaint or

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Jiro Usugami comment from the customers. According to the decision of the CS meetings, a service improvement is fulfilled and provided to the customers. Table 3 presents the answers of Company A to our questionnaire survey. They recognized that customer feedback contributed to their customer service improvement and firm competitiveness. They reported that the hardest process to be driven by employees was implementation, and the important issue was the invisibility of cost‐benefit in their customer feedback. Table 3: Results of questionnaire survey Q1 Q2 Q3

Do you think that customer feedback contributes to your customer service improvement? Do you think that customer feedback contributes to your firm competitiveness? Which is regarded as the hardest process to be driven by employees in the four steps: data gathering, data sharing, implementation and feedback? What are the important issues of your customer feedback?

Yes. We strongly think so. Yes. We think so. Implementation is the hardest step, followed by data sharing, feedback and data gathering. Cost‐benefit is invisible.

Case 2: Company B ‐ an air line company – B is a large Japanese air line company. They have established a system of service quality management including customer feedback. Table 4 shows the examples of service improvements in response to the customers’ desires for new services and complaints against difficulties in utilizing the service and facility. Table 4: Customers’ opinions and service improvements Data gathering Customers’ opinions Hoping that there are more menus available for the premium class breakfast besides the Japanese style menu. Desiring easier boarding for the passengers with wheelchairs when using a ramp. It is hard to explore the support information for the passengers with physical disabilities. It is hard to see how crowded the security check area is, and to move the baggage from the waiting table to the checking table.

Implementation/Feedback Service improvements Some local lines started to serve both the Japanese and western style breakfast. A wheeled stretcher has also been made available at some airports, besides a passenger boarding lift or a wheelchair stair lift. A new click button ‘for passengers with physical disabilities’ has been placed on the top page of the website. The walls of security check areas at Haneda airport have been changed to clear glass in order for the passengers to see the crowdedness easily. The waiting table has been combined with the checking table for easy moving of the baggage.

Company B strongly values the customers’ opinions and prepares a problem solving cycle for customer feedback, consisting of three steps: data gathering, data sharing and implementation including feedback. At the first step, the customer relationship center named as ‘customer desk’ gathers any opinions concerning customer services directly from customers or through employees. The frontline employees are supposed to report what they notice to the customer desk as well as the submitted customers’ opinions. Both customers’ opinions and employees’ comments are organized, shared and utilized by the employees in the whole company. At the second step, appropriate members of the customer desk identify the desires, complaints or other comments from the customers and frontline employees, and analyze them as organizational issues. At the third step, the plans for solving problems are made and fulfilled by the appropriate sections or the technical team consisting of cross‐functional employees. The most important issues are discussed at the CS promotion meeting. Not a few service improvements are implemented involving their affiliated organizations. The results of our questionnaire survey for Company B are reported in Table 5. They answered that customer feedback strongly contributes to their customer service improvement and firm competitiveness. They indicated that the implementation step was regarded as the hardest process to be driven by employees in their customer feedback, as well as it generated conflicts among cross‐functional employees. In addition,

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Jiro Usugami further creation of consciousness for customer priority and efficient analyses of the opinions concerning customer services were pointed out as the important issues. Table 5: Results of questionnaire survey Q1 Q2 Q3

Yes. We strongly think so. Yes. We strongly think so. Implementation is the hardest step, followed by data sharing, data gathering and feedback. Reduction of conflicts in the cross‐ functional project for implementation. Further creation of consciousness for customer priority. Developing appropriate and efficient analyses of customers’ opinions and frontline employees’ comments.

Case 3: Company C ‐ a railway company – C is a representative railway company in the capital area in Japan. They receive more than two million customers’ opinions within the period of one year. Many of them are desires and comments for smoother transfer. The examples of their service improvements in their customer feedback are presented in Table 6. Company C recognizes the customers’ opinions as important business resources and utilizes four steps of problem solving processes in their customer feedback. At the first step, the customer relationship center receives all the customers’ opinions by telephone, email, fax, regular mail and frontline employees, as well as all the comments from the employees concerning service improvement. At the second step, the customers’ opinions and employees’ comments are quickly forwarded to the appropriate members who review and analyze them. The reviewed opinions and comments are regularly reported to all members of the company including the executives. At the third step, the appropriate sections or the cross‐functional teams and meeting groups discuss problem solving plans and implement specific service or facility improvements. At the fourth step, company C publishes information on service improvement based on customer feedback and prepares for responding to further desires or complaints from the customers. Table 6: Customers’ opinions and service improvements Data gathering Customers’ comments Hoping that the passengers with wheelchairs are able to transfer easily at Asakusa station. It takes time to find the exit or the directions for changing trains. The route from a certain entrance to line M is too long and confusing without signs indicating the directions for line M.

Implementation/Feedback Service improvements A new gate has been set up at Asakusa station, so that the passengers with wheelchairs could pass barrier free floors from the train to the gate. The directions for the exit and changing trains are now displayed in a few lines on the screen in advance of arriving at the station. A new sign has been fixed at the entrance in order to indicate the more convenient entrance for line M.

Table 7 shows the answers of Company C to our questionnaire survey. They recognized that customer feedback strongly contributed to their customer service improvement and firm competitiveness. They mentioned the difficulties in data gathering, in linking the problems concerning sectional services with the issues of the whole company, and in analyzing the customers’ opinions and giving them priority.

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Jiro Usugami Table 7: Results of questionnaire survey Q1 Q2 Q3

Yes. We strongly think so. Yes. We strongly think so. Data gathering is the hardest step, followed by data sharing, implementation and feedback. Challenges as regards linking the problems concerning sectional services with the issues of the whole company. Challenges as regards analyzing the customers’ opinions and giving them priority.

5. Conclusions This study discussed the practical relationship between customer feedback and service improvement, the problem solving processes and the way of employee participation in customer feedback, the effects of customer feedback on customer service improvement and firm competitiveness, as well as the important issues of customer feedback including the bottlenecks for EDI, based on three case studies. The first purpose of this study was to examine what specific customers’ opinions had resulted in what kinds of real service or facility improvements in the Japanese hospitality industry. The majority of the customers’ opinions gathered in our case studies were related to the desires for richer service and easier transfer, and comments on the perceived inconvenience at the facilities. In response to those opinions, our case studies have fulfilled various kinds of service improvements. For example, they have prepared a new wheel stretcher or set up a new barrier free route in response to the desires for easier and smoother movement from the customers with wheelchairs. They have fixed a new sign indicating the directions or changed the size of the sign informing about a place in response to the customers’ complaints on difficulties in finding the route for a destination or the location of a facility. They have also added natural hot spring facilities or a new meal menu in response to the comments from the customers who desired richer services. The second purpose of this study was to verify whether CRM contributed to customer service improvement and firm competitiveness through a questionnaire survey for our case studies. The results showed that customer feedback strongly contributed to customer service improvement and firm competitiveness in the Japanese hospitality industry. The third purpose was to identify which process to be driven by employees of the Japanese hospitality industry was regarded as the hardest one in the four steps of customer feedback: data gathering; data sharing; implementation; or feedback, based on a questionnaire survey for our case studies. Two out of the three case studies answered that implementation was the hardest process to be driven by employees, followed by data sharing. The remainder indicated that data gathering was the hardest step, followed by data sharing. In addition, our case studies referred to some important issues of customer feedback, such as invisibility of cost‐benefit, reduction of conflicts in the cross‐functional implementation, and challenges as regards appropriate and efficient analyzing any opinions concerning customer services as well as giving them priority. This study concluded that CRM of our case studies contributed to practical customer service improvement and firm competitiveness; appropriate or cross‐functional employees participated in the incremental innovation processes of customer feedback; and the bottlenecks for EDI included the difficulties in data specifying and cross‐functional project, in the Japanese hospitality industry.

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6. Limitations and future research In this study, research data is limited for descriptive analyses based on the case studies. However, the findings from our case studies will be relevant to the other Japanese hospitality industries. Additional quantitative research is necessary in order to examine both similarities and differences of customer feedback and employee driven innovation in the Japanese hospitality industry.

References Chang, Song Yaping Gong, Cass Shum (2011) Promoting innovation in hospitality companies through human resource management practices、International Journal of Hospitality Management，Vol 30‐ 4, December 2011, 812‐818. Grissemann , Ursula, Andreas Plank, Alexandra Brunner‐Sperdin(2013) Enhancing business performance of hotels: The role of innovation and customer orientationInternational Journal of Hospitality Management, Vol 33, 347‐356. Halpern, N. (2010) Marketing innovations: sources, capabilities and consequences at airports in Europe’s peripheral areas, Journal of Air Transport Management, 16(2), 52‐58. Høyrup, S., Bonnafous‐Boucher, M. Hasse, C., Lotz, M., and Møller, K. (eds) (2012)Employee‐Driven Innovation: A New Approach, Palgrave Macmillan Høyrup, S (2012) Employee‐driven Innovation: A New Phenomenon, Concept and Mode of Innovation;A new approach (pp. 3–33)，Palgrave Macmillan.; Hu, Meng‐Lei Monica, Jeou‐Shyan Horng, Yu‐Hua Christine Sun (2009) Hospitality teams: Knowledge sharing and service innovation performance, Tourism ManagementVol. 30‐11, 41–50. Kesting, P. and Ulhøi, P. (2010) "Employee‐driven innovation: extending the license to foster innovation", Management Decision,Vol. 48, 65‐84. Ngo, L.V. and O’Cass, A.(2012) Innovation and business success: the mediation role of customer participation, Journal of Business Research, available online 30 March 2012. Peltier, James W. Debra Zahay, Donald R. Lehmann (2013) Organizational Learning and CRM Success: A Model for Linking Organizational Practices, Customer Data Quality, and Performance, Journal of Interactive Marketing, Vol. 27‐1, 1‐13. Teglborg, A, R.Redien‐Collot, C.Viala &M.Bonnafous‐Boucher (2012) Employee‐driven Innovation: Operating in a Chiaroscuro A new approach (pp. 33‐56)，Palgrave Macmillan.

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Space Technology Transfer: A Systematic Literature Review Karen Venturini1 and Chiara Verbano2 1 University of San Marino, Republic of San Marino 2 University of Padua, Padua, Italy kventurini@unirsm.sm chiara.verbano@unipd.it Abstract: Technology transfer has been shown to stimulate innovation in business and commerce, support economic growth and provide a return on public investment in R&D. This is particularly true for space technologies characterized by a very high innovative value and production in small quantities. The aim of this paper is to systematically review the space technology transfer literature and to suggest directions for future research. The transfer of space technology has been studied by academic researchers, managers of space agencies and government ministry officials. The range of studies calls for a systematic review of the literature aimed at synthesizing the findings from individual studies or reports in an unbiased manner, so as to present a balanced and impartial summary and to interpret the findings in a way that highlights the research gaps in this important field of research. This paper presents an overview of the dominant thinking (made explicit in the selected articles) from the 1995 until today, indicating problems of analysis, research gaps and a future research agenda. Keywords: space industry, technology transfer, space technology, spinoff

1. Introduction In 2011, NASA reported that approximately 100 companies had used spin‐off technologies. Some of the benefits of this use were more than 12,000 lives saved, more than 9,200 jobs created, and savings of more than $6.2 billion (Space Foundation, 2012). The U.S. space economy grew by 12% in 2011, reaching an estimated total of $289.77 billion. As in past years, the majority of this growth was a result of commercial success rather than increases in government spending (Space Foundation, 2012). The potential inherent in space technologies to be transferred and to generate new innovative processes has been evident since the founding of NASA. In 1960, NASA created an Office of Technical Information and Educational Programs to implement a technology dissemination strategy, and since then it has continued to promote transfer programs, supporting firms in their demands for technology and disseminating information through the annual publication “NASA Spinoffs” (Selly, 2008). Similarly, other countries and their space agencies also began to take an interest in the processes of space product transfer. Over the last 50 years, scholars and scientists have reported, and in some cases analyzed this phenomenon in major international journals. However, no one has ever collected and interpreted this body of publications. The primary objectives of this article are to systematically review the space technology transfer literature and to provide direction for fruitful future research. A systematic review of the literature follows an explicit, rigorous and transparent methodology (Fink, 2005). According to specific criteria of selection, we constructed a database of 40 articles and then we interpreted the database respecting the areas of major interest in the development of technological transfer processes, namely: actors, geographical context and industrial sectors, motivations, space technologies, paths, models and mechanisms, impact/effectiveness, determinants and barriers. The results contain a summary of findings from each area of interest of technology transfer (TT). The paper is organized as follows: firstly, we describe the methodology used for identifying and selecting the papers. Secondly, we review the papers along descriptive characteristics and six topics of interest. Thirdly, the conclusions include those that are referred to in the literature as "future researches”.

2. Methodology The analysis process involved the completion of the following activities (Hackett and Dilts, 2004): a) Selection of databases and identification of papers.

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Karen Venturini and Chiara Verbano To identify the collection of papers for review, we conducted an electronic journal database search. We used the online databases ProQuest ‐ ABI/Inform and ScienceDirect because they store the abstracts and full texts of the majority of ISI management journals. The objective was to conduct a survey of all published research on technology transfer from space companies to the industrial system, written in English between 1995 and early 2012. The search in electronic database required the identification of keywords taken from the definition of the concept of technology transfer. Bozeman (2000) defines technology transfer (TT) as the process that allows the passage of a technology from one organization (donor) to another entrepreneurial organization (receiver), but there are many definitions and synonyms for the concept of transfer such as adoption or acquisition (Brisson, 2006); valorization or adaptation (Autio and Laamanen, 1995), commercialization (Philips, 2002; Williams and Gibson, 1990), diffusion (Rogers and Shoemaker, 1971, Rogers, 2003) and spin‐offs (Szalai, Detsis and Peeters, 2012; Venturini, Verbano and Matzumoto, 2013). In relation to the reference context, the keywords used were as follows: space industry or space sector, aerospace sector and aerospace industry; space programs and space agencies, national research centers and systems integration companies that represent the main promoters of transfer processes. b) Selection of papers. In the second stage of the analysis we selected the articles for review. We decided to investigated the inter‐ firm typology of TT, that is between a space firm and a firm in the recipient sector (Cohendet, 1997). A first selection led to the rejection of articles on the following topics:

International and intra‐firm technology transfer between companies operating in the space sector;

Transfer of aircraft technologies;

Space policy and space activity that did not explicitly refer to technology transfer.

The first database comprised 112 items. A further selection process took place to ensure that the articles selected were completely in line with the research objective. Articles were discarded if the object of research was not the transfer of technology or the scope of the analysis was not exclusively the space sector. c) Classification and analysis. In the last stage we proceeded to analyse the database according to the following parameters:

Descriptive characteristics: journals discipline sector, year of publication, professional field, productivity of the authors and research type (theoretical, empirical, or literature reviewing);

TT topics and results of previous studies: a) Actors, geographical field of reference and sectors involved, b) Motivations and mechanisms, c) Space technologies transferred, d) Paths and models, e) Impact/effectiveness and f) Determinants.

3. The descriptive characteristics of the space TT database The database obtained as a result of the identification and selection of articles is composed of 40 papers (Table 1). The distribution of articles among journals was highly skewed toward journals with an economic perspective, particularly those published in the Journal of Technology Transfer, which devoted an entire issue (in 2002) to the subject of the transfer of technology from space programs and the measurement of its effects. Management and economics experts (who mainly publish in economic journals) were the first to analyze and achieve a greater scientific output on technological transfer in space, having realized the enormous potential of space technologies. The temporal distribution of articles has been fairly constant over time, with the exception of a peak in 2002 with 8 papers, which was due to a special issue dedicated to technology transfer in the Journal of Technology Transfer.

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Karen Venturini and Chiara Verbano In total there are 71 authors of whom five have written two articles and one has written three. 80% of the authors come from academia, especially from economics departments or business studies colleges, while the remaining 20% come from space agencies (with NASA in first place) and from public research centers. Only two authors come from private firms. With regard to the research type, the majority of articles (23) are empirical; specifically: 16 case studies, 2 surveys, 5 with examples while the remaining 16 are theoretical. Table 1: Distribution of articles per journal Journal of Technology Transfer

Acta Astronautica

Technovation Space Policy Advances in Space Research Comparative Technology Transfer and Society IETE Technical Review Mechanical Engineering International Journal of Technology Transfer & Commercialisation Sensor Review The Journal of High Technology Management Research Australasian Physical & Engineering Sciences in Medicine Research Policy Smart Materials Bulletin Earth, Moon and Planets IEEE Transactions on Engineering Management Physics Procedia Professional Safety Long Range Planning Management Research Review

Becerra-Fernandez, Buckingham, Brown, Entessari (2000); Harper and Rainer (2000); Herztfeld (2002a), Hertzfeld (2002b); Bach, Cohendet and Shenk (2002); Amesse, Cohendet, Poirier, Chouinard (2002); Pankova (2002); Kremic (2003); Lundquist (2003); Park, Lee and Lee (2012); Szalai, Detsis, Peeters (2012); Chambers and Prince (1995); students of the International University of Space (1997); Winfield (1997); Sridhara and Shoba (2010) Molas-Gallart and Sinclair (1999); Petroni and Verbano (2000) Goehlich, Blanksby, Goh, Hatano Pečnik, and Wong (2005), Petroni, Venturini and Santini (2010) Bubenheim and Lewis (1997); Bamsey et al. (2009); Sridhara and Shoba (2010) Seely (2008); McMillan (2008) Krishen (2009, 2011) Sharke (2002); Noor and Cutts (2004); Becerra-Fernandez (2002) Hollingum (2011) Adams and Spann (1995) Hughes (2007) Molas-Gallart (1997) Anonymous (2002) Green (2010) Zelkowitz, (1996) Komerath and Komerath (2011) Argabright (1999) Nosella and Petroni (2007) Verbano and Venturini (2012)

4. TT topics and results of previous studies 4.1 Actors, geographical context and sectors involved Actors in the space sector who are able to initiate processes of transfer to the industrial sector (Figure 1) are on the one hand government controlled agencies and public research centers, and on the other, prime contractors or systems integration firms that supply orders or undertake contracts for developing new products that incorporate space technology. Two additional promoters are public authorities such as regional bodies, which can support innovative projects through direct funding or through tax incentives (Petroni et al., 2010), and SMEs that supply large space companies, which in turn are also able to initiate processes of transfer to other SMEs. To facilitate the process of technology transfer a consultancy firm or organisation may be called. Such firms may identify technological or commercial opportunities on behalf of the space firm or the transferee; helping package the technology to be transferred between the two firms; selecting suppliers to make components for the technology; providing support in making the deal between the firms concerned (technology brokers) or taking part in the transfer itself (contract research organisations) (Cohendet, 1997; Watkins and Horley, 1986). Technology brokers can be specialized staff operating within decentralized independent units at space agencies, or private organizations devoted to assess the market needs in areas where there is a potential for exploitation of space technologies. Other actors that can facilitate the transfer process are: incubators, venture capital companies, science and technology parks.

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Karen Venturini and Chiara Verbano The analysis shows that most of the articles investigated either space agencies or public research centers as promoters of technology transfer. Regarding the TT intermediaries, the literature has analyzed especially the role and functions of internal organizational infrastructure to space agencies (Technology Transfer Offices) and finally the geographic context most analyzed is the United States, followed by Canada.

Figure 1: TT actors in the space sector (source: adapted from De Stavola, 2007)

4.2 Motivations and mechanisms Identifying the reasons for the transfer of space technologies by public and private organizations is of primary importance in defining the best methodology and evaluating the effects of transfer. Motives that lead a government agency to undertake technology transfer may be economic or political. The former include the following: pursuing new commercial markets and reducing dependency on public funding (Adams and Spann, 1995), maintaining public relations, evaluating agency performance, sharing costs (Kremic, 2003), and reducing the development time for a new technology (Hughes, 2007). Public agencies have had to confront new patterns of behavior and management that have often upset traditional missions and organizational routines. The request to deal with the side‐effects and marketing of new knowledge has only emerged strongly in recent years and in response to the pressures caused by a reduction in public spending and the political desire to gain popular support for space activities. The motives for technology transfer in a government agency are not uniform across all organizational levels. For a government agency employee, the motivations are achieving self‐realization, completing a task and benefiting research (Kremic, 2003). The political reasons for TT are to amplify the "drip" effect of scientific knowledge and technology acquired during space exploration programs to external contractors, to develop a strong aerospace and industrial space capability, to help SMEs, to encourage companies, universities and research institutions to collaborate and finally, to accelerate innovation (Chambers and Price, 1995; Petroni and Verbano, 2000; Sridhara and Shoba, 2010). Alternatively, the motives for private corporations to implement a TT process include the following: preempting and/or deterring competition, lowering costs, increasing growth, networking, training employees, following customers and responding to content laws and/or legal requirements. Generally speaking, an employee working in a private corporation shares the same motives as the organization itself (Kremic, 2003). When compared, the methods used by a public and private organization are also different. Government agencies try to broadcast their technologies domestically through technology portals, web sites and publications in order to reach as many people as possible, through involving support contractors (contractors employed to build networks, make contacts and to some extant advertise the technologies to potential users), creating consortia or institutes (responsible for sharing technologies among partners and marketing them), licensing agreements, intermediaries, brokers, and encouraging its researchers to submit articles for publication (Kremic, 2003). A private corporation, seek to control access to their technology, and therefore prefer joint ventures, direct investment and other controlled methods of access (Kremic, 2003) and licenses (Kremic, 2003).

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Karen Venturini and Chiara Verbano In synthesis, the TT mechanisms as follows (ISU, 1997):

Financial (direct government funding, royalties, tax incentives);

Legislative initiatives (or regulations) to foster TT from federal government to the private sector;

Contractual: licensing or more complex collaborative arrangements that define the product to be marketed, division of responsibilities among parties and decisions on the handling of IP (Harper and Rainer, 2000; Sharke, 2002);

Organizational infrastructures (TTO, networks, umbrella organizations, Science Parks);

Marketing (brokers, promotion);

Production of documents (Selly, 2008) (i.e. reports, technical notes, memoranda, technical translations, contractors’ reports, conference proceedings, handbooks, monographs etc.);

Education and legal mechanisms.

4.3 Space technologies transferred Verbano and Petroni (2000) stated that there are three areas where technological advancements performed during space exploration matter: the launch of the spacecraft, the construction and control of satellites in orbit, and the processing of data transferred from the satellite during the voyage. The satellite is like as a "technological archipelago", most of which concerns the planning and construction of the so‐called “carriage” and its accessory systems (on‐board computer, orientation systems, antennas for receiving and transmitting data, systems for generation and distribution of energy); in other words, the "container". The content, mainly comprising instruments, is called the “payload”. Technologies for scientific satellites most frequently develop from the integration and upgrading of technological matrices present in non‐space industrial sectors. These technologies are then upgraded for use in space (Petroni, Venturini and Santini, 2010). The need to survive and function in space demands technologies that can guarantee safe operations and perform in extreme environments that include heat, gravity, vacuum, partial atmosphere, solar radiation and particles, planetary dust and storms. They should use less power, have a high degree of autonomy and reliability, and aid humans in achieving a high level of productivity (Krishen, 2009). Other features of space products are miniaturization (to limit size), low weight (to restrict weight on board the spacecraft and satellite) and standardization (to facilitate reuse of the components in other systems). The study of the technological characteristics of space products is also useful for the purposes of transfer because it has been found that the most easily transferable technologies are those that have been the subject of spin‐in and have generic and standardized qualities (Petroni and Verbano, 2000). Technologies that are usually subject to transfer take the following path: spin‐in from Earth sectors – integration and up‐grading for use in space – spin‐out towards the Earth's industrial system with consequent downgrading (Verbano and Venturini, 2012).

4.4 Paths and models At the start of the transfer process in the space sector, consideration should be given to research programs promoted by space agencies, from which transferable technologies emerge. According to Bach, Cohendet and Schenk (2002), ESA programs that generate technology transfer processes can be divided into mission‐oriented projects, aimed at achieving the objectives of the space mission and organized in a hierarchical manner, and diffusion‐oriented programs, promoted by the government to stimulate the economy and promote the possibility of a specific technology in other domains. The flow of knowledge in the space sector essentially travels at the following levels:

1. International: collaboration, strategic alliances, collaboration between space agencies for the implementation of mission‐oriented programs;

2. National: relationships can arise along the space industry production chain a) at high levels, between systems integrator companies and suppliers b) at lower levels, among the various component suppliers. The mechanisms of knowledge transmission takes place through "technical specifications, concurrent engineering, strategic alliances in engineering activities, quality control, shared product development, supplier certification, delivery times, risk sharing, sharing of costs, production volumes and prices "(Giuri, Tomasi and Dosi, 2007).

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Karen Venturini and Chiara Verbano The mechanisms of knowledge transmission in the field of space can be either intra‐ or intersectoral (Figure 2). Intrasectoral knowledge transmission may take place either at a vertical level between systems integration firms and subcontractors, or at the horizontal level as a result of collaboration between large space firms for the development of new programs. Intersectoral knowledge transmission may occur through the transfer of space technologies to other sectors.

Figure 2: The space technologies transfer paths On the basis of this differentiation, the space agencies may promote technological development programs that tend to outsource advanced technology R&D to both industry and universities. In this last case, space agencies promote the transfer of personnel, technologies and knowledge, as well as the demonstration testbed and the technical support for the technology’s adaptation. An important element is the technical and educational support (educational and training materials, workshops and courses) that the government agency has to guarantee (Bubenheim and Lewis, 1997). The private sector should be assisted in long‐term research and development by a public organization that would foster access to facilities and share the financial and technical risks (Chambers and Price, 1995). The high cost of space technologies and the length of time required to develop innovation often pose an obstacle to firms. In order to meet private sector standards, the public space sector needs to reduce the technology development time scale, reduce engineering and manufacturing costs, lower technology performance requirements in order to match them to the recipient's needs, and find an appropriate market for space technologies. Moreover an international standard for describing a new technology should be created (ISU, 1997). The transfer path taken from a government body to a firm is certainly among the most difficult, and to facilitate this the literature discusses organizational infrastructures designed to help it and the adoption of new methodologies such as for identifying potential markets and partners for potential applications. These methods may help the donor company to systematize the process of transfer more successfully and help to identify potential markets for its edge technologies.

4.5 Effects of technology transfer Space programs can generate direct effects, i.e. those that match the objectives of the mission or program of research, or indirect effects. The indirect effects for the private firms which worked in the space programs occur in four areas: technology (sales of the same product to other customers, improvement of current product line based on space technology, new product based on space technology); marketing (reputation and image enhancement after a contract with a space agency); effects on organization and method (the upgrading of a firm’s technological skills, learning or developing standards, methods and management techniques during the collaboration), and critical mass (critical assets such as maintaining or enlarging the number of employees in the space sector) (Bach, Cohendet and Schenk, 2002; Amesse et al., 2002). Some spin‐offs may have a direct economic impact on industry, others may improve public wellbeing or increase public support for the government (Goehlich et al., 2005). Among the tools for measuring economic impact, the relevant parameters are those described as "value added", (defined as sales attributable to the product minus the cost of material input), and the amount of additional R&D. The ROI index should not be used (because the public sector does not count the benefits it generates for civil society, and R&D expenditure is not an government investment), nor should cost/benefit analysis be used since it is similar to the ROI index (Hertzfeld, 2002b). Private benefits that result from spin‐off are mostly those generated by sales of products and services in the commercial market. Public benefits are those widely appropriable by a large section of the community, such as the benefits of regional development resulting from contracts awarded to firms in different areas of the country; social effects such as improved diagnostics or cures for illnesses as a result of space technology, or the discovery of an archaeological site. In other words, benefits that the entire world and future generations can enjoy.

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DETERMINANTS Related to the context – Decline in employment and greater competition (Adams and Spann, 1995); – Presence of an effective intellectual property regulation (Adams and Spann, 1995); – Availability of government financial support (Zelkowitz and Marvin, 1996; ISU, 1997); – Prestige of the sector receiving the technology (Winfield, 1997); – Involvement of leaders from industry, academia and government in problem definition (Winfield, 1997); – Building of infrastructures composed of universities and industrial partners with a coordinator to manage the relationships (Hughes, 2007). Regarding agents involved in the TT process (organizational and managerial determinants): – Availability of financial incentives (ISU, 1997) also for adaptation and marketing activities (Zelkowitz, 1996; Petroni and Verbano 2000); – Market familiarity and identification of user’s needs (Adams and Spann, 1995; Petroni, Venturini and Santini, 2010; Krishen 2011); – Direct linkage between Space and Earth technology development (Bamsey, 2009); – Recipient’s technical and scientific knowledge and R&D staff (Zelkowitz, 1996; Petroni, Venturini and Santini, 2010; Krishen, 2011); – Organizational style and culture (Adams and Spann, 1995; ISU, 1997). Open and less bureaucratic facilities not only ensure a better flow of information but also the creation of new ideas due to crossfertilization across different fields of activity (Bach, Cohendet and Schenk, 2002). Important is also the professional motivations (Zelkowitz, 1996; Krishen, 2011); – Assertive attitude towards technology transfer by managers or CEO (Zelkowitz, 1996); – Management skills for building a good TT process: learning the needs and benefits of each stakeholder, diagnosing the value chains, building a strategic identity for the TT program, setting durable goals and choosing a strategy to achieve these, cultivating agents of change, developing a customer-oriented project, developing communication of TT program, taking care of the process, identifying administrative rules focused on TT (Adams and Spann, 1995; Bubenheim and Lewis, 1997; ISU, 1997; Lundquist, 2003; Krishen 2011); – Creating a flow of information and communication between donor and receiver (ISU, 1997; Bach, Cohendet and Schenk, 2002; Nosella and Petroni, 2007) though specialized information network (Chambers and Price, 1995), multi-functional teams (Hughes, 2007), academic and industry research teams (Krishen, 2011), link between manufacturing and development process (Krishen, 2011); – R&D organization willing to collaborate and ready to supply assistance to recipient. Fundamental to this are the support of engineers and technologists in the transferring firm (Petroniet al. 2010). Related to the technology – The technology to be transferred must be not too mature at the beginning of the program. The technology must also be generic in order to satisfy industrial needs on Earth (Bach, Cohendet and Schenk, 2002). In certain cases, however, successful transfer requires mature technology, or at least its behavior must be known (Zelkowitz, 1996; Petroni,Venturini and Santini, 2010); – Similarity of use based on common requirements. The transfer of technology from space programs occurs especially in those Earth sectors where technological requirements are similar to those in the space sector (ISU, 1997; Winfield, 1997; Bach, Cohendet and Schenk, 2002; Bamsey, 2009; Petroni, Venturini and Santini, 2010); – Suitability and flexibility of the technology to be integrated with other technologies (ISU, 1997; Petroni, Venturini and Santini, 2010); – Versatility, small mass, high reliability level, high performance, cost-benefit relationship (Petroni, Venturini and Santini, 2010); – Technology assessment and application project development (Winfield, 1997); – The diversity and competencies of the technology among both program participants and between sectors. A condition for this recombination requires that the technologies the participants bring to the program have a sufficient level of diversity to widen the area of exploration; in other words, a set of technological opportunities (Bach, Cohendet and Schenk, 2002). BARRIERS Related to the agents involved: – Lack of property rights agreements (ISU, 1997; Hertzfeld, 2002); – Complex and time-consuming federal procurement procedures (Hertzfeld, 2002); – Lack of understanding of the technology and its potential profits (Krishen, 2011); – Profit opportunities not clear or too risky (Krishen, 2011); – Potential licensee not familiar with proposed technical area (Krishen, 2011). Related to the technology − Time constraints. Often prolonged periods of public administration are a deterrent to private firms undertaking shared innovative processes (ISU, 1997); − Development of project driven technologies and not mass production (ISU, 1997); − The dual-use nature of space technologies (ISU, 1997). In particular, barriers faced when organizing defense R&D in the development of dual-use technologies include differences in procurement practices, in regulations, in government accounting rules, the priority given to defense needs and requirements in contrast to civilian needs, and the frustrations of defense researchers in performing TT tasks (Molas-Gallart, 1997; Molas-Gallart and Sinclair, 1999); − A further obstacle is related to adapting the needs of space to the needs of society and industry, and the frequent technological outdatedness of space products compared to that of Earth products (Bach, Cohendet and Schenk, 2002)

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However, each case is structurally very different and certain benefits cannot be easily translated into numbers; for example, the number of lives saved.

4.6 Deteminants and barriers

Factors that facilitate (determinants) or impede (barriers) the flow of technology transfer are of particular interest to researchers. We can classify the determinants and barriers identified in the database according to the source of origin: context, actors or technology (Petroni, Venturini and Santini, 2010; Verbano and Venturni, 2012) (Table 2). In general the studies reviewed focus attention on some factors that facilitate or hinder the transfer, without analyzing the influence of the same on the success of the transfer. Studies on the determinants of the space technologies transfer are therefore partial (just few determinants are considered) and limited (not confirmed the impact on performance of the TT). Table 2: Determinants of space technology transfer

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5. Conclusions: emerging gaps and future researches The aim of this study is to systematically identify the scientific and academic articles published over the past 17 years on the subject of technology transfer from the space sector to the industrial system. Based on the selection criteria and the limits of the research, such as time frame (1995 to 2012) and scientific validity (peer‐reviewed), we built a database of 40 papers. The first object of the study is to characterize the database obtained. Journals that have published on this topic are mainly managerial journals and for the most part, the authors of the studies are academic researchers in the fields of economics and management. They have been the first and most consistent in producing research on the subject. The most widely used research methodology is the qualitative case study, perhaps because it is more suited to investigating a complex process like transfer, in which motivations, mechanisms and pathways depend on the context in which they occur (Kremic, 2003). The second objective of this research is to examine the articles selected in order to collate what has already been studied in the field and ascertain the gaps in the literature. An analysis of the database revealed the following gaps and proposed the future research topics for researchers and scholars in the field:

Actors, geographical context and sectors: few studies have compared technology transfer in different geographical areas other than the U.S. and Canada. New studies are required that deal exclusively with private promoters (or new public actors such as regions) or private brokers and other organizations devoted to facilitate the transfer such as incubators, venture capital companies, science and technology parks. Discussion on the transfer of space technologies in new industries such as clothing, home automation, design, cultural heritage will useful;

Motivations: The majority of articles are devoted to analyzing the motivations and mechanisms adopted by public agencies and no in‐depth analysis has been made of the motives and mechanisms adopted by systems integrator companies and prime contractors, or small and medium‐sized firms as recipients. Regarding the mechanisms, there has been little investigation of financial, marketing and educational mechanisms.

Technologies: it would be opportune to investigate which space technologies and applications could be transferred to fields other than the medical; for example, sports and clothing design;

Paths and models: The transfer path most analyzed in the articles in question is the one from a government agency to small and medium sized firms and little study has been made into the transfer path from systems integration firms to small and medium‐sized companies, or the processes by which small and medium‐sized companies adapt, learn from and further develop new products that incorporate space technology space. There are also gaps in the analysis of alternative paths of TT, for example from one SME to another.

Effects of TT: no analytical framework exists that is able to take into account the range of spin‐off phenomena and the complexity of the channels through which they make an impact on economic activity and civil society. Design methodologies are also required to provide accurate measurements (Bach et al., 2002). Costs should be publicly known and a detailed calculation needs to be made which takes into account all the different factors and steps involved in the development and marketing phases. Indeed, a high degree of transparency with regard to costs, whether sustained by a government agency or an industry, is often restricted by legal and/or confidential regulations (Szalai, Detsisi and Peeters, 2012).

Determinants: validation of determinants through case studies and surveys is lacking, as are studies that analyze the differences between determinants and their significance with regard to the different technologies and different sectors to which the new technologies are directed. No assessment has yet emerged of the determinants that have greater influence in promoting processes of transfer, nor are there studies that have integrated all the identified determinants in a fragmented literature.

Finally, concerning the system integrators, they generate basically a process of learning between its supplier companies and companies receiving technology. The methods of teaching and learning have not yet been studied.

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References Adams, M., and Spann, M.S. (1995), “Strategic redirection via technology commercialization: Preliminary results from defense and space contractors, The Journal of High Technology Management Research, Vol. 6, No.1, pp 77‐93. Amesse, F., Cohendet, P., Poirier, A., and Chouinard, J. (2002), “Economic Effects and Spin‐offs in a Small Space Economy: The Case of Canada”, Journal of Technology Transfer, Vol. 27, No. 4, pp 339‐348. Anonymous (2002), “Space technology moves textiles‘smart”, Smart Materials Bulletin, Vol. 9, No. 1, pp 9‐10. Argabright, G.C. (1999), “Using technology transfer to improve safety and health”, Professional Safety, Vol. 44, No. 9, pp 28‐32. Autio, E., and Laamanen, T. (1995), “Measurement and evaluation of technology transfer: review of technology transfer mechanisms and indicators”, International Journal of Technology Management, Vol. 10, No. 7/8, pp 643‐664. Bach, L., Cohendet, P., and Schenk, E. 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The Evolution of Resources in Research‐Based Spinoffs: Learning from a Case Study Chiara Verbano1, Karen Venturini2 and Avi Wasser3 1 University of Padua, Padua, Italy 2 University of San Marino, Republic of San Marino 3 Haifa University, Haifa, Israel chiara.verbano@unipd.it kventurini@unirsm.sm awasser@research.haifa.ac.il Abstract: A great deal of interest and concern has been raised in recent years over the theme of research‐based spinoffs (RBSOs) and their economic and social implications. An RBSO is a new business entity formed to market one or more related technologies generated from the research work of a public research institute. The literature has studied this phenomenon from three different theoretical perspectives: resource‐based, business model and institutional (Mustar et al. 2006), but no studies have integrated the above three theoretical perspectives. Other gaps identified in the literature are the lack of an analytical consideration of the impact of technological resources on RBSO performances and the limited empirical studies on the evolution over time of RBSOs, i.e. considering the resources in the different stages (or phases) of the RBSOs’ development. The aim of this paper is to evaluate the evolution of a spinoff’s resources and institutional linkages over time, adopting the four stages of spinoff development identified by Djokovic and Souitaris (2008): 1) opportunity recognition, 2) entrepreneurial commitment, 3) threshold of credibility and 4) threshold of sustainability. To this extent, the authors have extensively investigated a research‐based spinoff from the Italian ICT sector .This paper provides a thorough and integrated analysis of the research‐based spinoff in terms of resources (including institutional resources), using a longitudinal approach, and highlights the importance of resources during its life‐cycle.

Keywords: spinoff, resources, research‐based spinoff, case study, Italy

1. Introduction A spinoff company is a new business entity formed to commercialize one or more related inventions generated from the research work of a parent institution. If the parent organization is a public research institute, the literature uses the term research‐based spinoff (RBSO), and if the parent organization is a university, the term used is university (or academic) spinoff (USO). The research‐based spinoffs have been particularly analysed in recent years by scholars and researchers for their economic and social implications. Economic implications are due to the fact that marketing of innovation through the creation of a new business permits the public institute to compensate the cost for maintaining R&D Lab, more and more expensive, and to obtain new earnings. The social implications are related to the fact that commercialization of public R&D warrants the dissemination of technological knowledge in the local economy and the related activation of innovative processes. The role of spinoffs is reinforced by the growing involvement of universities and public research organizations in the processes of regional economic development (Piccaluga and Lazzeri 2012). However, the academic and research‐based spinoffs have not been studied in depth until now. Recent evidence has shown that the majority of high‐tech companies, including research‐based spinoffs, has grown slowly (in terms of number of employees and turnover) (Piccaluga and Lazzeri 2012). The spinoff organizations are characterized by both the typical problems of start‐ups and difficulties associated with lack of personnel with a managerial and commercial experience as happens in some cases of technology transfer (Venturini et al. 2013). Studying in detail the successful cases of this kind of organization is, therefore, important to make some proposals in terms of management. The gaps of the literature on the topic of RBSOs are basically the following: firstly the majority of scholars have investigated the spinoff process to a single perspective and secondly they have observed the spinoffs in a moment and not in their long‐term evolution. The aims of this paper are to consider all resources identified by

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Chiara Verbano, Karen Venturini and Avi Wasser different theoretical approaches and to evaluate resources from a longitudinal point of view during the lifetime of the spinoff. To achieve these research objectives we analysed a case study of an Italian spinoff working in the field of ICT. From the analysis of the case interesting insights emerge for public research institutions engaged in enhancing the results of their research through entrepreneurial initiatives and for local and national governments and private firms interested in supporting start‐ups derived from research organizations.

2. Literature review RBSOs involve the creation of ventures based on formal and informal transfer of technology or knowledge generated by public research organisations (Smilor 1990). The definition of an RBSO should specify the outcome of the spinoff process (i.e. the firm formation), the essential parties involved and the core elements that are transferred (Djokovic and Souitaris 2008). Regarding the involved parties, Roberts and Malone (1996) identified the following four: the parent organization from which the technology is extracted, the developer of technology, i.e. the person who brings the technology from basic research to a point at which the transfer can begin, the entrepreneur and the venture investor. The core elements transferred to an RBSO are technology and knowledge incorporated in people. We adopted the following definition: the spinoff is a new company created by staff previously or currently employed in a university (teachers, researchers or students) (USO) or in a public research institution (RBSO), created to exploit a new technology or knowledge produced by research within the university or the public research institution. RBSOs and USOs face two main problems: firstly, the non‐commercial environment such as the public research environment, which typically lacks commercial resources, and, secondly, the venture’s ability to commercially develop the new technology may be adversely impacted by the conflicting objectives of key stakeholders (university, academic entrepreneur, venture management team and suppliers of finance) (Mustar et al. 2006). The literature has studied the phenomenon of spinoffs from three different theoretical perspectives: resource‐ based, business model and institutional (Mustar et al. 2006). The resource‐based perspective identifies four resources that are central to the achievement of competitive advantage: technological, human, social and financial (Djokovic and Souitaris 2008). Technological resources refer to firm‐specific products or technologies; spinoffs may vary in degree of innovativeness, scope, tacitness and stage of development of their technology. RBSOs differ considerably in the newness of their core technology, and innovativeness can be an important source for competitive advantage (Heirman and Clarysse 2004; Shane 2001; Lee et al. 2001). Human capital resources refer to attributes of the founding team, the management team and the personnel of the company. Human resources are measured by the size of the founding team, professional management experience, organizational size and background of the founders. Teams with technical and commercial experience can better address the difficulties related to the marketing of their product (Mustar et al. 2006). Network (or social) resources refer to the spinoff’s government, industry and financial contacts. It is important to establish teams of people who have links with the world outside the university to acquire managerial knowledge and financial resources more easily. It is also important that the spinoff develops different networks during its life cycle (Nicolaou and Birley 2003). Financial resources refer to the amount and type of financing of the firms. It is often difficult for academic spinoffs to get funding from venture capital firms because of the non‐managerial context from which they come, the lack of resources and potential conflicts with a public entity. The business model perspective has characterized research‐based spinoffs on their business models: the articulation of the value proposition, the identification of the market segment, the position in the value chain and the estimated cost structure and profit margin. There are different taxonomies of RBSOs depending on the activity undertaken, on how the technology has been transformed into a commercial value and on their growth orientation (Mustar et al. 2006). For Heirmann and Clarysse (2004), two other elements may affect the organization and configuration of the resources of the spinoff: the complexity of the selling process, i.e. the characteristics of the buying centre in terms of number and accessibility of decision makers and size and geographical dispersion of markets that the spinoff faces. Shane (2001) proposed that the tendency for an invention to be exploited through firm formation varies with the attributes of the technology regime (age of technical field, tendency to market segmentation, effectiveness of patents, importance of complementary assets etc.)

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Chiara Verbano, Karen Venturini and Avi Wasser The institutional perspective studies how the context shapes the starting configuration and the later development of RBSOs and, in particular, it classifies the RBSOs on the basis of their degree of dependence on source technologies (Roberts 1991), the strategic choice made by the parent institute (Boeker 1989) and the organization modes of the parent organization (Clarysse et al. 2005; Power and McDougall 2005), for example considering the presence and the effectiveness of technology transfer office (Bigliardi et al. 2012). Some studies also analysed the government support mechanism for USOs in the U.S. and Europe, and others evaluated the effectiveness of governmental TT policy (Shane 2004a). Considering the evolution of the spinoff during all phases of its life cycle, Vohora, Wright and Lockett (2004) identified four critical junctures between these phases: 1) Opportunity recognition, which is the period from the R&D phase (carried out in the parent organization) until the recognition of business opportunity (verification of technology and understanding of the market potential); 2) Entrepreneurial commitment, in which there is the definition of the strategic plan and business plan, the identification of resources and capabilities possessed and the acquisition (including the entrepreneurial champion) of possible patent protection; 3) Threshold of credibility, i.e the period dedicated to the re‐orientation of the strategic plan, in which the top management of RBSO define the resources and knowledge to integrate or to acquire in order to overcome gaps and weaknesses; and 4) Threshold of sustainability, in which the focus is on generating revenues and economic value over time towards consolidating the company. Regarding the performance measurement of spinoffs, economic‐financial indicators such as sales volume and growth (Schmelter 2004; Egeln et al. 2003; Bigliardi et al. 2013), net cash flow (Ensley and Hmieleski 2005; Bigliardi et al. 2013) and revenue growth (Ensley and Hmieleski 2005, Bigliardi et al. 2013) are used even if some authors claim that in the start‐up phase of the spinoff, the growth can be minimal (Rickne 2006, Smith and Ho 2006). Other indicators used are the number of patents filed (Rickne, 2006), the quality certificates obtained, the number and growth of employees (Rickne 2006; Schmelter 2004; Shane 2004b; Egeln et al. 2003; Bigliardi et al. 2013) and the level of investment in research and development (Baum and Calabrese 2000). An analysis of the scientific literature on the research‐based spinoffs identified the following gaps:

The lack of an analytical study on the impact of technological resources on RBSO creation and development;

The need to integrate the three theoretical perspectives adopted in previous studies: the resource‐based perspective, the business model perspective and the institutional perspective;

The limited empirical studies on the development and evolution over time of RBSOs, following a longitudinal approach;

The identification and evaluation of the resources at each stage of development of the RBSO.

3. Research questions and methodology The first objective of this research is to create a framework that overcomes the gaps of the literature. This framework should consider the four types of resources and the external mechanisms in the four stages of development of an RBSO (Fig. 1). The dimensions of analysis for each type of resource were obtained from the literature review. Next, in order to integrate the resource‐based perspective and the institutional perspective, we included, among the social resources, two resources (derived from the institutional perspective) such as the relation of RBSO with the parent organization and the organizational and supporting mechanisms and policies adopted by the parent organization for the spinoff creation. Following a longitudinal approach to evaluate the evolution of the spinoff’s resources over time, the following four RBSO development stages were considered (Djokovic and Souitaris, 2008): 1) opportunity recognition, 2) entrepreneurial commitment, 3) threshold of credibility and 4) threshold of sustainability. Moreover, among the external mechanisms were included governmental and industrial policies stimulating or facilitating spinoff creation. The second objective of this research is to validate the framework in RBSOs, answering the following research questions:

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How did the four types of resources change in the process of spinoff creation and development?

What are the most important and critical resources for the success of RBSOs along the process of spinoff generation and development?

Figure 1: The comprehensive research framework adopted The resources necessary to the success of RBSOs, are specific to the types of business (Druilhe and Garnsey 2004). For this reason we choose a specific sector such as ICT. We decided to focus on one of the most active and innovative industries in spinoff generation. Moreover, this sector appears to be the most important in regard to the number of spinoffs generated by universities or public research institutes. Therefore, the selection criteria of RBSOs have been defined as follows:

operating in the ICT sector in the Italian context,

generated by a public research institute,

at least 8–10 years old to permit the analysis of all the four stages of development.

RBSOs that have passed the start‐up phase can be considered successful. The single case study methodology has been implemented using retrospective data collection, i.e. asking participants to reflect back upon their experiences and attitudes. Web meeting interviews followed by phone calls with one of the founders responsible for the spinoff were performed to this extent. The interviews were conducted using an interview protocol with a set of open and closed questions, according to the research framework outlined in Fig. 1. Data collection was completed with the analysis of internal documents (business plan, balance sheet, etc.) to complete and verify information emerging from the interview. To answer the research questions, each dimension of the four types of resources were evaluated on the basis of the information collected during the interviews, using a scoring scale (low, medium, high). This evaluation was then reviewed with the founder in the last meeting, obtaining a Table of assessment of each resource in each stage of development. Analysing this Table by rows (along time) and by columns (between resources), the authors have discerned the major changes during time and the most important resources, respectively.

4. Analysis of case study 4.1 General information and stages of development of Aethia spinoff Aethia has been operating since 2000 in the Italian sector of High Performance Computing (HPC), where is recognized as one of the first companies to propose the cluster computing technology. HPC most generally refers to the practice of aggregating computing power in a way that delivers much higher performance than one could get out of a typical desktop computer or workstation in order to solve large problems in science, engineering or business. Aethia has specialised in the realisation of complete and ready‐to‐use systems, offering flexible support services during all phases of system deployment and use, including parallel applications development. This feature is fundamental to exploiting HPC potentialities and turning them into competitive advantages. Now, thanks to a decade of expertise and know‐how, Aethia is one of the main leaders of the sector, able to offer

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Chiara Verbano, Karen Venturini and Avi Wasser turnkey HPC systems to companies, research groups and computational centres. Aethia’s products include clusters for HPC software platforms, servers, storage and workstation solutions. Services include technical advice and personalized training courses for the administration and management of the cluster. Aethia operates in different fields and has an extensive R&D program for the activities developed for its customers to strengthen and enhance its own line of products. The main collaborations with academic and private research institutes has led to the realization of solutions and systems for advanced computing in several application sectors, including computational chemistry, fluid dynamics, theoretical physics, electrical engineering, environmental simulations, data‐mining, genomics and proteomics and bioinformatics. The main characteristics of Aethia activities are: ease of use of the technology cluster even for non‐experts, complete systems of all the necessary software and ready‐to‐use, professional solutions with the best price/performance ratio and remote assistance service after sales to support the management and use of the system. The company profile is presented in Table 1. Table 1: General information on the Aethia spinoff

The main events and stages of development in the history of Aethia are listed in Table 2. Table 2: Main events and stages of development in the history of Aethia

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4.2 Analysis of resources used in the process of spinoff creation and development Following the research framework, the authors divided the resources in technological, human, financial and network ones identifying them together with external mechanisms and performance. Technological resources:

The degree of innovation (i.e. the newness or innovativeness of the core technology compared to technologies in the market) had a decreasing trend from a high level in the first phase to a low level in the last phase. In the early 2000s the technology was highly innovative (created in 1994 in NASA centres), while now it is well known in the ICT industry.

Stage of development of the technology. From an initial prototype form, the technology has been developed to obtain a variety of finished products with related support services. At the beginning, the founders worked on commission; the customer advanced requests to which the founders tried to respond. Then, the founders tried to formulate, with great effort, different packages with different applications. There has been a transition from a technology platform to a finished product.

Ability to patent/protect the technology. The ability to patent or protect the technology was always constant: it is, in fact, very difficult to protect any hardware or software. The only possible protection is the complexity of the know‐how required for the development of the ICT system.

The scope of the technology was high during all four phases. The technologies used for the calculation are inherently applicable in different fields. For the founders, it is important that the technology is open, in order to create different applications. The possible applications arise from the relationship with the customer, who suggests possible uses, and from collaborations and partnerships in research projects funded at the regional and European levels.

Human resources:

Scientific and managerial experience. Both founders came from a scientific background and had a degree in nuclear engineering. Also, both founders had experience in the sector, having worked firstly at university and then with a grant of the Polytechnic of Turin. The initial weakness of RBSO was the lack of administrative, commercial and legal experience of personnel. At the beginning of the spinoff there was a significant discrepancy between technical and managerial level of competence. In addition, the founders had no entrepreneurial experience.

Variety of backgrounds and work experience in the team. In each stage the founders increased the variety of backgrounds of staff team employing additional holders with technical, commercial and managerial experience.

Joint working experience and cognitive diversity of the team. The majority of the team members knew each other and did not have different point of views on how to manage the spinoff, except in the second stage, when one of the founding members left the spinoff because he wanted to make quick profits.

Presence of surrogate entrepreneur. The spinoff did not have any surrogate entrepreneur in the first phases, but in the third phase, three other partners (respectively with technical, commercial and organizational expertise) succeeded in the spinoff management.

Financial resources:

Type of funding. In the second phase (before the foundation), the spinoff project was accepted into the program of INFM’s spinoff support, for which the founders have obtained the reimbursement of legal costs of setting up. The support offered included also some managerial (business plan) and financial services. At the beginning of the third phase, the project was accepted into the incubator program of the Bio‐industry Technology Park of Ivrea, who offered a small fee for the purchase of computer and office equipment. After the incubation period in the technology park, the founders received various funding through participation in European research projects (10% of total funds). The rest of the funding came from business income (90%). In the last phase, the share of funding from participation in European research projects had increased to 15% of total funds, while the rest (85%) came from business income.

Network resources:

Relationship with parent organization (PO). In the first two phases, the support from the parent organization was only on the definition of a strategy. In the early stages, the financial support of the

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Chiara Verbano, Karen Venturini and Avi Wasser parent organization was relatively low, just enough to pay the legal fees for the establishment of the spinoff. The most important resource coming from the PO was management consulting; a business tutor organized meetings for business plan and helped to make decisions on the location and organizational structure.

In the first two phases, the scientific quality of the PO was important for the public recognition of spinoff. In fact, it was prestigious for the spinoff using the trademark INFM. In the other phases, the spinoff did not have any support from the parent organization.

External contacts. In all phases the staff of spinoff created contacts with customers. In the second phase, the staff established relations also with suppliers. In the third phase, contacts with the technology park, financial institutions and venture capitalists were added. The spinoff’s managers failed to have an effective relationship with the venture capitalists because the goal of the spinoff was to build capacity slowly, while the venture capitalists were motivated by financial logic and the maximization of returns in a short time. In the third phase, the spinoff also began to joint with universities as well as other businesses. In the last phase, contacts were developed with institutions that banned funding, such as Regions and the Technological poles of Piemonte Region.

RBSO strategies to access missing resources. In the first phase, the strategy of RBSO was focused to find an incubator. In the second phase, the main goal of RBSO was to find customers (as a result of the scientific quality of the PO). In the third phase, the company worked to establish partnerships and commercial agreements with suppliers and with other research centres and universities in order to apply together research programmes. In the last phase, the spinoff established collaborations with companies that produce complementary technologies or professionals and participated in programmes of regional innovation poles.

External mechanism. The spinoff has enjoyed regional incentives from the second stage onwards, and in the last phase has obtained incentives from national and European projects. Performance. In the second phase, the sales growth rate (average annual) was unique (100%); in the third phase, the sales growth rate (average annual) increased by 10% in relation to the first year. The employment growth rate increased by 150%, and the R&D investments were 5% of total sales (the customers increased from 5 in the second phase to 50). In the last phase, the sales growth rate increased by 18%, the employment growth rate by 80% and the R&D investments up to 15% (thanks to participation in European research projects). The number of customers went up to 150, and there were three business partners. The following table (Table 4) illustrates the level of each resource in the RBSO’s phases. In response to the first research question, i.e. how the resources change in the different stages of spinoff ‘s development, the following considerations emerge:

Technological resources. The degree of innovativeness of the technology, which is high in the early stages tends to fall over the years in accordance with the diffusion of knowledge. In the meanwhile, the degree of empirical development rises until the offer of finished products and related services. The level of protection of the technology and the scope of the technological platform remains constant over time with a score respectively medium for the first resource and high for the second resource.

Human resources. The scientific experience of the team that founded the spinoff is high at all stages of the spinoff’s life, characterizing it as a high tech company, while the managerial experience and background of the team is flawed. The gap between the scientific and the professional management abilities is particularly acute, and to fill this gap, in the third stage managers employed some new partners. These new partners possess, respectively, technical, commercial and managerial skills. The spinoff expands its team with people from different professional backgrounds, and this facilitates the RBSO management. The different competencies enable the spinoff to expand its product line, to add another brand and to better compete in the market.

Financial resources. The parent organization and of the science park give a low financial contribution. The spinoff is funded in the first year of life with its net income. In the third and fourth phases, the RBSO have funds also from participation in regional and European research projects.

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Chiara Verbano, Karen Venturini and Avi Wasser Table 4: Assessment of spinoff resources in each stage of development

Network resources. In general, these resources are widely grown over the years, thanks to the expansion of the management team of the spinoff. The relationship with customers, suppliers and other research centres (such as INFM and the Science and Technology Park) is constant over time. The RBBO’s attempts to approach lenders such as venture capitalists have failed, while, in the last phase, the RBSO has intensified relations with companies engaged in complementary activities to those of the spinoff and with professionals that provide the necessary knowledge. There were no relationships with trading partners and competitors. The same management strategies have evolved from the search for an organization that would support the spinoff to the search of customers, using the prestige of the parent organization, to the establishment of partnerships with suppliers and research institutes and finally to the search of new complementary skills in order to offer a wider product portfolio.

The answer to the second question resulted from the analysis of Table 4:

In the first two phases (opportunity recognition and entrepreneurial commitment), the most important resources seem to be the technological ones. The human resource most relevant is the sector experience of the founders; social resources are instead at a medium level while the other resources have a lower importance.

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In the third phase (credibility), the degree of innovativeness loses importance, even if the ‘stage of development’ and ‘scope of technology’ of the remaining resources remain consistently high, even in the last phase. The importance of human resources (managerial and entrepreneurial experience) and social resources (contacts) increases. It also appears that, to evolve, the spinoff has to acquire at least a medium level of all resources, recovering initial shortcomings. At least in this sector, the financial resources are not particularly relevant.

In the last phase (sustainability), the bond with the parent organization dissolves and does not appear to be a key resource in the maturity stage. Instead, contacts with industrial and commercial actors, government agencies, suppliers and customers in particular are of strategic importance. The diversity of the team in terms of professional experience appears crucial to expand this network of contacts and access new skills.

5. Conclusions This research offers a framework to overcome the limitations of literature on spinoff companies, in that it allows us to analyse the entire process of generation and development of an RBSO. In addition, the framework integrates the resource‐based perspective with the institutional perspective, giving the research a more comprehensive insight. In addition to this theoretical contribution, the following lessons can be derived from the case analysed:

The technological resources seem the most important in the first stages, followed by the social resources, through which are provided managerial and entrepreneurial competencies lacking in the human resources;

In the last phases of credibility and sustainability can be observed a progressive enrichment of human resources (sectorial, managerial and entrepreneurial competences) and social resources, while some technological resources decrease in importance. The spinoff slowly changes identity; the relations with the parent organization and the science park decline while relations with industry stakeholders intensify. The scientific and academic connotations of the spinoff give way to a more managerial connotation.

Financial resources seem the most critical along all the process considered; only in the sustainability phase this resource does reach a medium level of importance. This aspect is typical of the ICT sector, which does not usually require a huge amount of funds invested, compared with other industries. In any case, it was difficult for the spinoff to find financial partners willing to accept a longer period before the achievement of profit. In this case, there is an important role of national, regional and European incentives.

To ensure sustainable development over time, the spinoff should equip itself gradually, arriving at the maturity stage with all four resources considered.

Of course, these are the first indications that emerge from the case analysed, which needs to be supported by other empirical analyses. Further, the proposed framework could be applied to spinoffs belonging to other industries or national contexts. The authors do not have items for the comparison of the Italian case with other foreigner cases, for example, American or British, because framework used for the analysis is new, and has not yet been validated by any other empirical research Future research objectives will be to compare the levels of sustainability and credibility of spinoffs in Italy with those in other countries. However, we believe that the findings of this research have potentially useful implications for those involved in spinoff generation (managers, researchers, public research institutions and universities and governments and government agencies), to deepen the knowledge of mechanisms and conditions supporting spinoff development and to build more profitable policies and practices of technology transfer, useful for strengthening the national industrial system.

Acknowledgements The authors gratefully acknowledge financial support for this research granted by the University of Padua (Research project CPDA109359).

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Companies’ Innovativeness Influenced by Organizational Structures Annika Vesterinen and Kalle Elfvengren Lappeenranta University of Technology, Lappeenranta, Finland annika.vesterinen@lut.fi kalle.elfvengren@lut.fi Abstract: Innovation results from collaboration, collective knowledge and intelligence. Successful innovation process needs organizational structure for the sharing of knowledge and for communication to flow between people. This paper presents the common organizational structures and discusses the potential effects of different structures to the innovativeness of companies. This study helps to understand the link between company's organizational structure and company's innovativeness. The study is based on the findings of a literature research. As a result of this study, the chosen structure could promote and enhance the creation of new innovations. Keywords: innovativeness, organizational structures

1. Introduction There are numerous studies about the effects of organizational structures on a company's performance and operating models. These studies are often considered in Faculties of Political Sciences and Social Sciences, where Faculties of Technology have nothing in common with them. For researchers in the field of technology, innovations have been the main question for a while. First the focus was of the definition on innovation and innovation processes. Innovations are considered as being a task for one person or a one unit. Now, thoughts about innovation are approaching a model of open innovations where they are seen as the result of people and community working together. At the same time, the concept of innovativeness or innovation capability has become a part of the research. Nevertheless, there are few studies about how organizational structures affect companies’ innovativeness. Only a few organizational structures are known which support the innovativeness of a company and researchers have only registered them because those structure models have become more common after open innovation companies became popular. Although there is no knowledge about how those older structures are affecting or do they have an influence at all for innovativeness in companies. This research looks for the links between the theories of organizational structures and innovativeness and which features of the organizational structures benefit and prevent innovativeness. The research begs the question of whether there is a structure that is the best choice for a company that is trying to reach maximum level of innovativeness.

2. Organizations and their structures The key issues of organizational study have always been about what keeps an organization together, with what kind of organization and with which practices the best possible results can be achieved. Studies of organizational structures have been attempts to answer these questions. (Juuti 2006) Organizations’ structures, functions, and internal cultures are affected by many factors. The organization can be said to be a co‐operation system formed by people and it exists for certain goals. These operations are pre‐ defined and repetitive in organization. Organization members and their groups affect the characteristics of the organization, but it is also affected by its environment. (Juuti 2006) Organization structures include information of the repeated organization activities and the hierarchy which is formed by people’s different stations. The organizational structure takes the position of the division of tasks and roles, and defines the various functions and relations between them. The goal of the structure is to assist co‐operation between people and groups so that the division of tasks can be differentiated enough, while maintaining the organization's co‐operation between the different parts. Ultimately, the organization's structure is the relationship between people and their jobs. (Juuti 2006)

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Annika Vesterinen and Kalle Elfvengren The structure of the small organization is the most basic organizational structure. Also, larger companies may take advantage of the structure of the small organization when it can be used as organizing innovative projects. The greatest strength of the structure is its informality and flexibility. This allows the organization to learn and develop within the structure, as well as rapid response to environmental changes. Weaknesses come from the same things: a free‐form organization’s working habits are hard to teach the new members and when the organization is growing, maintaining the model becomes challenging. (Peltonen 2007) The functional structure, the so‐called line organization, separates the different functions (figure 1). There, selected employees focus on their areas of expertise under their own management. The basic idea of the structure is that the employees of each function have often received professional training just for those core areas. The company's distributions of efforts of well‐defined functions are more efficient than those where everyone is learning all the stages of the process. This forms the strengths of the structure. Responsibility for the whole company is in the highest management, which also has the right to make decisions on issues that affect the whole organization. For this reason the company's decision‐making can accumulate to management and its response to environment changes too slow, which is a structural weakness. (Peltonen 2007) A common approach used by large manufacturing companies is to organize the company by product type. Each product has its own functional activities. Each product has its own functional activities. Some functions are centralized across the whole organization to improve efficiency or provide common features. This type of structure supports the notion of product platforms. (Trott 2005)

Figure 1: Functional structure The division structure consists of separate business units, which are formed on the basis of business areas (figure 2). Each business unit has its own management and function structure. Business units can be thought of as their own organizations within a larger organization (Mintzberg 1979). This cleavage of functions under the different business units makes it easier to respond to market fluctuations, but at the same time it hinders the proper utilization of specialties. It can be said that the divisional structure combines large company resources with small company flexibility and simplicity. Integration of the whole organization within the structure may be difficult. (Peltonen 2007) The matrix structures aim to combine two of the structures presented above (figure 3). The structure is flexible and is well suited for many kinds of companies. In the matrix structure, the divisional structure is built on top of the functional structure. The model utilizes both an overall picture and the benefits of specialization. Matrix structures, however, also have conflicts between these two structures. Employees may feel confused, since they are controlled in two different directions – divisional purposes and functional processes. This may cause slowness in an otherwise flexible structure. Preventing and solving the situation requires good communication skills, as well as a shift away from a traditional hierarchical way of thinking. (Peltonen 2007) Companies using the team structure are built around the processes. This changes the functional division of work and company runs the business with project teams which produce and implement processes. Processes can be produced either for an external or internal customer. Thus, the model does not have traditional, hierarchical leadership positions, but each process has its own leader. The executive group is responsible to the company's management. The process structure is suitable for a dynamic and complex environment in which the organization is required to be flexible and informal with the company's internal practices, which

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Annika Vesterinen and Kalle Elfvengren make use of teamwork and different specialties. In many cases, the process teams are only temporarily composed for specific projects. Challenge in the structure is the adoption of the approach, creation of the reward system and define core processes. (Peltonen 2007)

Figure 2: Divisional structure

Figure 3: Matrix structure The network structure is currently a more common organizational structure (figure 4). In it, a part of the company’s operations has been outsourced to specialized firms. This allows for large operation without large investments. The development of telecommunications technology and its ease of use have benefited the network structure. Outsourcing must be done in accordance with the company's strategy, when features that are strategically important to the company's competitiveness will not be outsourced. The management of the network structure is in a central unit, where can be located some of these strategically important and therefore no‐outsourced functions. Management may be difficult in widely networked businesses, because the maintenance of relationship requires a significant part of management work and all workers are not bound to the company. Still, the network model has got rid of unnecessary bureaucracy, and the model is very flexible. In addition, on account of outsourcing, various alliances and partnerships with large and smaller companies have become more common and increased its value. (Peltonen 2007) Often organizations do not have only one model and companies are mixing different organizational structures to match their functions. This combination of several models is called a hybrid structure. Hybrid structures are often complex and difficult to assess. This may lead to the confused image of the company. However, it can show, when it is working, that the result may be greater than the sum of its parts, because it can be combining each of strengths and avoid weaknesses of structures. (Peltonen 2007).

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Figure 4: Network structure

3. Innovations and innovativeness Innovations are seen as ideas or inventions and innovativeness as an idea‐rich environment. Apilo, Taskinen and Salkari (2007) point out that this is not one and the same thing. They claim that anyone can come up with ideas, but not all can be inventors. In addition, individuals have ideas, but the innovations require a participating organization, at best an innovative one that has the ability to combine technologies and market needs in new ways (Apilo and Taskinen 2006). Figure 5 shows that the innovation capability is anyway much linked to the organization. A more detailed study of capability requires a wider vision of the organization, its structures, personnel ability to absorb and capacity of information distribution (Yliherva 2007). This kind of study about the company's operations needs more detailed understanding of the organization. In conclude the organizational structures have also a direct impact on company's innovativeness and innovation capability.

Figure 5: Innovation capability (Paalanen et al. 2009) There are several different definitions for innovation capability. Similar in definitions is the fact that the innovation capability needs activities to support it. Different functional processes do not need to be in use constantly, but the company will need to have the ability to start the actions. Innovation capability is not just a concrete thing, which the company either has or has not, but it is a sum of various possibilities, although several studies also have definitions of the company's specific characteristics. Innovation capabilities give a base for the company's innovation activities. Capability does not show directly whether the company is innovative or not, but it helps with to start the activities. This means that the organization may have innovation capability, but it is not necessarily innovative and vice versa. Areas of the capability and its background affect actual innovativeness, if company uses them correctly (Saunila 2009). It is good to remember that organizational structure which supports innovativeness does not produce ready innovations for the company, but it may help or block innovation processes.

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Annika Vesterinen and Kalle Elfvengren It is characteristic for innovative organizations that the power of decision‐making is not in the hands of senior management only. In innovative organizations, the power is transferred to employees, and they are specifically encouraged to participate in decision‐making. (Stålhe et al. 2004) Also, the organization's size affects its innovation capability: small organizations are more flexible than large ones, and large companies need more actions to make secure interactions between different functions. In larger organizations just the smoothness of the interaction creates a problem in innovation. Then new and good ideas can remain in the idea stage for only the reason that there have been interruptions in organizational communication at some point. For that reason, the organization was not able to take advantage of its resources and expertise, even though both of them were available. (Kauhanen 2006)

4. Organzational structures affecting companies’ innovativeness According to Davila et al. (2005) organizational structure influences every aspect of how innovation occurs. It is a major part of How variable in the equation: How you innovate = What you innovate. No single organizational structure is appropriate for all types of innovation. The structure needs to vary based on the innovation strategy and the characteristics of the portfolio. Many large companies have struggled and failed in the attempt to integrate innovation into their organization. Often the organizational ‘antibodies’ kill off the innovations and the structures, resources and processes responsible for innovation. According to Markides (1998) because of this, it is very hard to innovative successfully within the structure of a large, established organization. A small business with fewer than 20 employees differs significantly in terms of resources from an organization with 200 or 2000 employers. Finnish mobile phone company Nokia may be a fine recent example of a big company which has lost its innovativeness because of sluggish and over swelled organization. In the first decade of this century Nokia was a highly successful and innovative player in its field, but it somehow lost its place as a number one brand in mobile phones. Could the hierarchical and slow decision making processes for new innovations be a one reason of losing its position as a market leader? According to Allen and Henn (2012) both organizational structure and space are tools that can be used to manage the innovation process. Every organization has a spatial dimension, and most space has an organizational dimension. Both organizational structure and space influence the interaction patterns among people, which are central to the innovation process. According to Allen and Henn (2012), bringing these two together gives the managers a better and more effective way of structuring interaction patterns that lead to innovation. Burns and Stalker (1961) studied at the impact of technical change on organizational structures and on systems of social relationships. It suggests that ‘organic’, flexible structures, characterized by the absence of formality and hierarchy, support innovation more effectively than do ‘mechanistic’ structures. Mechanistic structures are characterized by long chains of command, rigid work methods, strict task differentiation, extensive procedures and a well‐defined hierarchy. However, according to Trott (2005) there is some evidence of an inverse relationship between formalization and innovation. That is, an increase in formalization of procedures will result in a decrease in innovation activity. According to Narayanana (2001) two organizational structure variables that have been found to stifle innovation are formalization and centralization. Formalization refers to the degree of rules, written documentation and operation procedures. It presents the degree of bureaucracy that exists in an organization. Centralization refers to the decision making. The more centralized an organization is, the more likely it is that the decisions are made at the top levels of the organizations. Lower formalization and higher decentralization facilitates participation to decision making, flow of information and exchange of ideas, which in turn contribute learning and innovation (Narayanan 2001). For example, in 1992 Nokia decided to focus on telecommunications. After the organization reform more than one‐third of Nokia’s employees were in R&D. Researchers were not centralized in a single R&D unit; instead, they were spread throughout the company. They were organized this way to encourage creativity throughout the organization. The structure of the organization was flat, in which employees are encouraged to communicate openly rather than up and down a hierarchy. This resulted more creativity and innovative new products (White and Bruton 2007).

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Annika Vesterinen and Kalle Elfvengren The company must take into account as well themselves as the stakeholders in their innovation activities. This means that the company should be aware of markets and be networked at the same time. Knowledge of the markets helps company know which kinds of innovations are needed now and in the future. However, the company would not get the full potential out of that knowledge if the organization's communication does not work. The organization must be able to acquire knowledge and learn from it. The flexible organization is capable doing it best. Many greater innovations often require a paradigm shift and the flexible organization adopts new behavioral models faster and reforms its actions easier. It is normal that the power is transferred from the senior management to employees as well in innovative companies. The features of the innovative organization will be compared next with the characteristics of organizational structures. This will show which features have advantages and disadvantages over each structure, and to determine which organizational structures support the company’s innovation and which ones weaken it. The structure of a small organization has a clear advantage of in its very low degree of formality: it is informal, and there is no hierarchy inside the organization. It also reacts quickly to changes in the environment. Because the structure is compact, it is easy to communicate without the need for a third party. The structure has just one feature which prevents the innovativeness: often a small company does not have many resources for innovation. However, this is not a problem, if a small business can take advantage of its network or if the structure is used in larger companies as a way to organize projects. The functional structure is based on specific sectors and hierarchical decision‐making. Its operations are highly standardized and communication is formal. In addition, the structure is slow to respond to environmental changes. The only innovative feature that the functional structures’ organization has is the staff expertise. The corporation that uses this structure may produce functional innovations that do not require the participation of the entire organization. The division structure is not as hierarchical as the functional structure and therefore it can react more quickly to changes in the environment. The structural features of the organization are closer to customers, which improves the knowledge about markets. In practice, the structure consists of a number of small organizations within a larger concept, which allows it to take advantage of the small company's flexibility and simplicity as well as large companies’ resources. However, in this model, experts are diversified in different profit centers and they are unable to turn their attention to their own field very closely. The matrix structure is flexible and close to the market and at the same time it allows the expertise and specialized know‐how in organization. The structure is suitable for very different types of companies, so it is able to regenerate without major structural changes, even in the case of radical innovations. The structure itself is already demands good communication skills and a change in the way of thinking in the organization. Employees within the structure have two managers, which helps them get ideas going forward. The structural features do not set any disadvantages to innovativeness and they provide a good framework for innovation, if the company is able to use their resources properly. The team structure promotes innovation considerably: it consists of cross‐functional project teams, which operate on a market basis, and assess company’s performance on that how much value it produces to its customers. In addition, it is flexible and suitable for different types of businesses and specialties. The structure has similarity with the matrix structures because it requires changes in thinking and good communication skills. The difference between the team structure and the matrix structures is that the working teams are temporary. This can be difficult to innovativeness because the innovation may be forgotten if the company does not pay attention to innovation and only focuses on customers' orders. Advantages of the network structure are its excellent flexibility, the actual utilization of the network, the large global resources of the network and the elimination of unnecessary bureaucracy. In addition, the structure helps both large and small companies' innovation activities. The network structure has one intimidating factor for the company's own innovativeness: because employees do not commit to the company, the company must ensure that they are committed to the innovation process and that innovation would not go outside the company with employees involved in outside companies. So there is no direct disadvantages in the structure, but the company's challenge is to determine responsibility for the innovation processes and access issues.

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Annika Vesterinen and Kalle Elfvengren However, according to Tidd et al. (2005) the evidence suggests that the higher the uncertainty and complexity in the business environment, the greater is the need for flexible structures and processes to deal with.

5. Conclusions It can be concluded that each organizational structure can bring something good for the company's innovation activities. Yet, almost every structure has also some inhibiting properties, which may hamper the innovation process.

5.1 Non‐recommended structures The functional structure clearly has more disadvantages than advantages to the organization's innovativeness. It contributes to innovation only through specialties, but it cannot be recommended for initialing the innovative company. The divisional structure is able to make up for some of the functional structure’s problems. However, at the same time, it forms disadvantages to itself. It is interesting that the divisional structure problems are partly the same as the good properties in functional structure. These two are non‐ recommended structures.

5.2 Recommended structures Small organizations, team and network structures each had many advantages for innovativeness and only slightly disadvantages. Some of the advantages were part of the structural model itself and some were characteristics which the model required the use and which will help the company's innovation activities at the same time. Although the approach is dependent on the organization's decision to use them, they can be calculated as a part of the organizational structure, because the company cannot establish a structure without using them. Thus, the structure would not exist without these models. Also disadvantages have similarities between these structures: the slowing factors are not structural. The company will only consider these issues so that it can avoid them in structures when creating the environment for innovation. The best features for innovation activities are in the matrix structure. From its basic features not a single disadvantage could be found, but a significant number of good features. Structure is commonly used as a organization model. This proves that it has good properties, and it is easy to create and maintain, otherwise it would not be so common in companies. However, few companies represent only one structure model. Hybrid structures are profitable, because the structure can be accurately tailored to the organization and its resources can be utilized more efficiently. Therefore, every company should familiarize itself with its own needs and goals and explore which organizational structures it can use to benefit its operations. Further research opportunities rise from these recommendations presented above. The current findings should be validated further by real life company cases (interviews and a survey). As an obvious shortage, the proposed conclusions are based only the general presumptions based on literature, and the deeper conclusions need further research and a systematic research strategy.

References Allen, T. and Henn G. (2012) The Organization and Architecture of Innovation. Routledge USA, 136 p. Apilo, T. and Taskinen, T. (2006) Innovaatioiden johtaminen. In Finnish (Management of innovation). VTT Research notes 2330. 126 p. Apilo, T., Taskinen, T. and Salkari, I. (2007) Johda innovaatioita. In Finnish, (Managing innovation). Hämeenlinna, Talentum Media Oy. 260 p. Burns, T. and Stalker, G. (1961) The Management of Innovation. Tavistock, London, UK, 269 p. Davila, T., Epstein, M. and Shelton, R. (2005) Making Innovation Work – How to Manage It, Measure It, and Profit from It. Wharton School Publishing, USA, 334 p. Juuti, P. (2006) Organisaatiokäyttäytyminen. In Finnish (Organizational behaviour). Helsinki, Otava, 298 p. Kauhanen, J. (2006). Henkilöstövoimavarojen johtaminen. 8. edition. In Finnish (Management of human resources), Helsinki, WSOY. 292 p. Markides, C. (1998) Strategic innovation in established companies. Sloan Management Review, 39 (3): 31‐42. Mintzberg, H. (1979) The Structuring of Organizations: A Synthesis of the Research. Prentice‐Hall, Englewood Cliffs, N.J., 512 p. Narayanan, V. (2001) Managing Technology and Innovation for Competitive Advantage. Prentice‐Hall, New Jersey, USA, 510 p. Peltonen, T. (2007) Johtaminen ja organisointi. In Finnish (Management and organizing). Keuruu, KY‐Palvelu Oy. 223 p.

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Annika Vesterinen and Kalle Elfvengren Saunila, M. (2009) Innovaatiokyvykkyyden mittaaminen suorituskyvyn johtamisen näkökulmasta. In Finnish (Measuring innovation capability form performance management perspective). Lappeenranta University of Technology, Department of Industrial Engineering and Management. 94 p. Ståhle, P., Sotarauta, M. and Pöyhönen, A. (2004) Innovatiivisten ympäristöjen ja organisaatioiden johtaminen. In Finnish, (Leadership of innovative environments and organisations). Tulevaisuusvaliokunta teknologian arviointeja 19: Eduskunnan kanslian julkaisu 6/2004. 154 p. Tidd, J., Bessant, J. and Pavitt, K. (2005) Managing Innovation – Integrating Technological, Market and Organizational rd Change. 3 ed., John Wilet & Sons, USA, 582 p. Trott, P. (2005) Innovation Management and New Product Development. 3rd ed. Prentice Hall, UK, 536 p. White, M. and Bruton, G. (2007) The Management of Technology and Innovation: A Strategic Approach. Thomson South‐ Western, Canada, 404 p. Yliherva, J. (2004) Organisaation innovaatiokyvyn johtamismalli ‐ Innovaatiokyvyn kehittäminen osana johtamisjärjestelmää. In Finnish, (Management model of an organisation's innovation capabilities – Development of innovation capabilities as part of the management system). University of Oulu, Department of Industrial Engineering and Management. Doctoral thesis. 166 p.

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Structuring the Unstructured: Service Innovation in a UK Small Business Services Firm Vessela Warren and Barry Davies University of Gloucestershire, Cheltenham, UK vwarren@glos.ac.uk bdavies@glos.ac.uk Abstract: This study focuses on structured innovation models for the services sector. A plethora of research recognizes the importance of formal and structured innovation processes (Booz et al., 1982; Bowers, 1989; Scheuing and Johnson, 1989; Griffin, 1997; Johne and Storey, 1998; Cooper and Edgett, 1999; Cooper, 1986, 2001; Akamavi, 2005). The literature however lacks process models that specifically address services development. Cooper and Edgett (1999) with their ‘stage‐ gate’ model attempt to provide such an approach. This generic ‘from idea to launch’ innovation system was generated through research in leading USA business to consumer (B2C) companies. The innovation system, whilst constructed on the basis of best practice, was not designed to meet the needs of business to business (B2B) services firms. Alongside the lack of process models, a number of researchers claim that service firms have no process, or use unstructured, informal and often ‘ad hoc’ service development processes (Sundbo, 1997; Gottfridsson, 2011). It is therefore unclear whether a systematic approach to service innovation, or indeed the implementation of a model such as the ‘stage‐gate’ (Cooper and Edgett, 1999) is useful for B2B services firms. This study therefore reports on a case study of a small B2B services firm implementing a novel ‘end‐to‐end’ innovation system, and considers the implications for its management practices. In this longitudinal case study (18 months), we adopted a participant observational methodology (Jorgensen, 1989), with connotations of action science (Argyris and Schön, 1978). The research involved all those participating in the innovation system in the firm, including decision‐makers, middle managers and employees at lower hierarchical levels and the firm’s external networks. The researchers established that a systematic approach to service innovation through structured process could meet the needs of the case study organization and it is found that such a process is appropriate and useful in the context of small B2B services firm. The paper explains the reasons why such an approach was found to be appropriate and useful, in the context of small B2B services firm. A better understanding is provided of how small business services firm can adapt and improve the usefulness of such a structured process. Keywords: innovation, services, new service development, B2B, small business

1. Introduction In the last 20 years the developed economies have moved towards a service economy (OECD, 2000). The service sector accounts for 75% of the UK GDP (ONS, 2011). Innovation, in the form of new goods, services, processes and business models, plays a key role in firms’ growth (Ansoff, 1965; Drucker, 1985, 2007). Innovation capability, meaning the ability to consistently deliver innovations, is vital for firms to thrive today’s dynamic, uncertain and competitive business environment (Hamel and Prahalad, 1996; Hamel, 2006). Innovation has been explored extensively in the context of the manufacturing sector (e.g. Abernathy and Utterback, 1978; Christensen, 1997; Benner and Tushman, 2003). Service innovation is a neglected area of study by scholars and practitioners alike (Chesbrough and Sphorer, 2006). The exception being some work conducted in financial services development (e.g. de Brentani, 1993; Edgett, 1993, 1996; Akamavi, 2005). Innovation in the context of service sector remains therefore unexplored and relatively immature as Tether, Hipp and Miles (2001) suggested a decade or more ago. The paper, first, provides the theoretical background of the study. Next, the case study organization and the research methodology adopted are outlined. It then describes the initial steps undertaken to implement a structured service innovation process and the current innovation practices within the case study firm. The paper, finally, reveals the problems and issues identified with the small business services firm’s unstructured approach to service development, and illustrates the emerging structured innovation process that brings a greater improvement to the service innovation activities. Implications for researchers and managers focusing on structured innovation models for the services sector are also presented.

2. Background Given the manufacturing dominance, a plethora of research recognizes the importance of formal and structured innovation processes (Booz et al., 1982; Bowers, 1989; Scheuing and Johnson, 1989; Griffin, 1997; Johne and Storey, 1998; Cooper and Edgett, 1999; Cooper, 1986, 2001; Akamavi, 2005). An extensive body of

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Vessela Warren and Barry Davies literature on models for the development of goods exists (e.g. Booz et al., 1982; Cooper, 1986, 1994, 2001; Crawford, 1987; Pessemier, 1977). In particular, Cooper’s ‘stage‐gate’ model (Cooper, 2001) is well‐recognized amongst scholars and practitioners. Stage‐Gate International (2012), founded by Cooper and Edgett, claims that the ‘stage‐gate’ model is the “world’s most widely implemented innovation process” within large multinational companies. These claims are, of course, made by a consultancy having a vested interest, but the range of firms using the system is extensive. The literature lacks models specifically addressing the development of services, with a few conceptual models proposed in the ‘80s (e.g. Bowers, 1989; Scheuing and Johnson, 1989). Cooper and Edgett (1999) attempt to provide such an approach by tailoring Cooper’s (1986) ‘stage‐gate’ process model for goods to the business to consumer (B2C) service sector such as insurance, banking and telecommunications. This generic ‘from idea to launch’ system (See Figure 1 below) was generated through research in leading USA companies. Based on the researchers’ experience in the development of models for the manufacturing sector, they proposed a practical end‐to‐end process model for product development for the service sector. Their process model is a stage‐ gated system, where a potential new product passes through a series of stages and decision points before it can be launched in the market place. It is claimed that this new product development (NPD) process is rigorous and formal and maximizes the service development productivity (Cooper and Edgett, 1999).

Figure 1: A generic stage and gate process model (Cooper and Edgett, 1999) This innovation system, whilst constructed on the basis of best practice, was not designed to meet the needs of business to business (B2B) services firms. There is little literature available on the implementation of systematic innovation processes in B2B companies. Perhaps one of the arguments that could be adopted is that the innovation of goods is easier to define in terms of development stages. Alongside the lack of process models, a number of researchers claim that service firms have no process, or use unstructured, informal and often ‘ad hoc’ service development processes (Sundbo, 1997; Gottfridsson, 2011). It is therefore unclear whether a systematic approach to service innovation, or indeed the implementation of a model such as the ‘stage‐gate’ (Cooper and Edgett, 1999) is useful for B2B services firms. This paper aims to establish if a systematic approach to service innovation through structured process could meet the needs of a particular services firm, or not. The following case study is provided to illustrate the applicability of the process in the context of small B2B services firm.

3. The case study of Delta The UK based small business services firm in this study is named ‘Delta’. Delta’s main business was to deliver business support services to the private sector on behalf of the UK public sector organizations (e.g. local government). Founded in 1996, the firm was acquired in by its own management in 2000 and in the period 2007 – 2008 had grown significantly, where major income was achieved by winning long‐term public sector contracts. These contracts involved delivering business support services predominantly to other SME firms in the private sector. Typical services included leadership and change advisory services, skills advisory services and training. The company has also increased the number of employees from 7 to around 50 on 3 sites across the UK. Turnover in 2010 was around £2 million. In 2008, Delta sensed the need to diversify its customer segment and start delivering own new commercial services. In the period 2008 – 2010, firm’s senior managers together with one of the authors of this paper developed a project proposal outlining a project plan for the identification, design and implementation within Delta of novel business processes. These processes were aimed especially for service innovation, identified as the primary drivers for business growth, particularly in the private business to business (B2B) arena. Due to the economic and financial situation worldwide and the cut backs announced in 2010 by the UK government, for Delta there was a real need to diversify its customer base by directly targeting SMEs with its own commercial services in order to reduce its reliance on public sector contracts.

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Vessela Warren and Barry Davies The company recognized that it lacks knowledge and expertise to address key issues such as:

‘how to develop innovation capacity and capabilities;

expertise in implementing best practice in service product and process innovation to achieve a fully integrated service design process and procedure;

knowledge and experience in systems development;

market research capability to provide insight into prospective public and private sector customer needs;

the awareness of and expertise in using business tools that will facilitate the company’s re‐ invention/repositioning as a business services company and launch into new markets’.

Therefore, the firm’s owners approached the local university and established a knowledge transfer partnership that culminated at the end of 2009 in a partly funded innovation project and in March 2010 the project commenced. A case study research methodology was adopted. In the project team were senior managers from ‘Delta’ and the authors of this paper. The purpose of the re‐ engineering and implementation initiative was to bring new innovation process within Delta for use as a systematic approach to service development, viewed as a strategic platform for sustainable growth. This case study provided rich material for research into the application of cutting edge methodologies such as the ‘stage‐gate’ in the context of small B2B service firm, and allowed developing theoretical perspectives and empirical insights. In this longitudinal case study (18 months), two main approaches i.e. participant observation (Jorgensen, 1989), and action science (Argyris and Schön, 1978) were combined to allow both the exploration of the issues involved around the implementation of the service innovation process, and assessment of how the small business services firm can adapt and improve the usefulness of the process itself. The research project involved decision‐makers, middle managers and employees at lower hierarchical levels and the firm’s external networks. In the spirit of ethnographic research, qualitative and quantitative data was collected and evidence was derived through methods such as semi‐structured interviews, questionnaires, documentary analysis, discussions as well as participant observations (Gummesson, 2000).

4. The innovation management practices within Delta In the period April ‐ May 2010, a review of the firm’s current and future strategic position was undertaken by one of the authors of this paper. This strategic clarification process was commenced as it was considered crucial for establishing the new service innovation process requirements and to provide a means of detailing the scope for the service development activities. Thirty two responses from senior and middle management, staff in 3 locations and the firm’s external network were received to the questionnaire. In‐depth interviews and discussions were carried out with the Board of Directors, including the three managing directors/owners, the business development director and the director of business operations. The stage‐gated process of Cooper and Edgett (1999) was identified from the literature as a well‐ developed model where detailed information about the different stages within the model can be accessed. It was also a model that could be used as the foundation of an action science approach, which creates alternatives to the ‘status quo’ (Argyris and Schön, 1978). The stage‐gated process was presented to the Delta’s decision makers and they agreed that this model can be implemented in the organization for systematic service innovation; an implementation plan was developed and approved by the management committee. In June 2010, the report was presented to the Board of Directors outlining the key strengths and areas of improvement in the firm’s internal environment and key trends and opportunities in the firm’s external environment. After thorough discussion of the report, the proposed recommendations and action plan were approved by the Board. The discussion was followed by a presentation of the end‐to‐end innovation system proposal and awareness rising of the importance of structured service development process.

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Vessela Warren and Barry Davies Late in June 2010, a formal facilitated brainstorming session was held as part of the proposed action plan. More than a hundred ideas for new services were generated in less than two hours, by seven senior and middle managers. In the following months, senior managers sidestepped the design and implementation phases of a formal service innovation process. They saw an opportunity for Delta to develop some of the ideas proposed at the brainstorming session without a formal and structured methodology. The reaction was:

’we know what we are doing’

‘we need to see quick gains’

‘we are already innovative’

‘we don’t have time to get involved in formal process’

In the following months, the researchers also took part in the service development activities, as this was seen as an opportunity to assess how innovation activities are happening within Delta, without a structured service innovation process. The researchers considered that the practical experience and testing of ideas for services with potential customers is beneficial to the organization. This would have enabled Delta to bring new experience and knowledge for integration into the design of the innovation system. The observations, between July and December 2010 (6 months), showed that no new services were launched. Most of the initial projects for the development of new services were put on hold; decisions were delayed or projects were not resourced well enough to be moved forward appropriately. A general feeling of de‐ moralization and frustration was building up within those involved in the innovation activities. This led to recognition of the need for a different approach. The following section illustrates the emerging structured innovation process within Delta.

5. Structuring the service innovation process within Delta The experience of working without a structured process led to a strategy workshop for senior managers being held, to discuss the key problems/ issues with the current innovation practices. At this workshop, case examples were reviewed of best innovation practices such as ‘stage‐gate’ process, and awareness was built of the need of something similar for Delta due to inadequacies and limitations of the firm’s current innovation process and the surfacing problems and frustrations associated with it. A number of problems/issues were identified with the current unstructured approach to service development. These are summarized below:

Idea proposals were not selected on the basis of open and transparent selection procedures and criteria.

‘Ad hoc’ approach to project initiation and prioritization.

Unclear process as to the development of new services.

Unclear responsibilities and lack of project leadership.

Disconnection between the execution of innovation projects and other current operational projects.

Lack of team work and cross‐functional involvement.

Development work executed within silos; as a consequence different people working on the same or similar development activities.

Idea/project proposals were approved informally without recognition/connection to other projects, which also required development effort by more or less the same people.

Too many idea/project for the limited resources.

No clear focus or overarching business strategy to support ideas funneling.

Business decisions typically made ‘ad hoc’, without rigorous and explicit analysis or constructive debate and, rarely, definitive outcomes.

Lack of strategic consensus between senior managers/owners.

Critical decisions to enable project progress were made slowly or not at all.

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Vessela Warren and Barry Davies At the beginning of the workshop, the senior managers had different perspectives on what innovation system is, these were articulated as follows:

‘Eureka moments – ‘ad hoc’ innovation’ (Managing Director/Owner[1])

‘Structured way of doing business’ (Managing Director/Owner[2])

‘Letting go old habits, being aware’ (Managing Director/Owner[3])

‘Ways of converting ideas into profitable business’ (Head of Enterprise)

‘System is a vehicle to commit’ (Business Development Director)

‘Ways of improving culture and performance’ (Director of Business Operations)

When asked if Delta needs an innovation system, the answer was expressed by one of the managing directors in the following terms: ‘We have an innovation system for the public sector…Structured way of doing but reactive. It is like a mid‐range family saloon which works for our roads but we cannot go far away… [but] …We don’t have an innovation system for the private sector …We need a new vehicle for change that is fit for purpose’ During the workshop, shared business goals were shaped and what might be the obstacles in achieving these goals were outlined. This strategic workshop culminated in creating a shared ‘vision’ of what could be developed as a service innovation process and how it could work in practice. The Board of Directors and Head of Enterprise participating in the workshop expressed support and commitment to the implementation of a structured process to service development. After the initial failures in developing new services, the senior managers understood that the company was not realizing the benefits of innovation. Therefore, they had to change their actions and behaviours and increase their commitment to improve execution and yield positive results from the innovation process. It seemed evident that senior managers started to understand the benefits to the business that such a structured process can bring and grasped that this initiative will require substantial investment of time and resources. One researcher’s responsibility was to implement the new innovation process within the firm and to guide those involved in the innovation activities through the series of different ‘stages’ and ‘gates’ of the staged‐ gated process. A conceptual design of an innovation system, including procedures, sample documentation and tools were developed and implemented to support the different activities involved in such a process such as: idea generation, idea selection, writing a business case and decision reviews. Other aspects of the new system such as project planning and management, team work, learning and creative thinking were also addressed with in‐ house training. The conceptual design of the service innovation process included key features of ‘best practice’ and was built from researchers own experience and involvement in developing new service/ new market for Delta and other organizations. The need for a stage‐gated system that accelerates the process ‘from idea to launch’ through an informed and timely decision making was seen as crucial. The need to develop and launch services on time and within budget, is indeed what ultimately drives the success of a business. Key elements of Delta’s innovation system for the private sector were identified and their applicability within the firm were discussed. Some requirements, made by the senior managers, related to the new innovation process were also taken into account for the process design:

‘Brings teams together’

‘Easy to use’

‘Easy to understand’

‘Simple’

‘Help us capture and share ideas’

‘Make us money’

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‘Flexible’

‘Enable us to share knowledge and learning’

In the following months, from February to April 2011, eight workshops were delivered involving in total twenty‐eight participants, including senior management, middle management and staff at lower hierarchical levels within the organization. During these workshops, major process activities were explored and their applicability in the firm considered by using dummy services. At early steps of the process implementation, the different prescribed activities (see Figure 1) were skipped or not fully completed by those responsible for the development of new services. Some senior managers also sought ways of circumvent the process by introducing projects without putting them thorough the process. This had a knock on effect on the previously approved projects through the innovation process that were using the same resources. Initially, the different stakeholders involved find it difficult to comply with the procedures, rules, and paperwork that were brought in with the introduction of a structured service innovation process. From May 2011, the initial hurdles were gradually overcome. This was achieved because of the help of the researchers who were providing appropriate guidance, with one of them also acting as process manager. A change of behaviour and mind‐set to developing new services through a formal process were noticed in senior managers/owners and rest of the organization. The reasons for these changes might have been for several reasons: grasping the benefits that such a systematic methodology can bring to the company or initial lack of confidence in evaluating business ideas (overcome by using the proposed tools for idea evaluation and decision). This newly gained confidence allowed more new ideas to be selected and new service projects to enter the innovation funnel and being systematically evaluated, prioritized and appropriately resourced. For instance, a major development to the firm’s practices was the introduction of ‘innovation challenges’. These initiatives were launched by selecting the most promising ideas from the ‘Idea Bank’. This had resulted from the prolific idea generation activities. These ‘creative challenges’ were advertised internally and aimed to recruit volunteers to take part in the further developing the selected ideas. Partly, the teams were formed by including those who have proposed the ideas and partly by those who volunteered to take part. During one of the ‘innovation challenges’, two ideas were selected and two competing teams were created for the development of each of the ideas. Creating positive competition between the teams raised the stake and excitement within the organization. Both teams showed high level of enthusiasm, openness, commitment and creativity during the development of new services. In particular, one of the teams made a greater progress than the other team. For instance, team members have spent many hours in thinking, discussing and structuring their idea proposal by using the proposed tools (e.g. idea proposal, business case, project plan). Their proposal was based on facts and information instead of gut feeling. From the decision makers the team was expecting: ‘Guidance on where my priorities are – effective use of our time plus priorities…We also need more guidance from the screening committee’ (Call Centre Manager) ‘Realistic in their expectations, Reasonable assessment of the proposal such as risks and opportunities, Outright agreement – clear yes and/or clear no, Consistency across the panel.’ (Business Development Director) Their business case was sent back for revision, after the first decision review, and further research and analysis were carried out by the development team. At the following gate review the team suggested a new model for staff recruitment that was required to deliver the proposed new service. In relation to the new innovation process the business development director said: ‘the innovation system helps us think through. We were able to come up with more advantageous proposition (e.g. look what other companies do)’ In less than 1.5 months, the project proposal was approved for implementation and in less than 3 months a new division was set up to and the new service was launched. Senior managers had also recognized that structured process for service development ‘makes sense’ and ‘it is useful approach to accelerate the development of new service from its conception to its launch’.

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Vessela Warren and Barry Davies With the implementation of the new structured process, the service innovation activities within Delta saw a greater improvement. There were two explanations. Firstly, the introduction of the stage‐gate processes itself. Secondly, the implementation of the innovation system through the techniques of ‘innovation challenges’, the use of competing teams and employee engagement. Such a systematic approach for service innovation was found to be appropriate and useful in the context of small B2B services firm for a number of reasons:

Applicability of structured model to small service firm settings.

Deep understanding of the market place and customers’ needs, which inputs are uncovered/incorporated throughout the innovation project.

Deep understanding of firms’ strength and weakness, opportunities and threats and formulation in a strategy plan. SWOT needs to be taken into consideration to provide a framework for generation of new ideas and help focusing innovation effort.

Implementing a structured idea generation process and linking it closely to the stage‐gate process is an important factor for a continuous process pipeline supply and effective process management.

Companywide training on creativity. For example, creativity is skill that needs to be nurtured and applied not only at idea generation stage, but also used in the development stage, as by applying creativity to the solution of customers’ problems can help delivering services that match customers’ requirements.

Training on project planning and management and standard project management methodologies were implemented for all innovation projects.

The process became supported and embedded within the culture of the organization.

6. Conclusions This applied research has provided an opportunity to the researchers to learn more about the ‘stage‐gate’ methodology and have a first‐hand experience of the challenges that service firm managers experience in implementing novel innovation process. Some authors criticize the ‘stage‐gate’ process of being too formal and lacking flexibility. Some practice evidence suggests that in larger organizations, when the process has been already implemented, there was a general perception that the new product development became less about execution and more about formalities, rules and paperwork. However, this may be correct for when the process is already up and running; therefore process managers should look to introduce process improvements and flexibility but at early stages of implementation trying to be too flexible there is a risk going back to unstructured ways of service development. The researchers established that a systematic approach to service innovation through structured process could meet the needs of the case study organization and it is found that such a process is appropriate and useful in the context of small B2B services firm. This paper provided a better understanding of how small business services firm can adapt and improve the usefulness of such a model. The process brought a new level of awareness within the service firm toward service innovation, and a greater synergy among different stakeholders and departments across the organization. Clearly formal and structured innovation processes are important and useful to small B2B services firms. These processes bring structure where chaos can easily being built up and frustration arise. Service innovation involves complexity of activities, decisions and internal and external interactions; indeed it is questionable whether innovation can exist over a long time period without such systematic processes. Service firms, independently of their size, therefore need to adopt a structured approach in order to develop service innovations on a consistent basis.

References Abernathy, W. J., and Utterback, J. M. (1978) The Productivity Dilemma: Roadblock to Innovation in the Automobile Industry, Baltimore: John Hopkins University Press. Akamavi, R. K. (2005) “A Research Agenda for Investigation of Product Innovation in the Financial Services Sector”. Journal of Services Marketing, Vol. 19, No. 6, pp 359‐378. Ansoff, H.I. (1965) Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion. New York: McGraw‐Hill. Argyris, C. and Schön, D.A. (1978) Organizational Learning: A Theory of Action Perspective. New York: McGraw‐Hill.

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Vessela Warren and Barry Davies Benner, M. J., and Tushman, M. L. (2003) “Exploitation, Exploration, and Process Management: The Productivity Dilemma Revisited”, Academy of Management Review, Vol. 28, No. 2, pp 238‐256. Booz, Allen and Hamilton Management Consultants (1982) New Products Management for the 1980s. New York: Booz, Allen and Hamilton Management Consultants. Bowers, M. R. (1989) “Developing New Services: Improving the Process Makes it Better”, Journal of Services Marketing, Vol. 3, No. 1, pp 15‐20. Chesbrough, H., and Sphorer, J. (2006) Services Science: A Research Manifesto. Haas School of Business, UC Berkeley and IBM Research. Christensen, C. M. (1997) The Innovator’s Dilemma: When New Technologies Cause Great Firm to Fail. Boston: Harvard Business School Press. Cooper, R. G. (1986) Winning at New Products. Reading, MA: Addison‐Wesley Publisher. Cooper, R. G. (1994) “Perspective: Third‐Generation New Product Process”, Journal of Product Innovation Management, Vol. 11, pp 3‐14. Cooper, R. G. (2001). Winning at New Products: Accelerating the Process from Idea to Launch, (3 ed.). Cambridge, MA: Perseus Publishing. Cooper, R. G. and Edgett, S. J. (1999) Product Development for the Service Sector – Lessons from Market Leaders, New York: Perseus Books. nd Crawford, C. M. (1987) New Products Management, (2 ed.), Richard D. Irwin, Chicago, IL. de Brentani, U. (1993) “The New Product Process in Financial Services: Strategy for Success”, International Journal of Bank Marketing, Vol. 11, No. 3, pp 15‐22. Drucker, P.F. (1985) “The Practice of Entrepreneurship”, Innovation and Entrepreneurship Practice and Principles, Harper & Row, New York. Drucker, P.F. (2007) Innovation and Entrepreneurship, The Classic Drucker Collection, (Rev. Ed). Taylor & Francis. Edgett, S (1993) “Developing New Financial Services within UK Building Societies”, International Journal of Bank Marketing, Vol.11, No.3, pp 35‐43. Edgett, S (1996) “The New Product Development Process for Commercial Financial Services”, Industrial Marketing Management, Vol. 25, No. 6, pp 505‐515. Gottfridsson, P. (2011) “Development of New Services in Smaller Organizations: They Do Just Happen”, Australian Journal of Business and Management Research, Vol. 1, No. 7, pp 91‐99. Griffin, A. (1997) “PDMA Research on New Product Development Practices: Updating Trends and Bechmarking Best Practices”, Journal of Product Innovation Management, Vol. 14, pp 429 ‐ 458. Gummesson, E. (2000) Qualitative Methods in Management Research, (2 ed.). London: Sage. Hamel, G. and Prahalad, C.K. (1996) Competing for the future, USA: Harvard Business School Pres. Hamel, G. (2006) Why, What, and How of Management Innovation, Harvard Business Review. Johne, A., and Storey, C. (1998) “New Service Development: A Review of The Literature and Annotated Bibliography”, European Journal of Marketing, Vol.32, No.3/4, pp 184‐251. Jorgensen, D. (1989) Participant Observation: A Methodology for Human Studies. Applied Social Research Series, Vol. 15. Newbury Park: Sage Publications. OECD (2000) “The Service Economy, OECD Publications” [online], Paris, http://www.oecd.org/industry/industryandglobalisation/2090561.pdf. Office of National Statistics (ONS), (2011) “The UK Service Sector” [online], http://www.statistics.gov.uk/pdfdir/ios0111.pdf. Pessemier, E. (1977) Product Management, John Wiley Publications, New York, NY Scheuing, E. E., and Johnson, E. M. (1989) “A Proposed Model for New Service Development”, Journal of Services Marketing, Vol.3, No. 2, pp 25‐34. Stage‐Gate International (2012) “Stage‐Gate International”, accessed on 1 October 2012, <http://www.stage‐ gate.com/aboutus_ourfounders.php>. Sundbo, J. (1997) “Management of Innovation in Services”, The Service Industries Journal, Vol.17, No. 3, pp. 432‐455. Tether, B., Hipp, C., and Miles, I. (2001) “Standardization and Particularization in Services: Evidence From Germany”. Resarch Policy, Vol. 30, No. 7, pp 1115‐1138.

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Student Entrepreneurial Intentions: Two Perspectives Doan Winkel1, Jeff Vanevenhoven2, Mark James3 and Eric Liguori4 1 Illinois State University, College of Business, Normal Illinois, USA 2 University of Wisconsin – Whitewater, College of Business & Economics, Whitewater Wisconsin, USA 3 United International College, Division of Business & Management, Zhuhai China 4 California State University – Fresno, Craig School of Business, Fresno California, USA dwinkel@ilstu.edu vanevenj@uww.edu mjames@uic.edu.hk eliguori@gmail.com Abstract: A Social Cognitive Career Theory (SCCT) model of entrepreneurial intentions is tested with students from the United States and China. Relationships between attitudes, contextual factors and motivational processes were found to interplay and contribute to entrepreneurial intent. Self‐efficacy was a powerful mediator among these relationships. The SCCT model was generalizable to both cultures. Keywords: entrepreneurial intentions, self‐efficacy, social cognitive career theory

1. Introduction Becoming an entrepreneur is a career choice (Bird & Brush, 2002) to enter a solitary, “sink or swim” environment laden with risk and uncertainty (e.g., McMullen & Shepherd, 2006) in which they may invest in unpredictable ventures characterized by high failure rates (Aldrich & Ruef, 2006). We must understand the individual and environmental characteristics and processes that shape a career decision. One framework within which to examine such processes is Social Cognitive Career Theory (SCCT: Lent, Brown, & Hackett, 1994, 2000). SCCT explains the motivational and individual and contextual mechanisms underlying career‐related choices and behaviors. Entrepreneurship begins with some degree of individuals’ voluntary, conscious, planned behavior (Krueger et al., 2000; Shook et al., 2003). As a behavioral process that unfolds over time, it is necessary to focus on entrepreneurial intentions in understanding this process (e.g., Ajzen, 1991). Behind entrepreneurial action are entrepreneurial intentions, which are a fundamental construct in entrepreneurship research (e.g., Krueger, 2007; Zhao, Seibert, & Hills, 2005). Our primary purpose is to examine how various attitudes, contextual factors, and motivational processes interplay and contribute to an individual’s entrepreneurial intent. Our secondary purpose is to test the generalizability of an SCCT model of entrepreneurial intentions across two different cultures (the United States and China).

2. Theoretical development: Entrepreneurial intentions Many scholars have introduced intention models into the entrepreneurship domain to explore the linkages between the environment and the individual (e.g., Ajzen, 1991; Davidsson, 1995; Shane, 2003; Shapero, 1982). These models describe how exogenous influences affect one’s intentions to create a new venture and eventual behavior of founding the new venture. These models offer inconsistent findings that warrant elaboration. The most prominent similarity across models is the inclusion of a self‐efficacy type measure, such as perceived feasibility, behavioral control, and conviction. Since intentions involve processes of evaluation and choice, self‐efficacy, defined as an individual’s cognitive conviction in his/her ability to successfully perform diverse tasks (Bandura, 1977; Wood & Bandura, 1989), is a fundamental variable in the investigation (Boyd & Vozikis 1994). Most models also include some measure of an individual’s attitude, such as perceived desirability and sense making. This attitude construct is often seen as unidimensional and represented by an individual’s affective reaction (Fishbein & Ajzen, 1975). However, attitude is a combination of affective, cognitive, and conative reaction (e.g., Allport, 1935; Breckler, 1984; Robinson et al., 1991).

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Doan Winkel et al. Intentions are the best predictor of planned entrepreneurial behavior, over and above personality, attitudes or demographics (Kim & Hunter, 1993; Krueger et al., 2000). Because intentions incorporate personality, attitudes, past experience, and social pressure, this construct provides a strong link between an individual and their actions (e.g., Ajzen, 1991; Shapero, 1982). Emerging models are becoming more integrative of past models, such as combining the Ajzen and Shapero models, and extending them to include more individual and contextual factors (e.g., Segal et al., 2005). While most intentions studies use these models, there are also studies that incorporate other theories. One such theory from the careers literature, Social Cognitive Career Theory (SCCT), offers a powerful opportunity to incorporate the dynamic interplay of previously studied individual, contextual and motivational variables in the formation of entrepreneurial intentions (e.g., Segal, Borgia, & Schoenfeld, 2002; Segal, Schoenfeld, & Borgia, 2007).

3. Social cognitive career theory Anchored in Bandura’s (1986, 1997, 2001) Social Cognitive Theory and concept of self‐efficacy, Lent and colleagues (1994, 2000) developed Social Cognitive Career Theory (SCCT) to explain how individuals develop career interests and goals, make career choices, and achieve career‐related performance outcomes. SCCT emphasizes the importance of human agency through focusing on the following mechanisms: a) self‐efficacy beliefs ‐ the beliefs about one’s capacity to execute a course of action within a given performance domain (i.e., “Can I can do this?”), b) outcome expectations ‐ the anticipated consequences of the action (i.e., “If I do this – what will happen?”), and c) goals ‐ the intention to engage in a particular behavior or produce a particular outcome (Bandura, 1986). Key SCCT premises are that self‐efficacy beliefs predict goals/intentions, and that outcome expectations are critical determinants of career goals (Lent et al., 1994). SCCT further suggests that person inputs (i.e., individual differences and predispositions) and background variables (i.e., environmental influences) influence self‐efficacy beliefs and outcome expectations, which in turn affect the formation of intentions (e.g., Lent et al., 1994; Schwab & Tokar, 2005). SCCT is the most accepted and validated model from the careers literature to understand the psychological processes underlying career interests and goals (e.g., Lent et al., 2002). Scholars recognize the utility of SCCT constructs as predictors of entrepreneurial intent (e.g., Segal et al., 2002, 2007). Applications to the entrepreneurship domain focused on a subset of constructs. The usefulness of an SCCT model for explaining entrepreneurial intent has not fully been realized, so we develop and test a more complete SCCT model of entrepreneurial intent.

3.1 Model constructs Core motivational processes Central to SCCT are the motivational processes that link individual and contextual influences to goals/intentions and subsequent behaviors. The first construct is self‐efficacy beliefs, which are “concerned not with the skills one has but with judgments of what one can do with whatever skills one possesses” (Bandura, 1986: 391). Because these are specific in nature, they must be discussed specific to the context (Bandura, 1997, 2001). We define entrepreneurial self‐efficacy as the self‐confidence that one has the necessary skills to succeed in creating a business (Wilson et al., 2007). The second motivational construct of SCCT is outcome expectations, which are derived from expectancy‐value theories that stress that behavior is a joint function of one’s expectations of obtaining a particular outcome as a function of performing a behavior and the extent that he/she may value such an outcome (Bandura, 1986; Schunk, 1991). While individuals perceive a variety of personal, social, and material consequences when considering a decision to become an entrepreneur, using a utility maximization perspective, we expect personal and material outcomes to be particularly salient (Eisenhauer, 1995). Thus, we conceptualize outcome expectations as the expected personal and material results of one’s decision to engage in entrepreneurial activity, and the value the individual places on those expected results. The third motivational construct of SCCT is goals. SCCT’s conceptualization of goals encompasses intention to engage in a specified behavior (Bandura, 1986; Lent et al., 1994), so we will focus on entrepreneurial

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Doan Winkel et al. intentions, defined asv“a conscious and planned resolve that drives actions necessary to launch a business” (Thompson, 2009: 671). Individual and contextual influences According to SCCT, individual and contextual factors are critical determinants of the motivational processes outlined above (Lent et al., 1994). We define individual factors as one’s psychological predispositions/attributes (e.g., personality and predispositions). We define contextual factors as early or recent experiences that shape one’s perceptions, beliefs and experiences. Contextual variables vary on the basis of the dependent variable, and since most SCCT research focuses on career paths, background variables include role models and current support that can influence career choice.

4. Study 1 4.1 Hypothesized model person factor influences SCCT posits that individual attributes influence self‐efficacy and the manner in which individuals process efficacy‐relevant experiences (e.g., Lent et al., 1994; Rogers et al., 2008). Bandura (1986) suggested that self‐ efficacy is influenced by enactive mastery, role modeling, social influences, and psychological dispositions. Of these, psychological dispositions are specifically applicable within our focus on individual factors. Research suggests that entrepreneurs may possess unique cognitive skills and styles (e.g., Gregoire, Corbett, & McMullen, 2011). Cognitive style captures the ways in which individuals organize and process information (e.g., Kickul et al., 2009). As this organizing and processing occurs, an individual’s belief in their capability to engage in a particular course of action will change. For instance, as an entrepreneur processes information about the market, the industry, and the competitive landscape, they will become more or less confident in their ability to bring a product or service to market. Therefore, H1: Individuals having (a) an internal locus of control, (b) a high preference for risk, and (c) lower creating (d) knowing and (e) planning cognitive styles will exhibit higher levels of entrepreneurial self‐efficacy.

4.2 Contextual factor influences One’s motivational processes will also be affected by various “external” antecedents (e.g., Lent et al., 1994). We focus on role models and support received from others (e.g., Lent et al., 2000; Segal et al., 2007). Considerable research shows that having a role model impacts individuals’ desire and intention to become entrepreneurs, their attitude of entrepreneurship, and their belief in their ability to succeed in entrepreneurial activity (Brockhaus & Horowitz, 1986; Krueger, 1993). Individuals with previous entrepreneurial experience should have a more accurate perception of what to expect from an entrepreneurial career (Lent et al., 2000). Contextual influences should directly impact entrepreneurial intentions. Research also indicates that social support directly influences motivational processes (e.g., Lent et al., 1994). This support enables or deters learning experiences that form beliefs about one’s own capabilities, outcomes expected from performing various activities, and ultimately, the level of interest in and intention to engage in various activities (Lent et al., 2000). Empirical research found direct relationships between contextual support and core motivational processes (e.g., Lent et al., 2000; Sequeira, Mueller, & McGee, 2007). Therefore: H2: Individuals with more prior exposure to entrepreneurship will exhibit (a) a higher level of entrepreneurial self‐efficacy, (b) more positive outcome expectations, (c) more positive entrepreneurial attitudes, and (d) higher levels of entrepreneurial intentions. H3: Individuals with more social support will exhibit (a) a higher level of entrepreneurial self‐ efficacy, (b) more positive outcome expectations, (c) more positive entrepreneurial attitude, and (d) higher levels of entrepreneurial intentions

4.3 Entrepreneurial outcome expectations and attitude An individual will choose among alternative behaviors by considering which behavior will lead to the most desirable outcome (Vroom, 1964). Consistent with SCCT’s predictions (e.g., Lent et al., 1994, 2000) expectancy variables significantly influence individuals’ decision‐making process (e.g., Gatewood, 2004). Previous studies found that perceptions of environmental support and barriers (which create outcome expectations) impact entrepreneurial intentions (e.g., Arenius & Minnitti, 2005; Turker & Selcuk, 2009). Therefore:

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Doan Winkel et al. H4: Individuals with more positive entrepreneurial outcome expectations will exhibit (a) higher levels of entrepreneurial attitudes and (b) higher levels of entrepreneurial intent Entrepreneurial attitude is similar to the perceived desirability construct in the entrepreneurial intentions literature (e.g., Krueger et al., 2000). There is strong evidence (e.g., Ajzen, 1991; Fishbeing & Ajzen, 1975) that attitudes significantly impact one’s intentions. Devonish and colleagues (2010) provide robust evidence that one’s attitudes toward entrepreneurial behavior directly and positively impacts their entrepreneurial intentions. Therefore: H5: Individuals with higher levels of entrepreneurial attitudes will exhibit higher levels of entrepreneurial intent

4.4 Mediating Influences: Entrepreneurial self‐efficacy Entrepreneurial self‐efficacy should mediate the relationships between both person and contextual factors and entrepreneurial intentions, and relationships between both person and contextual factors and outcome expectations (e.g., Lent et al., 1994, 2000). Bandura (1997) argues that one’s self‐efficacy impacts their emotional and thinking processes. People with higher self‐efficacy believe in their capabilities and strive to accomplish difficult tasks as they promote positive thoughts and emotional reactions (Bandura, 1994). One’s entrepreneurial self‐efficacy has been shown to impact their attitudes toward entrepreneurship (e.g., Bandura, 1997; Devonish et al., 2010; Krueger, 1993). Self‐efficacy will also enhance outcome expectations (e.g., Fouad & Smith, 1996; Lent et al., 1994) such that the outcomes that individual’s expectation from an entrepreneurial career should reflect their self‐efficacy. If one believes that entrepreneurial behavior is achievable, the outcomes they expect from that behavior should be more positive (e.g., Lent et al., 1994; Bandura, 2001). Individuals with greater confidence in their ability to engage in entrepreneurial behaviors (high self‐confidence) will exhibit higher levels of entrepreneurial intentions (e.g., Boyd & Vozikis, 1994). Therefore: H6: Individuals with higher levels of entrepreneurial self‐efficacy will exhibit (a) more positive outcome expectations, (b) higher levels of entrepreneurial attitudes, and (c) higher levels of entrepreneurial intent. Individuals make decisions to undertake activities they perceive are within their capabilities for success (Bandura, 1997). As such, an individual’s entrepreneurial self‐efficacy should be a key mechanism through which individual characteristics and contextual factors influence intention. Intentions are influenced by perceptions of abilities and skill sets (e.g., Bird, 1988; Chen et al., 1998). Further evidence suggests that self‐ efficacy mediates the relationship between personality constructs and one’s intentions (e.g., Krueger, 1993, 2000; Rogers et al., 2008; Zhao et al., 2005). Therefore: H7: Entrepreneurial self‐efficacy will mediate the relationships between (a) prior exposure to entrepreneurship, (b) social support, (c) locus of control, (d) risk‐taking propensity, (e) creating cognitive style, (f) knowing cognitive style, and (g) planning cognitive style and entrepreneurial attitudes.

5. Study 1 method Shinnar et al. (2009), Pruett et al. (2009), and Krueger et al. (2000) all argue the importance of studying entrepreneurial phenomena before they occur, and in order to be able to differentiate between groups, to include non‐entrepreneurial intending subjects. In other words, the sampling of current entrepreneurs introduces biases that are not representative of the related behavioral complexity, especially in relatively uncommon phenomena such as entrepreneurship. They also argue that samples of university business students with an orientation towards business but with a broad range of intentions and attitudes toward entrepreneurship will reveal vocational preferences at a time when they face important career decisions. Contextual Factors Prior exposure to entrepreneurial experiences was measured using Krueger (1993). Person Inputs Locus of control was measured using seven questions from Ghorpade, Hattrup and Lackritz (1999). Risk‐ taking propensity was measured using four questions from Gomez‐Mejia and Balkin (1989). Cognitive style was measured using eighteen questions from Cools and Van den Broeck (2007). Entrepreneurship attitude was measured using five questions from Linan and Chen (2009). Motivational Processes Entrepreneurial self‐ efficacy was measured using a six‐item scale from Wilson et al., (2007), outcome expectations were measured

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Doan Winkel et al. using a five‐item scale from Krueger and colleagues (2000), and intention was measured using a six‐item scale from Thompson (2009). Table 1: Study 1 and 2 sample demographics Study 1: United States N Percentage GENDER Male 143 45% Female 173 54% Missing 5 1% Total 320 100% Average Age 24 RACE Caucasian 226 71% African‐ 30 9% American Latino/Latina 15 5% Native‐ 9 3% American Asian 27 8% Multi‐Racial 9 3% Other 3 1% Total 320 100%

Study 2: People’s Republic of China N Percentage GENDER Male 137 57% Female 105 43% Missing 0 0% Total 242 100% Average Age 21 RACE Caucasian 0 0% African‐ 0 0% American Latino/Latina 0 0% Native‐ 0 0% American Asian 242 100% Multi‐Racial 0 0% Other 0 0% Total 242 100%

6. Study 1 results To assess validity and reliability we performed a factor analysis, which showed minor issues with low factor loadings and questions cross loading on factors, so some scale items were deleted. Descriptive statistics and alpha reliabilities for the two models are presented in Table 2. Table 2: Study 1 and 2 means, standard deviations, zero‐order correlations, and coefficient alphas SD+

Prior Exposure Social Support

Mea n + 1.6/1 .8 3.5/3 .5

0.9/1 .0 0.6/0 .6

‐.07

.01

.07

.08

.06

.07

.00

.07

.27* **

.23* **

.19* **

.21* *

.18* * .28* *

.24* ** .33* **

.19* ** .39* **

Locus of Control

3.0/3 .7

1.2/0 .9

.09

.28* ** (.81 )/ (.85 ) ‐ .14* *

‐ .13*

.09

‐.08

‐.01

.08

.09

.06

Risk‐ Taking Propensit y Creating Style

3.2/3 .3

0.8/0 .9

.17*

(.79 )/ (.81 ) ‐ .19*

.26* **

.19* **

‐.03

.29* **

.14*

.27* **

.26* **

3.6/4 .1

0.7/0 .7

.12* *

.20* **

‐.09

(.62 )/ (.62 ) .30* **

.22* **

.27* **

.38* **

.34* **

.24* **

.17* *

Knowing Style

3.9/3 .6

0.8/0 .7

‐ .11*

.28* **

‐ .26*

.02

(.79 )/ (.84 ) .34*

.31* **

.38* **

.21* **

.22* **

.35* *

Planning Style

3.9/3 .8

0.7/0 .6

‐.05

.28* *

‐ .25*

.01

.29*

(.80 )/ (.75 ) .57*

(.92 )/

.27* **

.19* *

.16* *

.17* *

Variable

1 2

.12*

.14* *

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Variable

Mea n +

SD+

1 0

Entrepre neurial Self‐ Efficacy Entrepre neurial Outcome Expectati ons Entrepre neurial Attitudes

3.7/3 .5

0.8/0 .7

.18*

3.4/3 .7

0.8/0 .7

.19*

4.7/4 .9

1.6/1 .3

.13*

(.81 ) .30* **

.29* **

.27* **

.33* **

(.67 )/ (.80 )

.33* **

.21* **

.42* **

(.85 )/ (.92 ) .50* **

.54* **

.35* **

‐ .23*

.30*

.39*

.30*

.35*

‐ .15*

.10

.22* **

.23*

.28* **

(.68 )/ (.80 ) .27* **

‐.03

.23*

.33*

.27*

.19* **

.31* **

.49* **

Entrepre 3.5/3 1.5/1 .22* .29* .08 .22* .21* .10 .04 .20* .31* (.80 ** ** ** ** ** ** neurial .4 .3 )/ Intention (.87 s ) *p< .05, **p<.01, ***p<.001, + = First value listed is for Study 1(US), second value listed is for Study 2(PRC) Values below the diagonal are Study 1 (United States, N=320) Values above the diagonal are Study 2 (People’s Republic of China, N = 242)

1 1

As seen in Figure 1, hypothesis 1 was partially supported. An internal locus of control, a high preference for risk, and creating and planning styles were predictors of entrepreneurial self‐efficacy. Hypothesis 2 was partially supported. Prior exposure to entrepreneurship was a significant positive predictor of only entrepreneurial self‐efficacy and outcome expectations. Hypothesis 3, 4, and 5 were fully supported. Hypothesis 6 was partially supported. Entrepreneurial self‐efficacy was a significant positive predictor of entrepreneurial outcome expectations and attitudes, but not a significant predictor of entrepreneurial intentions. To test mediation in hypothesis 7, we used Barron and Kenny’s (1986) approach. See Table 3 for the results of this analysis. Hypothesis 7 was partially supported, as follows: H7a: Entrepreneurial self‐efficacy did not mediate the relationship between prior exposure to entrepreneurship and entrepreneurial attitudes; H7b: Entrepreneurial Self‐Efficacy partially mediated the relationship between Social Support and Entrepreneurial Attitudes; H7c: Entrepreneurial Self‐Efficacy fully mediated the relationship between Locus of Control and Entrepreneurial Attitudes; H7d: Entrepreneurial Self‐Efficacy partially mediated the relationship between Risk Taking Propensity and Entrepreneurial Attitudes; H7e, H7f, and H7g: Entrepreneurial Self‐Efficacy did not mediate the predicted relationships and Entrepreneurial Attitudes.

7. Study 2 7.1 Cross‐cultural generalizability with a Chinese sample An emerging research stream has investigated a limited set of relationships contained in our model (e.g., Mueller & Thomas, 2000; Pruett et al., 2009), but none have studied cultural differences. We fit and compare a structural model containing the same variables from Study 1 to data from a sample of undergraduate students from mainland China.

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Figure 1: Study 1 (US Data) χ =68.7, df = 17, CFI=.96, NNFI=.85, SRMR=.05, RMSEA=.09 Table 3: Testing mediation US Data Path A‐C

Standardized Path Coefficients with B‐ C not included in model

Testing A‐B‐C Change in Chi Square A‐B‐C when A‐C set to Zero

Prior Exposure > Attitude

No Mediation

Social Support > Attitude

.41

46.6***

Partial Mediation

LOC > Attitude

.12

3.5 (NS)

Full Mediation

Risk Taking > Attitude

.25

24.8***

Partial Mediation

Creating Style >

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Doan Winkel et al. US Data Path A‐C

Standardized Path Coefficients with B‐ C not included in model

Testing A‐B‐C Change in Chi Square A‐B‐C when A‐C set to Zero

Attitude

Mediation

Knowing Style > Attitude

No Mediation

Planning Style > Attitude

No Mediation

China Data Path A‐C

Prior Exposure > Attitude

.17

5.0*

Partial Mediation

Social Support > Attitude

.21

9.5**

Partial Mediation

LOC > Attitude

.12

1.3 (NS)

Full Mediation

Risk Taking > Attitude

.23

11.6 ***

Partial Mediation

Creating Style > Attitude

No Mediation

Knowing Style > Attitude

No Mediation

Planning Style > Attitude

No Mediation

*p< .05, **p<.01, ***p<.001

7.2 Entrepreneurial intentions in China The Chinese government has recently put substantial resources and effort into supporting entrepreneurial behaviors and education (e.g., Lavelle, 2006). Universities have begun to recognize the importance of developing future entrepreneurs, which is a significant change from the traditional outcome of public sector or corporate employment (e.g., Chen, Li & Matlay, 2006; Millman et al., 2010). These changes have resulted in a rapidly growing body of research investigating entrepreneurship in China (e.g., Taormina & Lai, 2007).

7.3 Anticipated differences between American and Chinese students Chinese and American cultures differ on aspects such as individualism, uncertainty avoidance, and masculinity/femininity (e.g., Hofstede, 1980). “In general, researchers have hypothesized that entrepreneurship is facilitated by cultures that are high in individualism, low in uncertainty avoidance, low in power‐distance, and high in masculinity” (Hayton et al., 2002, p. 34). Individualistic societies value personal freedom and are generally more achievement‐oriented and competitive; individuals would report high levels of entrepreneurial self‐efficacy, outcome expectations, intentions, and support for an entrepreneurial career (e.g., Hayton et al., 2002; Hofstede, 1980). Given uncertainties and risks associated with entrepreneurship (Bonacich, 1987; McMullen & Shepherd, 2006), we expect individuals from societies ranking lower on uncertainty avoidance (the United States) to exhibit greater interest in and support for entrepreneurial activity than individuals from China (e.g., Hofstede, Noorderhaven, Wennekers, Uhlaner, & Wildeman, 2004). Given the goal‐oriented and assertive nature of entrepreneurship, we expect individuals from countries categorized as more masculine (United States) to exhibit greater interest in and support for entrepreneurial activity than individuals from societies categorized as more feminine (China).

8. Study 2 method Survey respondents were college students attending an English language college in the south eastern region of the People’s Republic of China. The survey instrument is the same used in study 1. The questions were translated into Chinese then back translated into English by native speakers (Behling & Law, 2000). The instrument was given to 252 students at an emerging liberal arts college that uses English as the medium of

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Doan Winkel et al. study, with a total of 242 usable responses. Students were then given both the English and Chinese translations to facilitate question understanding.

9. Study 2 results Hypothesis 1 was partially supported. An internal locus of control was a significant negative predictor of entrepreneurial self‐efficacy, thus the direction of influence was opposite that of US data. Individuals with a high preference for risk and creating and knowing styles were significant predictors of entrepreneurial self‐ efficacy. Hypothesis 2 was partially supported. Prior exposure to entrepreneurship was only associated with greater entrepreneurial attitudes. Hypothesis 3 was partially supported. Social support was a significant predictor of entrepreneurial outcome expectations and attitudes. Hypothesis 4 was partially supported. Entrepreneurial outcome expectations were a significant positive predictor of entrepreneurial attitudes. Hypothesis 5 and 6 were fully supported. Figure 2 shows the China data path coefficients for the model.

Figure 2: Study 2 (People’s Republic of China) χ =64.3, df = 17, CFI=.93, NNFI=.77, SRMR=05, RMSEA=.10 2

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Doan Winkel et al. As shown in Table 3, Hypothesis 7 was partially supported, as follows: H7a: Entrepreneurial Self‐Efficacy partially mediated the relationship between Prior Exposure to Entrepreneurship and Entrepreneurial Attitudes; H7b: Entrepreneurial Self‐Efficacy partially mediated the relationship between Social Support and Entrepreneurial Attitudes; H7c: Entrepreneurial Self‐Efficacy fully mediated the relationship between Locus of Control and Entrepreneurial Attitudes; H7d: Entrepreneurial Self‐Efficacy partially mediated the relationship between Risk Taking Propensity and Entrepreneurial Attitudes; H7e, H7f, and H7g: Entrepreneurial Self‐Efficacy did not mediate the predicted relationships and Entrepreneurial Attitudes.

10. Conclusion and implications Our primary purpose was examining how attitudes, contextual factors, and motivational processes interplay and contribute to an individual’s entrepreneurial intent. Our results show that, in general the SCCT model of entrepreneurial intentions is robustly supported. For the US sample, we found strong relationships between contextual factors, motivational processes, and intentions. As predicted, students’ self‐efficacy was a strong mediating mechanism driving much of the results. These results extend previous research into the interplay of these variables in predicting entrepreneurial intent. Whereas previous studies such as those conducted by Segal and colleagues examined various parts of an SCCT model, this study examined a more comprehensive SCCT model. Our secondary purpose was testing the generalizability of an SCCT model of entrepreneurial intentions across different cultures (the United States and China). Our results provide evidence that this model is generalizable across these two cultures. While we did find slight differences, in general, the model held across both cultures. Our study has implications for researchers and practitioners. For researchers, this is preliminary evidence that SCCT is very applicable to the entrepreneurship domain. This model should be more fully investigated in terms of other person inputs and contextual factors, and also in terms of how it extends to incorporate entrepreneurial goals and behavior. Our study provides evidence that should motivate researchers to continue to investigate this theoretical avenue of investigation into how entrepreneurship comes about from the point of view of intentionality. Practically speaking, this study provides significant information educators can use in their classrooms. For instance, we provide evidence of the importance of students’ self‐efficacy, outcome expectations, and attitudes. We encourage educators to design learning environments that give students the opportunity to enhance their self‐efficacy; they should motivate students to engage in entrepreneurship, and support them any way possible. We also encourage educators to accurately shape students’ outcome expectations and attitudes through experiential activities, which should form more strongly‐held beliefs and attitudes and thus more strongly held intentions.

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Complex Technology Assessment as a Determinant for Marketing Activities in Innovation Commercialisation Urszula Wnuk and Ludmiła Łopacińska Institute for Sustainable Technologies – National Research Institute (ITeE‐PIB), Radom, Poland urszula.wnuk@itee.radom.pl ludmila.lopacinska@itee.radom.pl Abstract: Innovations have become the cornerstone of today’s knowledge‐based economies. At the micro level, they are a priority for most businesses and an organisational imperative for their successful running, because they improve production processes, reduce manufacture costs, and as a result increase quality of goods, bring higher customer satisfaction, and generate more profits. At the macro level, innovations are critical to the success of industry and a key factor when deciding upon the competitiveness of the entire economy. Before an innovation is successfully implemented in practice, it ought to undergo an in‐depth evaluation procedure to prove whether it is marketable and profitable. The decision to commercialise any new technology should, therefore, be based on sound information about its commercialisation opportunity. For that reason, factors critical in determining the commercial success of innovations need to be identified, and assessed, so that appropriate marketing activities, facilitating successful innovation commercialisation, can be undertaken. Information about innovation’s commercialisation opportunity can be obtained when three aspects of a technology are thoroughly analysed, which include its implementation maturity, commercial potential and the level of innovativeness. Only then strategic decisions can be made concerning the type of marketing strategies that need to be applied in order for the innovation to be successfully brought to the market. The authors point out that additional factors also need to be taken into account both when interpreting the outcomes of a complex technology assessment and when deciding on the type of marketing activities to be undertaken. These factors include the type of innovation (unit or mass production) and its character (radical or incremental). The focal point of the article is the dependency between different types and characters of innovations, the outcomes of their complex assessment, and the type of marketing activities to be undertaken in order for the product to be successfully diffused into the market. The authors present 16 possible cases of the aforementioned dependencies and, by presenting some examples of marketing activities undertaken with reference to actual innovations, translate them into practice. The presented examples refer to technological solutions developed at the Institute for Sustainable Technologies – National Research Institute (ITeE‐PIB) in Radom, Poland, which, before being transferred to industry, were subject to an integrated assessment with the use of the Complex Technology Assessment System also designed at the Institute. Keywords: complex technology assessment, marketability, marketing of innovations, innovation commercialisation

1. Introduction In the modern world, a country’s innovation performance, which is its ability to innovate and translate research results into commercially viable products, is one of the main determinants of national progress and a country’s global competitiveness (OECD 2007). This means that innovations, which are brought to the market, are actually a sine qua non of growth, both at the micro (i.e. company) and the macro (i.e. national) level, because they bring numerous technological, economic, and social benefits. Before an innovation is brought to the market, however, it needs to prove that it can be turned into a manufacturable, marketable and profitable product. Therefore, prior to its commercialisation, the innovation has to undergo a rigid and in‐depth assessment. Such an assessment should be particularly focused on three aspects of a new technology ‐ the level of its implementation maturity, its commercial potential, and the level of its innovativeness. The results of the assessments, when put together, determine the overall commercialisation opportunity of an innovation, understood as the chance for the innovation to be effectively applied in industry. Therefore, the detailed information about the outcomes of these individual assessments is essential from the point of view of a successful commercialisation process, since it also supports the decision making process concerning the selection of most appropriate marketing strategies and technology transfer mechanisms. The analysis of literature (Mankins 1995; PROTEE 1999; Heslop, McGregor, Griffith 2001; NASA 2004; Bandarin 2007; Hommels, Peters, Bijker 2007; Liao and Witsil 2008; Mazurkiewicz et.al 2010, Gruszczyńska‐Gwarda 2010; Jones 2010; Coetzee and Pretorius 2011, Mazurkiewicz and Poteralska 2012) shows that there are a number of technology assessment (TA) methods and tools used for the assessment of technology marketability with reference to single and multiple commercialisation factors. Single factor oriented TA methods and tools include, inter alia, the Technology Readiness Levels (TRL) method by NASA (Mankins 1995)

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Urszula Wnuk and Ludmiła Łopacińska or the implementation maturity assessment method (SDW) developed at the ITeE‐PIB (Mazurkiewicz et.al 2010), which are focused on the technological readiness of innovations, or the Commercial Potential Index also developed by NASA (NASA 2004) for the assessment of the possibility of commercial utilisation of an innovation. The integrated TA methods and, namely those with the use of which e.g. technological, market, financial or legal factors are concurrently analysed, include the following:

The QuicklookTM assessment method (the IC2 (Innovation, Creativity and Capital) Institute at the University of Texas at Austin) (Gruszczyńska‐Gwarda 2010);

The STEP evaluation model (University of Cincinnati) (Bandarin 2007);

The Cloverleaf model (by L.A. Heslop, E. McGregor, M. Griffith) (Heslop, McGregor, Griffith 2001; Coetzee and Pretorius 2011);

The Commercialisation roadmap (the Office of Technology Licensing at the Georgia Institute of Technology) (Liao and Witsil 2008);

The PROTEE method (Procedures for Transport Evaluation and Monitoring of Radical Innovations in Learning Experiments Project within 4th RTD Framework Programme) (PROTEE 1999; Hommels, Peters, Bijker 2007);

® The ProGrid expert system (by C.W. Bowman and R. McCullough) (Liao and Witsil 2008; Jones 2010); and,

The Complex Technology Assessment System (by A. Mazurkiewicz, ITeE‐PIB) (Mazurkiewicz and Poteralska 2012).

Although the topics of technology assessment and innovation marketing techniques and strategies (e.g. Kotler 2005; Vincent 2005) are widely discussed in literature, no examples of how the outcomes of TA determine the latter were found by the authors. As the results of technology assessment help select appropriate marketing strategies facilitating a successful dissemination and implementation of a product in industry, the authors analysed the dependencies that exist between these two processes. Making use of the original Complex Technology Assessment System developed at the Institute for Sustainable Technologies – National Research Institute by A. Mazurkiewicz, the authors show how, when put together, the outcomes of its individual assessment modules determine the opportunities and constraints to the industrial application of a solution and facilitate the selection of proper marketing strategies. The authors stress that, in this decision‐making process, additional factors also need to be taken into account when bringing the innovation to the market. These factors include the type of innovation (unit or mass production) and its character (radical or incremental), since they are also of key importance when deciding on the way the innovation will be promoted and commercialised. The article discusses the role of a complex technology assessment in an innovation commercialisation process. It shows how the results of this assessment should be interpreted once additional factors (i.e. innovation character and type) are taken into consideration in order for an appropriate innovation marketing strategy to be selected. The authors present sixteen (16) possible cases of the dependencies between different types and characters of innovations, the results of their complex assessment, and the type of marketing activities obtained for a selected research sample generated within the Innovative Systems of Technical Support for Sustainable Development of Economy Strategic Research Programme that is currently executed by the ITeE‐PIB within the framework of the national Innovative Economy Operational Programme (Mazurkiewicz and Poteralska 2010).

2. Complex technology assessment vs. commercialisation opportunities of innovations The Complex Technology Assessment System designed, developed and practically utilised at the ITeE‐PIB is composed of three assessment modules, i.e. the implementation maturity level (SDW) assessment module, the commercial potential (PK) assessment module, and the innovativeness level (PI) assessment module, which can be used together as a complementary evaluation package or the assessments, can be conducted separately with the use of different assessment methods and tools (Mazurkiewicz and Poteralska 2012). The results obtained from the complex technology assessment can be used at different stages of the innovation development process (e.g. the concept stage, the R&D stage, and the final product stage), which supports strategic decisions concerning its future (whether the development process should be continued or

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Urszula Wnuk and Ludmiła Łopacińska terminated) and decisions concerning the selection of appropriate marketing strategies and commercialisation mechanisms. The authors of the article put together the results of these three assessment modules and analysed possible dependencies that occur between them, the time of the assessment, and the commercialisation opportunities of the innovation under assessment. The time of the assessment is understood as the stage of the advancement of R&D works at which the solution can be evaluated (the ‘ex‐ante evaluation’ during the concept stage, the ‘on‐going evaluation’ during the execution of R&D tasks and the ‘ex‐post evaluation’ when the solution reaches its final stage of development). First, the dependencies are analysed for mass solutions (Table 1) and then for innovations intended for single unit production (Table 2). Table 1: Possible cases of the dependency between the outcomes of a complex technology assessment and the commercialisation opportunities of a mass solution

Source: Authors Table 1 delineates possible dependencies between the implementation maturity, the commercial potential, the level of innovativeness, and the commercialisation opportunity of a mass solution at the time of its consecutive assessments. In the first four cases, the solutions are not ready to be brought to the market, being still at the concept stage. High commercial potential in Cases 2 and 4 indicates that the market is already interested in the type of innovation under assessment, and it is probable that, providing that its development process is not prolonged, once the product reaches higher implementation maturity, it will be implemented in industry. Cases 5‐8 depict solutions that are technologically mature enough to be brought to the market, but not always complying with the current market needs. As for Cases 5 and 6, their commercialisation opportunity is low due to the fact that, e.g., the time spent on their development was too long and other inventors have already managed to fill the gap in the market and the market is already saturated. This means that the solution is no longer innovative or commercially attractive. Cases 7 and 8 present solutions that have reached the stage of the final, marketable product and can, even despite the low level of their innovativeness (Case 7), be brought to the current market due to the high level of their commercial potential. In the case of single unit production, commercial potential and the level of innovativeness do not have a deciding voice in the commercialisation process, because unit solutions are developed for a particular end user and meet their individual demands. However, even in the case of unit solutions, it is advisable to analyse whether there would be a demand for them on the broader market, since other businesses may have similar needs and may in fact also be interested in the developed innovation. In such a case, the outcomes of the assessment of commercialisation opportunities for innovations intended for single unit production would be as presented in Table 2.

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Urszula Wnuk and Ludmiła Łopacińska Table 2: Possible cases of the dependency between the outcomes of a complex technology assessment and the commercialisation opportunities of a unit solution

Source: Authors The Complex Technology Assessment System developed at the ITeE‐PIB is aimed at incremental innovations, that is innovations that build on the already established technological concepts or are a form of continuation to existing solutions. Therefore, only the needs of the existing market present at the time of the evaluation of innovations were taken into consideration when analysing the commercialisation opportunities of the assessed solutions. This means that the possibilities to create entirely new markets were not taken into account; as a result, radical innovations were excluded from the assessment process. Radical innovations act as creative destructors (term coined by Joseph Schumpeter and first used in his book Capitalism, Socialism, Democracy (1942)); they do not build upon the already established technological concepts but create completely new trends, change customer expectations and behaviours, and change the basis of competitive advantage and the economics of the industry (Scheremata 2004). Despite the above, some of the outcomes of the complex technology assessment may in fact imply that the innovation under assessment can be of a radical character. Case 3 (low implementation maturity level, high level of innovativeness and low commercial potential) and Case 6 (high implementation maturity level, high level of innovativeness but low commercial potential) of Table 1 can serve as examples. In both cases, the assessed solutions are highly innovative, yet their commercial potential is considered to be low. Such a negative outcome of the commercial potential assessment with a simultaneously high innovativeness level may suggest that the assessed innovation is actually of a radical character, and the existing market is simply not ready for it. This also suggests that the experts evaluating the product might not have recognised its radical character and have not taken into consideration the changeable economics of the industry, the possibility to introduce the solution onto the niche market or the possibility to create an entirely new market. It happens that evaluators frequently attempt to force radical innovations to fit into existing models of innovation perception (Bessant et. al. 2009) and expect the outcomes of their commercialisation to be visible the moment they are practically applied. This may result in solutions that do not fit into certain paradigms and frames being labelled as commercially uninteresting, and therefore given up on, despite the great advantage their industrial application might bring in the future. The authors suggest that in both the cases in question (Table 1: Cases 3 and 6) innovations should be re‐assessed and the possibility of their radical character verified. In the case of radical innovations, the profitability of the dissemination of the innovation should be carefully analysed. If the results of this final evaluation still remain negative once the assessment criteria are altered, only then should further development of the solution be abandoned.

3. Complex technology assessment and commercialisation opportunities of an innovation vs. marketing campaign Having analysed the dependencies between the results of the complex assessment of a technology and its commercialisation opportunities, the authors then examined how these dependencies influence the decision to launch a marketing campaign (Table 3).

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Urszula Wnuk and Ludmiła Łopacińska Table 3: Possible cases of the dependency between the outcomes of a complex assessment of an innovation’s commercialisation opportunities and the decision to launch a marketing campaign

Source: Authors. As depicted in Table 3, the authors suggest that a marketing campaign should be launched with reference to both mass and unit solutions, and the decision to promote these products on the market should be based on their commercialisation opportunity, whose level is influenced by the individual assessments of a technology (i.e. implementation maturity, commercial potential, level of innovativeness). However, it needs to be noted that a high commercialisation opportunity is not always equivalent to the decision to undertake marketing activities. Similarly, a low commercialisation opportunity does not automatically indicate that the innovation cannot be brought to the market. Therefore, additional factors (e.g. the character and type of innovation) should be taken into account and the detailed reasons for the high and low outcomes of commercialisation opportunity assessment should be thoroughly analysed (e.g. the results of the commercial potential

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Urszula Wnuk and Ludmiła Łopacińska assessment). A closer look at Table 3 shows that high commercialisation opportunity is equivalent with a decision to launch a marketing campaign with reference to mass solutions (Cases 11 and 15) and unit solutions (Cases 12 and 16) whose high commercialisation opportunity is based on the high outcomes of their implementation maturity and commercial potential assessment. The authors contend that a marketing campaign should be undertaken with reference to the two unit solutions, because their high commercial potential suggests that other businesses operating in the same industry sector and specialising in the same area as the specified end user may in fact be interested in the assessed solution, but have little knowledge of its existence. In the case of mass solutions whose commercialisation opportunity has been assessed as high, a marketing campaign should aim at the identification of possible end users of an innovation among businesses operating on the existing mass market. For that purpose, a method of STP marketing (Segmentation – Targeting – Positioning) (Kotler 2005) should be applied. The method allows for the following:

The division of the market according to a defined set of criteria into homogeneous groups of consumers and the development of their profiles (Segmentation);

The comparison between the groups with reference to their attractiveness and competitiveness as well as the selection of the preferred segment (Targeting); and,

The product placement on the market including the understanding of consumer perceptions and the implementation of the product image (Positioning).

As for unit solutions with high commercialisation opportunity, a marketing campaign aimed at a broader market, and initially targeted at businesses in the same sector as the specified end user, should be launched. Although commercialisation opportunity has also been assessed as high with reference to two more unit solutions (Cases 10 and 14), no decision to promote them on the broader market should be made due to their low commercial potential indicating that the existing market is not interested in them. Low commercialisation opportunity is also not automatically equivalent to the decision not to introduce a solution to the market. This is particularly true in the case of both mass and unit solutions that are still at the development stage, but whose commercial potential has already been assessed as high (Cases 3 and 7 – mass solutions; and Cases 4 and 8 – unit solutions). In these cases, no matter if they are of mass or unit type, a marketing campaign should be directed at informing a broader market about the directions the R&D tasks are going in, the current stage of their advancement, and the possible areas of the application of the future solution and the benefits stemming from it. A decision to launch a marketing campaign should also be made with reference to two more solutions whose commercialisation opportunity has been assessed as low. These are solutions depicted in Table 3 as Cases 5 and 13. Their high level of innovativeness and a concurrently low level of commercial potential may suggest that these two mass solutions are of a radical character. A marketing campaign should be launched only after they are re‐assessed and prove to be radical. Otherwise, these two products should not be brought to the market at all. If solutions in Cases 5 and 13 are in fact radical innovations, the marketing campaign should aim at the penetration of niche markets or the creation of entirely new markets. This means that far more creative patterns of strategic thinking and thinking “outside the box” should be employed when launching such a marketing campaign, and the risk should be carefully assessed and specialist from additional fields like sociologists and psychologists should participate. The creation of new markets is a highly risky and costly procedure, and it should be pursued only in the case when the innovation assessment results indicate that the radical innovation will meet the currently unsatisfied customer needs that are likely to arise in the fast moving global technological progress. The authors agreed that no marketing campaign should be undertaken with reference to incremental solutions, neither unit nor mass, whose low commercialisation opportunity results from the negative assessment of their commercial potential. When deciding to launch a m arketing campaign, it is necessary to choose a marketing strategy and tools su itable for the character and the type of the developed innovation. There are two basic types of marketing strategies that can be chosen, i.e. passive marketing strategies (informational) and active marketing strategies (promotional). The first, with reference to the marketing of newly developed technological solutions, consists

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Urszula Wnuk and Ludmiła Łopacińska in the presentation of the innovation in commonly available informational resources and media (e.g. the Internet, scientific publications, leaflets, etc.) and waiting for someone to express their interest in them; whereas, the latter requires a face‐to‐face contact with the consumer, or a more aggressive and direct promotion of the final product (e.g. during conferences, technology fairs, in mailing, e‐mailing or phone campaigns). Possible cases of dependencies between the outcomes of a complex assessment of a technology, its commercialisation opportunity, and the decision to launch a marketing campaign (Table 3), can be illustrated with practical examples of activities carried out at the ITeE‐PIB within the Innovative Systems of Technical Support for Sustainable Development of Economy Strategic Research Programme currently executed within the framework of the Innovative Economy Operational Programme co‐financed from the EU structural funds (the European Regional Development Fund). The innovative technological solutions developed within this programme are first assessed with the use of the original Complex Technology Assessment method focused on the evaluation of their implementation maturity level (SDW assessment), commercial potential (PK assessment) and innovativeness level (PI assessment), and then their commercial opportunity is defined, and marketing strategies and commercialisation mechanisms are selected for them. The SDW assessment module and the PK assessment module have been used for the assessment of all (150) solutions developed within the Programme; whereas, due to the fact that the PI module is still under development, 76 solutions so far underwent this assessment (Belina, Łopacińska and Karsznia 2012). Within the aforementioned Programme, both unit and mass technological solutions are developed; however, none of them are of a radical character, thus the marketing campaign never addresses new markets. Innovations developed within the Strategic Programme are promoted throughout their entire development stage, so that the market is not only informed about the research results but is also made aware of the advancement of the R&D activity and can follow the progress of undertaken tasks all the way from the concept stage to the final product. This means that solutions with both high and low assessed commercialisation opportunities are promoted. Both passive and active marketing strategies are applied. The passive marketing campaign is used with reference to solutions with low commercialisation opportunity stemming from the fact that the solutions are still being developed and have not achieved the level of the final product (both unit and mass); therefore, they are not yet ready to be implemented (solutions with low implementation maturity). These solutions are promoted in scientific publications, informational leaflets targeting preferred industry sectors or even particular companies. They are also promoted with the use of the Internet, e.g. on the Institute’s and the separate Strategic Programme’s WebPages, the websites of cooperating institutions, or the Internet Platforms aimed at the exchange of knowledge and experience between different R&D institutions and businesses. The active marketing campaign, on the other hand, is used mainly with reference to solutions with a high commercialisation opportunity, particularly those displaying high commercial potential and implementation maturity (both unit and mass). They are presented on the Internet and in the media and also at scientific conferences, dedicated R&D‐business meetings, Polish and international technology fairs (e.g. Hannover Messe), and are also the subject of mailing campaigns. However, it needs to be noted that both passive and active marketing strategies undertaken at the ITeE‐PIB are intermingled, as the connection of these two seems to be the most advantageous and effective. Therefore, the elements of active marketing can also be applied with reference to solutions with low implementation maturity (both unit and mass), and vice versa. Conferences and trade meetings, during which even incomplete technological solutions are promoted, or the Internet, targeting preferred end users with information about both the existing and planned outcomes of undertaken research, constitute the examples of a marketing campaign composed of both active and passive marketing strategies. Presentations at technology fairs and exhibitions together with dedicated R&D‐ business meetings and mailing campaigns seem to be the most effective in the case of solutions developed at the ITeE‐PIB, and they have led to a successful implementation of many innovations in the industry.

4. Summary The article analyses the dependencies between the implementation maturity, the level of innovativeness and the commercial potential of innovations, and their commercialisation opportunities. The paper shows when, and what types of, marketing campaigns should be launched when these dependencies are considered. Taking into account the results of their analyses, the authors propose that a marketing campaign should be launched with reference to both mass and unit solutions; although, some experts may argue that, in the case of innovations aimed at single unit production, a marketing campaign is not necessary, since the product will be

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Urszula Wnuk and Ludmiła Łopacińska practically implemented by the specified end user even without it. As indicated in the article, a high commercialisation opportunity is not always equivalent to the decision to launch a marketing campaign, and a low commercialisation opportunity does not automatically indicate that there is no chance for the assessed solution to be brought to the market. The authors point out that additional factors including the character (radical or incremental) and the type (mass or unit) of innovations should also be taken into consideration when deciding upon the marketing and commercialisation of certain research results and that an in‐depth analysis of the reasons for high and low outcomes of the commercialisation opportunity assessment should be conducted.

References Bandarin R. (2007) Evaluation of Commercial Potential of a New Technology at The Early Stage of Development with Fuzzy Logic, Journal of Technology Management and Innovation, vol. 2, issue 4 (2007), pp. 73‐85. Belina B., Łopacińska L., Karsznia W. (2012) Commercial Potential Oriented Evaluation of Innovative Products, Maintenance Problems 4/2012. Bessant J., Möslein K., Neyer A‐K, Piller F., Stamm von B. (2009) Radical Innovation: Making the Right Bets, Executive briefing, Advanced Institute of Management Research (AIM), London, UK, [online], http://www.aimresearch.org/uploads/File/Publications/Executive%20Briefings%202/Radical_Innovation_Making_th e_right_bets.pdf [26.03.2013]. Coetzee G.L. and Pretorius M.W. (2011) Technology Readiness Assessment in the Process Industry: The Case of the Gas to Liquids Industry, ISEM Proceedings September 21‐23, Stellenbosch, South Africa pp. 53(1) – 53(17). Gwarda‐Gruszczyńska E. (2010) Quicklook™ jako metoda oceny potencjału komercyjnego innowacji i technologii, Acta Universitatis Lodziensis Folia Oeconomica 234, pp. 265‐275. Heslop L.A., McGregor E., Griffith M. (2001) Development of a Technology Readiness Assessment Measure: The Cloverleaf Model of Technology Transfer, Journal of Technology Transfer, 26, 369–384, Kluwer Academic Publishers, 2001. Hommels A., Peters P., Bijker W.E. (2007) Techno therapy or nurtured niches? Technology studies and the evaluation of radical innovations Research Policy, Vol. 36 (2007), pp. 1088‐1099. Jones C.F. (2010) Assessing your opportunities with “explicit rubrics”, FMI IGF Journal: Excellence in Public Sector Financial Management, vol. 22, no 1, pp. 8‐10, [online], http://fmi.ca/media/pdf/fmi_22_1_e_rev.pdf [15.02.2013]. Kotler P. (2005) Marketing Management. 11th Edition (Polish edition). Liao P. and Witsil A. (2008) A Practical Guide to Opportunity Assessment Methods, RTI Press publication No. MR‐0003‐ 0802. Research Triangle Park, [Online] http://www.rti.org/pubs/mr‐0003‐0802‐liao.pdf [27.03.2013]. Mankins, J.C., Technology Readiness Levels (1995) A White Paper, NASA, Advanced Concepts Office, Office of Space Access and Technology, [online] http://ehbs.org/trl/Mankins1995.pdf [27.12.2012]. Mazurkiewicz A., Karsznia W, Giesko T., Belina B. (2010) Metodyka oceny stopnia dojrzałości wdrożeniowej innowacji technicznych; Maintenance Problems 1/2010, ITeE‐PIB, Radom. Mazurkiewicz A., Poteralska B. (2010) Strategic innovative programmes of technical support for sustainable economic growth in Poland. Selected problems [in]: Mazurkiewicz A. (ed.) Innovative Technological Solution for Sustainable Development. ITeE‐PIB, Radom (Poland) ‐ Shanghai (China), pp.11‐28, ISSN 9788372049551. Mazurkiewicz A., Poteralska B. (2012) System of a Complex Assessment of Technological Innovative Solutions, Maintenance Problems 4/2012, ITeE‐PIB, Radom. NASA (2004) Commercialization Readiness Level Assessment Index, Technology Commercialization Process, Change 1 (4/9/04), [online] http://nodis3.gsfc.nasa.gov/displayDir.cfm?t=NPR&c=7500&s=1 [20.02.2013]. OECD (2007) Innovation and Growth: Rationale For an Innovation Strategy. PROTEE (1999) Final report for publication, [online] http://www.transport‐ research.info/Upload/Documents/200310/protee.pdf [22.01.2013]. Scheremata W. (2004) Competing through Innovation in Network Markets: Strategies for Challengers, Academy of Management Review, Vol. 29, No 3, pp. 359‐377. Vincent L.H. (2005) Marketing Strategy Formulation in the Commercialization of New Technologies, PhD dissertation, Georgia Institute of Technology, [online] https://smartech.gatech.edu/bitstream/handle/1853/7238/vincent_leslie_h_200508_phd.pdf [29.03.2013].

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Disruptive Innovation in Public Service Sectors: Ambidexterity and the Role of Incumbents Danielle Wood1, Sebastian Pfotenhauer2, Wiljeana Glover2 and Dava Newman2 1 Johns Hopkins University, Baltimore, Maryland, USA 2 Massachusetts Institute of Technology, Cambridge, Massachusetts, USA danielle.wood@jhuapl.edu pfotenh@mit.edu wjglover@mit.edu dnewman@mit.edu Abstract: The theory of Disruptive Innovation predicts that incumbent firms with traditional leadership roles often fall prey to new entrants encroaching upon their market with simpler, more affordable or more accessible offerings. Inspired by examples from the higher education, health care and space sectors, this study advances the counterargument that incumbent organizations in public service sectors may avoid the dynamics of Christensen’s Innovator’s Dilemma and instead become leaders in potentially disruptive innovation activities themselves. The paper explores two possible explanations for the observed incumbent behaviour. The first explanation is that the public sector characteristics of these fields – including a simultaneous high need for and high barriers to innovation – may play a key role in explaining why the observed examples run counter to established theory. The second explanation is that incumbents engaged in Disruptive Innovation thrive because they demonstrate organizational ambidexterity by exploring new opportunities while exploiting established capabilities, and by differentiating the organization into specialized units while also integrating the organization as needed. The paper points to theoretical and empirical gaps in the literature of Disruptive Innovation regarding incumbent behaviour and innovation dynamics in the public sector, and outlines future work necessary to fill these gaps. Keywords: disruptive innovation, public sector, ambidexterity, exploration, exploitation, integration

1. Background: Disruptive innovation, incumbent behaviour, and organizational ambidexterity Disruptive Innovation (henceforth “DI”) is “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors” (Christensen 2013). Closely related is the “Innovator’s Dilemma” (Christensen 1997) in which high‐performing incumbent firms tend to focus their innovation activities on the top‐end user needs. As a result, these firms focus on a comparative advantage for a small customer base while largely ignoring low‐ end users. However, the technological requirements for satisfying these less sophisticated needs may change, opening a window of opportunity for new entrants. These newcomers may creep into the incumbents’ customer base from below and disrupt its “sustaining innovation” trajectory, ultimately taking over the market completely. It is difficult for incumbent firms to quickly adapt to the new conditions created by the disruptive technology – the new entrant always almost wins. Studies have examined what incumbent organizations can do to save themselves from extinction due to DI (Ansari & Krop 2012). One answer is ambidexterity – the simultaneous pursuit of seemingly competing requirements (W. Smith & Lewis 2011). One line of ambidexterity research, emanating from March’s (1991) seminal work on innovation, suggests that successful firms need to practice both exploration of new opportunity and exploitation of existing opportunity (O’Reilly III & Tushman 2008). March (1991) defines the two terms, stating that exploration is “captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, execution” (p.71). Other operational definitions of exploitation and exploration consider the rate of learning, use of knowledge, number of newcomers in teams, distance of search across organizations, nature of alliances, and nature of investments (Gupta et al. 2006). A second line of research holds that large, hierarchical organizations need to balance differentiation and integration of their organizational subunits. Lawrence and Lorsch (1967) define differentiation “segmentation of the organizational system into subsystems” with diverse characteristics, values and processes; integration is “achieving unity of effort among the various subsystems.” Organizations will perform better if they have levels of integration and differentiation appropriate to their environment and goals. Incumbents need integration to move large organizations effectively into a new area; they also need differentiation in order to have diverse

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Danielle Wood et al. activities happening simultaneously. Integration and differentiation are consistently studied to examine their influence on organization’s ability to innovate (Leiponen & Helfat 2011). Despite these rich bodies of research, a number of important theoretical and empirical questions remain unanswered. First, most studies focus on the role of new entrants threatening established incumbents; little empirical evidence exists as to how incumbent firm themselves may act as DI leaders. Secondly, existing studies tend to look at historical examples of clear success or failure and provide only an ex‐post explanation for what happened; little work has been done on how organizations react in real time. Thirdly, current theory of DI seems ill‐suited to explain innovation behaviour in the public service sector. While many authors attest huge innovation needs in public service sectors and readily identify suitable candidate technologies (e.g. e‐ learning in higher education), it is not clear why these disruptive changes do not seem to materialize to the extent one would expect. The present study responds to these three gaps by considering empirical examples of incumbent public service organizations that are currently pursuing a potential DI in their field. In particular, the focus is on three public service sectors: higher education, health care, and space. The paper discusses two interrelated explanations for why these incumbents appear to contradict established DI theory. First, the peculiar conditions of public service sectors give rise to different innovation dynamics and hence different organizational strategies than fully competitive markets. Second, incumbents in public service sectors are effectively applying ambidexterity. The preliminary analysis lays the foundation for an on‐going study of disruption in public service sectors.

2. Examples of public service organizations pursuing disruptive innovation Figure 1 summarizes examples of incumbent organizations in the three public service sectors: higher education, health care and space. Each example organization is chosen because it is a high performing incumbent working through a transition into a new activity that is potentially disruptive. These examples are based on publically available information about each organization, extended observations of the sectors, and preliminary discussions with the organizations in the higher education and space sectors. Figure 1: Examples of incumbent organizations pursuing disruptive innovation in public sector industries

2.1 Higher education, MIT and edX In May 2012, MIT and Harvard jointly launched the edX initiative to deliver Massive Open Online Courses (MOOCs). The response of interested learners was indeed massive: Approximately 155,000 students from 160 different countries registered for the first course offered through edX; 7,157 students successfully completed the course. This is more than the cumulative number of students at MIT who have taken the course over the previous decades. The edX initiative followed serious previous engagement with open online education efforts on the part of MIT. In 2001, MIT created the Open Course Ware (OCW) initiative, committing itself to permanently publishing the course materials from all its courses online for free, worldwide consumption. EdX, unlike OCW, now promises an actual online class experience with graded homework assignments, labs, and tests. There are plans to provide certificates for course completion for a fee. While online education is not new, EdX has received much attention as a disruptive effort because of the brand universities involved, potentially promising access to MIT and Harvard for millions who currently do not have access to higher education at all. It also has the potential to reduce infrastructure and administration costs; redefine classroom and teaching‐learning interactions; liberate students and teachers from geographical and temporal constraints; increase flexibility in educational attainment; challenge accreditation systems; and perhaps re‐ shape course contents and delivery.

2.2 Health care, Geisinger CareWorks Retail Clinics are small scale medical facilities typically located in shopping areas. Retail Clinics primarily serve minor conditions such as sinusitis and immunizations, thus avoiding some of the complicated procedures and

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Danielle Wood et al. costly equipment associated with less standard medical problems. Retail Clinics often provide improved access with shorter waiting times and no appointments; they may also serve as a safety‐net care provider. While such innovations are almost always introduced by new entrants, a few incumbents have opened their own retail clinics. One notable example is the Geisinger Clinic’s Geisinger CareWorks Convenient Healthcare. Geisinger Health System serves over two million patients. It is one of the nation’s largest rural health systems and was named the most integrated health system in 2010 by Modern Healthcare. In an effort to make care more accessible to its existing patients and to attract new patients the innovation branch of Geisinger Health System invented the Geisinger CareWorks business model. CareWorks has continued to add locations over the last decade. In September 2012, they announced the addition of 20‐25 additional CareWorks clinics in the Pennsylvania area. This announcement marks an attempt at diffusion of the business plan innovation beyond its initial attempt, and a strong leadership role in the emerging sector. A number of health systems have deployed similar retail clinics, such as Sutter Express Care in California and Mayo Express Care in Minnesota (Glabman 2009).

2.3 Space, Johns Hopkins University Applied Physics Laboratory Small satellites are an emerging technology that has enabled new types of organizations to be active participants in satellite engineering. Small satellites were initially built for research and education in the 1980s and 1990s, but more of them are being used for commercial and government applications. The small satellite approach breaks many of the assumptions of the traditional satellite industry. The small satellite community builds spacecraft that have lower performance expectations, can accept greater risk of failure, use newer technology and require simpler management schemes than traditional satellites. The Johns Hopkins University Applied Physics Laboratory (JHU/APL) is a University Affiliated Research Center that serves the needs of the US government. The Space Department of JHU/APL has built and operated high quality satellites for NASA and the defense community for decades. Over the last few years, JHU/APL has responded to the uncertainty in the US space community by investing in new types of satellite programs, including small satellites and hosted payloads, that are placed as secondary missions on satellites with a different primary mission (Huang et al. 2012).

3. Explanations for incumbents pursuing DI in public service sectors The three examples of potential DI cut against the grain of conventional theory. If DI is possible in these sectors, why are new entrants not crowding out incumbents from below? Moreover, why would incumbent organizations spearhead Disruptive Innovation, thus potentially eroding their own core market? How do incumbents straddle this paradoxical gap? The explanation for this behaviour appears to lie within the innovation dynamics of public service sectors, which differ from private sector settings in important ways. As discussed below, public service sectors involve a central consideration of public goods, leading to both close public scrutiny and tight regulation. Therefore, public service sectors tend to show a resistance to innovation and new entrants, notwithstanding persistent challenges and a high need for innovation. The following discussion highlights these needs and barriers to innovation. The resulting tension between needs and innovation barriers provides the conditions under which incumbent organizations seem to be more likely to engage in potentially Disruptive Innovation.

3.1 The peculiar innovation dynamics in public service sectors: High needs and high barriers 3.1.1 Innovation potential in higher education Among the many challenges in higher education that call for innovative solutions continue to be questions of access, affordability, educational quality, and globalization pressure (Santiago et al. 2008). Access to higher education has become a key issue because of its importance for economic growth and social progress. While OECD countries aspire to raise university attainment rates above 50%, many developing countries are still struggling to close gaps in secondary education and provide infrastructure. Affordability, secondly, is closely tied to access. Governments are rarely able to shoulder the entire cost of higher education, which have been spiraling out of control (Ehrenberg 2000). On educational quality, thirdly, the “standard model” of education (Sawyer 2008) is largely inadequate. Recent research emphasizes the important role of deeper conceptual understanding, learning as opposed to teaching, agent autonomy, and lifelong learning (Bransford et al. 2000). Fourth, there are globalization pressures because millions of international students are seeking access to affordable and high‐quality education, through studying abroad or distance learning (Altbach 2007). This raises

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Danielle Wood et al. questions of brain drain and circulation, immigration reform, and the cross‐border flow of skills and knowledge. Online education is viewed as a potential innovation that could increase access, affordability and internationalization of higher education. Some argue it could help to improve educational quality by providing personalization, interactive tools and rapid feedback. Yet, despite a decade of heralding an educational revolution, online education has not taken off to the extent that people have predicted. 3.1.2 Barriers to Innovation in higher education Education systems are not perfectly competitive markets, and the pressure to innovate appears to be significantly lower. First, education has public good aspects, meaning that not all effects of education are captured by individuals (Friedman 1962). Hence, the costs of education should not be left completely to market mechanisms, and governments across the globe invest heavily in education. Second, the demand and supply functions for education follow several curious patterns that deviate from standard market behavior (Winston 1998). “Consumers” often care more about prestige than about spending efficiency. On the supplier side, the true costs of education are frequently not covered by tuition fees and are frequently subsidized through university endowment, government subsidies or research funding. Additional market failures include imperfect information about the true economic value of their education and the availability of different educational options. In addition to market failures, there are social norms and institutional failures influence the innovation potential in education. The track record of educational reform has “produced, time and again, criticism that educators are mossbacks who resist change” (Tyack & Cuban 1995). Explanations for the resistance include entrenched self‐interests of professional groups and institutions trying to secure power or market shares; individuals who define good education as what they experienced themselves; experience‐based resistance by educators and administrators who do not want to follow the latest trends; lack of information about education research and novel technology; or inconsistent changes that do not produce uniform agendas or effective outcomes. These barriers to innovation in education help explain why incumbents are shielded from fast‐paced change led by new entrants that could redefine the sector. Because of the barriers to innovation, new entrants are not making incumbents irrelevant. Influential incumbents that serve as leaders have the potential to redefine the sector through innovation because they help define the culture. Similar patterns are seen in the Health Care and Space sectors. 3.1.3 Innovation potential in health care In health care, the political upheaval surrounding the national reform effort is a signal of the complex challenges facing the industry. A 2013 National Research Council report, “U.S. Health in International Perspective: Shorter Lives, Poorer Health,” compares the health of Americans to other wealthy nations. The study finds that Americans across income, demographic and economic categories are less healthy than counterparts in other high‐income countries. The NRC report cites low effectiveness and efficiency of healthcare delivery, characterized by wasted resources, unnecessary services, and overbearing administrative effort (M. Smith et al. 2012). Similarly, the Commonwealth Fund reported that the U.S. ranks last overall compared to six other industrialized nations on health care measures including quality, efficiency, equity, and access to care (Davis et al. 2010). Several innovations have been introduced in the U.S. healthcare industry in recent years, including pay‐for‐ performance business models as opposed to pay‐for‐service models; accountable care organizations; and lean healthcare that emphasizes reducing waste and maximizing value delivery. Retail Clinics are another potential disruption. They offer unscheduled, walk‐in medical visits; they are conveniently located; and they provide care at low cost by employing mainly nurse practitioners and physicians assistants. Retail clinics can thus improve access to care and efficiency of delivery, including lower administration costs. Retail clinics also encourage competition as they have lower costs than emergency rooms (Weinick et al. 2010). Unlike hospitals who legally must treat everyone regardless of ability to pay, Retail Clinics typically only treat patients that have the money or insurance (Freudenheim 2009).

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Danielle Wood et al. 3.1.4 Barriers to innovation in health care Similar to the education example, there are market and institutional failures that impede the potential success of innovation in health care. As summarized by Powell and Laufer (2010), unlike markets where there is a strong link between financial reward and value for the consumer (patient), “the absence of price competition, agency problems, and high barriers to entry in local markets…currently break this link in U.S. healthcare.” These factors help explain why existing innovations have not fundamentally changed health care. There are barriers that will impact both incumbents and new entrants that pursue Retail Clinics. These include a continued perception of inferiority of the Retail Clinic model to the traditional hospital or primary care physician models (Freudenheim 2009) and uncertainty regarding quality of care and customer satisfaction in the new model (Kaissi 2010). On the other hand, the barriers for an incumbent or new entrant to enter the retail clinics market are substantially lower than traditional models of care, due to fewer regulations and lower overhead costs. Retail Clinics may make insured patients less likely to see their primary care physicians, causing discontinuity in care (Reid et al. 2013). However, continuity can be maintained when Retail Care clinics are executed by incumbents. This may be accomplished by shared IT systems between the incumbents and its Retail Clinics (Kaissi 2010), for example. As in higher education, innovation barriers slow the pace of change and shield incumbents from becoming irrelevant. The Retail Clinics example explores how effective incumbents use their position to overcome barriers to innovation. 3.1.5 Innovation potential in space The US space sector faces challenges because the standard approaches for defining and executing space missions for public needs are costly and take years to complete. In the current climate of fiscal caution, the high costs of space missions are unpalatable. This leads to the erosion of the nation’s space‐based infrastructure to support scientific research, earth observation, communication and navigation. For example, a National Research Council reports highlights the impact of these dynamics on NASA’s program to observe the earth. The report finds a poor outlook for long term capability in satellite‐based earth observation. Existing satellites are aging and will eventually fail. Current plans and budgets do not include a complete plan to ensure accurate weather forecast, meaningful scientific archives and long term climate observations (The National Academies 2012a). These challenges are difficult to overcome because traditional satellite engineering approaches have high quality standards and cater mainly to demanding, risk averse customers in the government, military and large corporations. The technical challenges of operating in the dangerous environment of space cause satellite engineers to choose conservative, expensive engineering and management approaches. This has led to an industry in which quality is high but costs are inflexibly high as well. Innovative new entrants and incumbents are seeking alternative engineering and management approaches to execute more cost effective and timely space missions. One alternative engineering approach is to build satellites that are smaller, less expensive and less capable. These satellites cannot achieve all the functions of larger satellites built to traditional quality standards; however, they can be built in larger numbers and launched more frequently. This enables new service models with different cost profiles. Innovators also see potential for hosted‐payloads because a mission designed to serve one set of users can be leveraged to serve secondary users at much lower cost. 3.1.6 Barriers to innovation in space Space is an industry with many impediments to change (Szajnfarber et al. 2011). In the government space market, rather than a large set of heterogeneous buyers, there is a monopsony. The government acts on behalf of citizens (taxpayers) to purchase publicly relevant space services. Government plays the roles of appropriator, acquisition team and user. Each role acts in what is meant to be the best interest of the beneficiaries; however, beneficiaries have no means to express their preferences. Instead of market preferences being communicated through many transactions between buyers and sellers, there are a few highly formalized transactions that are redefined for each sale. On the supply side, a small set of firms dominates the market. There are high barriers to entry for new players, since they would need to first establish relationships with the buyers. Szajnfarber notes that it is difficult for buyers to know what they need in the space sector. The suppliers have more expertise than buyers to understand what is technically feasible and how that maps to user needs. Because space systems are complex and made of many subsystems, the innovation environment that supports one aspect of a satellite – such as the instrument – may not support other aspects – such as the flight software. Szajnfarber et al. (2011) also address the key institutional failure that limits innovation in the space industry. The government is a primary buyer and has consistently chosen a

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Danielle Wood et al. risk averse posture. This is logical for human space flight and for space missions that must meet high scientific or military standards. Risk aversion does not tend to adapt to the needs of the mission, however. Thus, most space missions in the United States face a common expectation of quality and risk reduction. This reduces the flexibility for innovation. In order for small satellite and hosted payload missions to be adopted, new cultural approaches to risk and quality must be accepted by customers and incumbents for some types of missions.

3.2 Ambidexterity in public service sectors The previous sections have revealed a momentous tension for innovation in public service sectors, characterized by a high need for innovation on the one hand, and high barriers on the other. This peculiar situation leads to atypical innovation dynamics compared to private sector industries. Incumbent organizations appear to be relatively robust against disruption. Despite feasible candidates for disruptive technologies, markets and business models have not been eroded from the bottom up. Instead, campus universities with in‐ class teaching, conventional clinics, and traditional, risk‐averse satellite engineering approaches still prevai. Secondly, incumbents are actively engaged in developing and propagating potentially disruptive innovations, contrary to what conventional theory would predict. EdX, Geisinger Care, and the APL small‐satellite program are examples. Thirdly, those incumbents engaging in disruptive innovation share certain organizational behaviours. In particular, they act ambidextrously, meaning that they simultaneously strive to achieve opposing organizational postures when facing disruption. This section defines ambidextrous behaviour for the examples. Figure 2: Organizational dimensions

This project identified a set of six pertinent organizational dimensions to operationally define ambidexterity for DI in public service sectors: Organizational Architecture; Attitudes, Culture, Values and Incentives; Technology and Capabilities; Policies; Processes; and Communication Tools (Figure 2). Along each of these dimensions, an organization may choose to explore new opportunities or exploit existing elements. Similarly, three of the dimensions define ways that organizational subunits may be differentiated, while three of the dimensions are integrative devices that link organizational subunits. The competing tension of exploration/exploitation and integration/differentiation are considered orthogonal rather than opposite ends of a two continuums; thus it is possible to have high performance in all areas. Such behaviour exhibits ambidexterity. The project assumes that organizations engage in ambidextrous behaviour at all times; however, the specific activity along these six dimensions may change over time when facing DI. Figure 3 provides examples of characteristic ambidexterity events and patterns at JHU/APL at particular moment in time. For reasons of space, we are unable to detail the analysis for other sectors here. As seen in the table, organizations are simultaneously pursuing efforts to promote all four areas. For example, for JHU/APL, “Attitudes, Culture, Values, Incentives” captures how competing priorities are co‐existing in different project management settings within JHU/APL. The organization is pursuing Exploitation by maintaining a long‐ held commitment to manage risk and ensure high quality for traditional satellite projects. These priorities lead to long, complex, costly satellite projects with large teams and high management overhead. Meanwhile, JHU/APL is pursuing Exploration by creating opportunities for parallel teams to set different project priorities. A small satellite team was able to experiment with an Agile project management approach that is borrowed from software development. A hosted payload team is defining a new project management and systems engineering approach that seeks to enable the government to quickly buy access to capacity on commercial satellites. The incentives and values in these two types of projects are fundamentally different. JHU/APL is working to enable both types of projects to happen simultaneously via ambidexterity.

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Danielle Wood et al. Figure 3: Example ambidexterity analysis for Johns Hopkins University Applied Physics Laboratory (JHU/APL)

4. Conclusion and future work This paper has illustrated how disruptive innovation in public service sectors follows different dynamics than private sector innovation, which allows incumbents to act as leaders in DI rather than followers or prey. This innovation dynamic is characterized by a tension between a high need for innovation and high barriers to innovation from market or institutional failures. The three examples of potentially disruptive technologies in public service sectors – EdX in higher education, Retail Clinics in health care, and non‐traditional engineering approaches in space technology – point to the importance of ambidexterity to explain the behaviour of incumbents. The topic of Disruptive Innovation by incumbents in public sector industries is ripe for additional research on the following three issues:

the innovation dynamics that enable incumbent organizations in public service sectors to contradict standard DI theory and pursue DI;

the role of ambidexterity in the areas of exploration/exploitation and integration/differentiation in explaining incumbent behaviour with DI;

potential causal links between public sector conditions and the key role of incumbents in leading DI, and the importance of ambidextrous behaviour.

In order to address these research questions, the project uses long term field work within specific incumbent organizations. Future work will formulate a theoretical framework that organizes empirical observations regarding ambidexterity and innovation dynamics. The research process will include historical analysis of the incumbent organizations to trace the timeline of their innovations as well as real‐time observations of organizational adaptation. This research will produce rich narratives describing incumbent ambidexterity based on real time observation; a better understanding of processes that occur within incumbent organizations that pursue disruptive innovation; theoretical propositions for broader deductive research on incumbent ambidexterity in pursuit of disruptive innovation; and insight into strategies for innovation in public sectors fields.

References Altbach, P., 2007. Tradition and Transition: The International Imperative in Higher Education, Chestnut Hill, MA: CIHE Publishing. Ansari, S. (Shaz) & Krop, P., 2012. Incumbent performance in the face of a radical innovation: Towards a framework for incumbent challenger dynamics. Research Policy, 41(8), pp.1357–1374. Bransford, J.D., Brown, A.L. & Cocking, 2000. How People Learn: Brain, Mind, Experience, and School: Expanded Edition, Board on Behavioral, Cognitive, and Sensory Sciences (BBCSS), Behavioral and Social Sciences and Education (DBASSE), The National Academies.

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Danielle Wood et al. Christensen, C., 2013. Disruptive Innovation. Available at: http://www.claytonchristensen.com/key‐concepts/ [Accessed January 24, 2013]. Christensen, C., 1997. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Harvard Business School Press. Davis, K., Schoen, K. & Stremikis, K., 2010. Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update, The Commonwealth Fund. Ehrenberg, R.G., 2000. Tuition rising: Why colleges cost so much, Harvard University Press. Freudenheim, M., 2009. Hospitals Begin to Move Into Supermarkets. The New York Times. Available at: http://www.nytimes.com/2009/05/12/business/12clinic.html [Accessed January 25, 2013]. Friedman, M., 1962. The Role of Government in Education. In Capitalism and Freedom. University of Chicago Press, pp. 85– 107. Glabman, M., 2009. Disruptive Innovations That Will Change Your Life in Health Care. Managed Care. Available at: http://www.managedcaremag.com/archives/0901/0901.disruptive.html [Accessed January 24, 2013]. Gupta, A.K., Smith, K.G. & Shalley, C.E., 2006. The Interplay between Exploration and Exploitation. The Academy of Management Journal, 49(4), pp.693–706. Huang, P.M., Darrin, A.G. & Knuth, A.A., 2012. Agile hardware and software system engineering for innovation. In 2012 IEEE Aerospace Conference. 2012 IEEE Aerospace Conference. pp. 1 –10. Kaissi, A., 2010. Hospital‐affiliated and hospital‐owned retail clinics: strategic opportunities and operational challenges. Journal of Healthcare Management / American College of Healthcare Executives, 55(5), pp.324–337; discussion 337– 338. Lawrence, P.R. & Lorsch, J.W., 1967. Differentiation and Integration in Complex Organizations. Administrative Science Quarterly, 12(1), p.1. Leiponen, A. & Helfat, C.E., 2011. Location, Decentralization, and Knowledge Sources for Innovation. Organization Science, 22(3), pp.641–658. March, J.G., 1991. Exploration and Exploitation in Organizational Learning. Organization Science, 2(1), pp.71–87. O’Reilly III, C.A. & Tushman, M.L., 2008. Ambidexterity as a dynamic capability: Resolving the innovator’s dilemma. Research in Organizational Behavior, 28(0), pp.185–206. Powell, P.T. & Laufer, R., 2010. The promises and constraints of consumer‐directed healthcare. Business Horizons, 53(2), pp.171–182. Reid, R.O. et al., Retail Clinic Visits and Receipt of Primary Care. Journal of General Internal Medicine, pp.1–9. Santiago, P. et al., 2008. OECD Tertiary Education for the Knowledge Society, Paris: OECD. Sawyer, K., 2008. Optimising Learning: Implications of Learning Sciences Research. In Innovating to Learn, Learning to Innovate. Paris: OECD, pp. 45–66. Smith, M. et al., 2012. Best Care at Lower Cost: The Path to Continuously Learning Health Care in America, Washington, D.C.: Institute of Medicine (IOM), The National Academies Press. Smith, W. & Lewis, M.W., 2011. Toward a Theory of Paradox: A Dynamic equilibrium Model of Organizing. Academy of Management Review, 36(2), pp.381–403. Szajnfarber, Z., Richards, M.G. & Weigel, A.L., 2011. Challenges to innovation in the government space sector.(Report). Defense A R Journal, 18(3), p.257(20). The National Academies, 2012a. Earth Science and Applications from Space: A Midterm Assessment of NASA’s Implementation of the Decadal Survey, Washington, D.C.: Space Studies Board (SSB), Engineering and Physical Sciences, The National Academies Press. Trow, M., 2002. Reflections on the Transition from Elite to Mass to Universal Access: Forms and Phases of Higher Education in Modern Societies since World WWII. In International Handbook of Higher Education. Springer, Dordrecht. Tyack, D. & Cuban, L., 1995. Tinkering towards utopia: One century of public school reform, Cambridge, MA: Harvard University Press. Weinick, R.M., Burns, R.M. & Mehrotra, A., 2010. Many Emergency Department Visits Could Be Managed At Urgent Care Centers And Retail Clinics. Health Affairs, 29(9), pp.1630–1636. Winston, G., 1998. Economic Research Now Shows That Higher Education Is Not Just Another Business. The Chronicle of Higher Education.

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Entrepreneurial Attitudes and Entrepreneurship’s Potential in East Timor Tomas Xavier1, Filipa Vieira2 and Cristina Rodrigues3 1 CGIT Centre, Engineering School, University Minho, Campus Azurém, Guimarães, Portugal 2 National University of East Timor, Díli, East Timor 3 Algoritmi R&D Centre, Engineering School, University Minho, Campus Gualtar, Braga, Portugal filipadv@dps.uminho.pt xavier6565@gmail.com crodrigues@dps.uminho.pt Abstract: Entrepreneurship has been recognized as a critical factor in promoting innovation, productivity, creating employment opportunities and economic development of a country. Entrepreneurship is defined as the process of creating something new with value by devoting the necessary time and effort, assuming the financial risks, psychological and social correspondents, and the consequences of getting satisfaction and independence (Hisrich et al, 2009). In the current environment it is important for a young country like East Timor to promote entrepreneurship as a key opportunity, in order to increase the number of individuals with individual initiative, i.e. entrepreneurs who take responsibility for economic development and job creation for the working population. But, since this is a new social and political challenge, are the East Timorese really sensitive and receptive to the idea of become entrepreneurs? The present study aims to understand the attitudes and values of the East Timorese students in relation to entrepreneurship. Taking as a starting point a survey set to study the potential of entrepreneurship among university students in East Timor, the paper presents and discusses the results obtained on various issues such as entrepreneurial intention, predisposition, risk disposition, and personality traits and skills. Our sample involves 140 students from National University of Timor Lorosa’e with no experience in entrepreneurial courses, divided into engineering students and economics students. East Timorese students report good entrepreneurial intentions but when asked to choose one investment option they hesitate between invest in an own business or invest in an investment fund. The risk disposition of students was measured through an index of entrepreneur risk disposition and results indicated good levels of risk disposition. East Timorese students present high levels of self‐ efficacy, endurance and autonomy. They also report good perceived levels of technical skills but admitted lower perceived financial skills. During the analysis, several differences were identified concerning students’ gender, course or having self‐ employed parents. The study indicated a high entrepreneur potential among East Timorese university students and the results give an important contribution to the theme of Entrepreneurship in East Timor. The results presented are preliminary and require more careful analysis. Keywords: entrepreneurship; entrepreneurial intentions; East Timorese university students

1. Introduction Wong, Ho and Autio (2005) argue that small firms and newly formed companies allow the creation of a significant number of new jobs and that some studies show that small and new firms have provided the creation the majority of new jobs. Entrepreneurship is thus a major factor in promoting economic and social development of a country. According to Heertje (1982) in order to solve the many problems of today both in the private and the public sectors, entrepreneurial activity on a large scale, based on a sensitive and innovative attitude, guided by a broad concept of welfare, is needed even more than before. Entrepreneurs are held responsible for economic development, by introducing and implementing innovative ideas. These ideas include product innovation, process innovation, market innovation and organizational innovations. The implementation, launched by entrepreneurs, of these new ideas allow to the generation of new products or services to satisfy new customer needs and to create new companies. Those new companies generate economic growth and supply new jobs for the working population (Van Praag, 1999). Based on this, the members of the Organization for Economic Cooperation and Development (OECD) recommend policy priority to entrepreneurship as an alternative to solve the economic crisis that countries go through (Lowe and Marriott, 2006; OECD, 2009). East Timor, a young country located in Asia and whose independence occurred 11 years ago, features a very slow economic development, only concentrated in urban areas and not reaching rural areas. Traditionally, East Timor has been, largely, an economy based on subsistence farming, with a scattered rural population and living near the poverty line. What can be done to reverse this trend? This article is organized into five sections,

677

Tomas Xavier, Filipa Vieira and Cristina Rodrigues besides the introduction. Section 2 examines the importance of education in promoting entrepreneurship. Section 3 gives a brief review of the history of East Timor and of the government policies to promote private sector. Section 4 presents the results of the study designed to understand the attitudes and values of the East Timorese students towards entrepreneurship. Finally, Section 5 presents the main conclusions.

2. Entrepreneurship and education Entrepreneurship is considered to be a core competence for economic growth and employment since is a transforming process from an innovative idea to an enterprise (Yildirim and Askun, 2012). According to Kuratko (2005) entrepreneurship has been argued as the most effective economic power in the global economics and social history. According to Drucker (2006) entrepreneurship is neither a science nor an art, it can be learned and should be practiced, because entrepreneurs are not born but are molded. Entrepreneurship is a growing culture in every way. To develop its activity, the entrepreneur needs to take risks, to identify opportunities and to seek knowledge. He also need to be organized and independent, shows leadership and decision‐making skills, be dynamic and optimistic, be capable of planning and have a business plan and, above all, to have entrepreneurial instinct. Policy makers believe that higher levels of entrepreneurship can be achieved through education and especially through entrepreneurship education. Curteis (1997) and Sarkar (2010) argue that the growth of the entrepreneurial capacity of a country depends on education and cultural knowledge of entrepreneurship on the part of all citizens and that entrepreneurship is developed as a cultural phenomenon linked to the development of education. Several authors, such as Raijman (2001) and Askun and Yildirim (2011) argue that education provides general skills, training and knowledge, which facilitates access to the business world. Education allows individuals to assess the extent of the labor market, the type of goods or services that are sought after by customers and also organize the business. To Carayannis et al (2003) there is no doubt that entrepreneurship education seeks to build knowledge and skills, and also increase the likelihood of business success, so the entrepreneurial values need to be taught, beginning in the early stages of a child's education, at the very latest during the junior high school years. Also Souitaris et al (2007) and von Graevenitz et al (2010) claim that entrepreneurship education increases the intention of starting a new business. Many countries members of the European Union and the United States of America acknowledge that entrepreneur education need be promoted and implemented in academic curriculum. For Yildirim and Askun (2012) the universities are increasing their entrepreneurial activities, including the offer of entrepreneur curriculum and infrastructures. A key assumption underlying these programs is that entrepreneurial skills are not only personal characteristics but these can be taught and developed. Indeed, it has been shown by several researches that (1) the education not specialized, measured in years of schooling, has a positive effect on entrepreneurial performance and (2) business training is effective for the performance of people who applied for Micro‐credit to start their own business (Oosterbeek et al, 2010).

3. East Timor East Timor is a young country located in Asia and occupies half of Timor Island, having a single land border with Indonesia. East Timor was an overseas province of Portugal until 1974 and for 450 years. After this period, the territory was invaded and occupied by Indonesia, a situation that lasted until the referendum held on August 30, 1999. The process leading up to this historic event was long and difficult (Durand, 2010). Unfortunately, the events that followed were dramatic, but the violence following the consultation did not destroy their results and self‐determination has finally arrived in East Timor in 2002. Restoration of Independence occurred in 2002, rising around one of the youngest countries in the world designated by the Democratic Republic of East Timor. Traditionally, East Timor has been largely an economy based on subsistence agriculture, with a scattered rural population and living near the poverty line. The National Human Development Report 2002 conducted by the United Nations Development Programme (UNDP) evaluates the performance of East Timor from 2002 to 2007, as one of the twenty poorest countries in the world, with about half the population living on less than a 1 USD per day, a strong indicator of poverty (UNDP, 2006). Official figures in East Timor indicate that 56% of people in paid employment work for the Government, or in its services (teachers, health professionals, among others) or in its business activity (DNE, 2010). In the case of rural areas, only 32% of people are working for the private sector, usually in small or very small businesses. In 2010 the population of East Timor was 1,066,409

678

Tomas Xavier, Filipa Vieira and Cristina Rodrigues inhabitants and presented an annual population growth of 2.4%. More than half the population is under 19 years old. Recognition of the importance of the private sector for the development of the economy, contributed to the definition of the target in 2030 that the private sector become the main source of growth of income and employment in rural areas of East Timor (RDTL, 2010). To ensure the growth of the private sector in rural and urban areas, and standardize the requirements and procedures for registration of companies, making it easier and faster to create a business in East Timor (RDTL, 2012) the following changes are planned structural.

the creation of a new investment law (to ensure the interests of investors and make new legislative reforms, with a view to creating a 'one stop shop' for companies, which will further improve the investment environment);

the creation of the Chamber of Commerce and Industry of East Timor (to train the human resources of private companies, so that they have quality and ability to identify new business opportunities, creating business, expand into new areas or markets, and start exporting (RDTL, 2010, 2012);

the establishment of a National Development Bank (financial support for entrepreneurs to invest in these areas that have been identified as having advantage and long‐term sustainability);

the creation of the Investment Company of East Timor (to help companies develop the Timorese economy, favoring investment clear and rigorous administrative and business operations independent and high standards of good governance);

the transformation of Microfinance Institute of East Timor into the National Bank of Commerce of East Timor (with branches in each district vehicles and mobile banking, is intended to provide services to individuals and businesses (micro, small and medium) in order to develop and expand their businesses in remote areas, to easily respond to the needs of all citizens, not only of urban residents, but also residents in rural areas (RDTL, 2010).

From the foregoing, it is perceived the strong desire of the Government of East Timor to foster private initiative and to offer a wider range of financial solutions available to all citizens. The Government effort shows an increase by 63 percent in the number of registered businesses between 2005 and 2009 (OECD, 2011). But increasing the private sector also requires that the Timorese people have a greater understanding of what can be done to create their own business... The keyword is entrepreneurship. Are they prepared?

4. Data collection and analysis This paper presents the preliminary results from a survey set to study the potential of entrepreneurship among university students in East Timor. Assuming it is a convenience sample, the students at the National University of Timor Lorosa’e were invited to participate in our study. Given the reality of East Timor, it was understood that this group of people for their above average formation is the country's future and will be the decision makers and / or leaders of opinion in relation to the general population. The survey, named by EmpreendeTIMOR, was applied to undergraduate university students. Since entrepreneurship does not have a corresponding word in East Timor, the students were approached during classes and invited to assist to a small seminar about entrepreneurship. After the seminar, students were asked to participate in the research and to respond to a bilingual questionnaire (Portuguese and Tetum). The questionnaire replicates the questionnaire used in the Portuguese ENGEmpreende survey (for detailed information see Vieira and Rodrigues (2012)). The sample has a total of 140 respondents, all undergraduate students in engineering (76.43%) or economics (23.57%). Students’ year of course is divided in first year (39.29%), second year (18.57%), third year (18.57%) and forth year (23.57%). The students’ age ranges from 17 to 39 years, with a mean of 22.07 years and a standard deviation of 2.608 years. The gender distribution has male domain, with 80.71% males and 19.29% females, and this domain is replicated in both courses areas (see Table 1). Table 1: Sample gender distribution

Male

Engineering students total (%) 85,05%

Economics students total (%) 66,67%

Female

14,95%

33,33%

Total

107

19,29% 140

in %

76,43%

23,57%

100,00%

Gender Distribution

679

Total (%) 80,71%

Tomas Xavier, Filipa Vieira and Cristina Rodrigues The sample characterization included a question about the parents’ entrepreneurial behavior (adapted by Laspita et al, 2012). The overwhelming majority of respondents (76.43%) admit that parents were never entrepreneurs. In the affirmative answers identify themselves as 16.43% of businesses still active but more than 7.14% already closed. Table 2 summarizes the distribution of responses obtained. Table 2: Entrepreneurial behavior of student’s parents Response to "Do you grew up in an entrepreneurial family? "

Total (%)

No, my parents were never entrepreneurs

76,43%

Yes, business still active

16,43%

Yes, the business still worked at least until 5 years ago

3,57%

Yes, but the business ended more than five years ago Total

3,57% 140

in %

100,00%

The result indicates that such low levels could constrain the entrepreneurial potential of students. To investigate this possibility, a new variable was defined to measures the experience of “parents self‐employed” by coding the “yes” answers as 1‐yes; otherwise 0‐no. The following is the analysis of the responses to the questionnaire different statements regarding entrepreneur intention, predisposition, risk disposition and personality traits and skills. The analysis of the main results of the study comprises, in addition to descriptive statistics, the tests of independence and tests to the means considering the variables characterizing the respondent's gender, course area (engineering and economics) and self‐employed parents (yes or no). The first question analyses the entrepreneur's intention and asked respondents if "Have you ever considered seriously start your own business?" (Adapted from Laspita et al, 2012). The results indicate that the majority of respondents admitted to have already thought about having their own business (60.71%), including 32.86% who claim be determined in be his own boss in the future, and 15.71% who are already starting the process. Were detected dependency relationships between the entrepreneur intention and the course of the respondents (χ2 (5) = 9.288, p <0.10) and entrepreneurial experience of parents (χ2 (5) = 28,721, p <0.10). Table 3 summarizes the distribution of responses obtained and analyzed by course area and self‐employed parents. Table 3: Entrepreneurial intention of students Response to "Have you ever considered seriously start your own business?"

Students' Course Engineering Economics students students total (%) total (%)

Self-employed Parents Yes total (%)

No total (%)

Total (%)

No, never

37,38%

45,45%

9,09%

48,60%

39,29%

Yes, but abandoned the idea

9,35%

0,00%

12,12%

5,61%

7,14%

Yes, I am determined to be my own boss in the future

35,51%

24,24%

30,30%

33,64%

32,86%

Yes, I'm already starting the process

14,95%

18,18%

39,39%

8,41%

15,71%

Yes, I am my own boss

1,87%

6,06%

1,87%

2,86%

Yes, I've been my own boss but now I'm not

0,93%

6,06%

3,03%

1,87%

2,14%

Total

107

140

in %

76,43%

23,57%

76,43%

100,00%

The analysis of the entrepreneurial intention by course demonstrates that:

are economics students who have a higher percentage of respondents who claim never to have considered the possibility of having their own business (45.45% of economics students against 37.38% of engineering students);

for both courses, the bigger affirmative option is “yes, I am determined to be my own boss in the future” (35.51% in engineering, and 24.24% in economics);

“already starting the process” was chosen by 14.95% of engineering students and 18.18% of economics students;

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Tomas Xavier, Filipa Vieira and Cristina Rodrigues

9.35% of engineering students assume that have abandoned the idea against the 0.00% of economics students.

When analyzing the entrepreneurial intention as a function of self‐employed parents conclude that:

The group with the lowest entrepreneurial intention is that of respondents without self‐employed parents (48.60% of the answers were "no, never"). Still, this group has 33.64% of respondents who claim determined to be his own boss in the future;

The group with self‐employed parents has a high entrepreneurial intention, particularly with 39.39% of the respondents that assume that the process has already begun, and 30.30% who claims to be determined to be “my own boss in the future”.

The entrepreneurship predisposition was measured by a question adapted from Raijman (2001): “Suppose you unexpectedly inherit $20 000. How would you invest this money?” Respondents choose between investing in their own businesses (37.14%), invest in an investment fund (26.43%) and deposit in a bank account (19.29%). It was found a relationship of dependency between the predisposition and the course of the student (χ2 (4) = 15.875, p <0.01). Table 4 summarizes the distribution of responses of students per course. Table 4: Entrepreneurship predisposition

Invested in a business of my own

Students' Course Engineering Economics students students total (%) total (%) 42,99% 18,18%

Invested in a car or home ownership

7,48%

6,06%

7,14%

Invested in an investment fund

18,69%

51,52%

26,43%

Deposited in a bank account

21,50%

12,12%

19,29%

Other

9,35%

12,12%

10,00%

Total

107

140

in %

76,43%

23,57%

100,00%

Response to "Suppose that you suddenly inherit $20 000. How would you invest the money?"

Total (%) 37,14%

In examining the predisposition by course area, we found that a significant percentage of engineering students admitted invest in their own business (42.99%), deposited in a bank account (21.50%) or invest in a mutual fund (18.69%). In turn, economics students rather invest in an investment fund (51.52%) and only 18.18% admit to invest in their own business. Economics students’ answers suggest a more cautious behavior when compared to engineering students. Are there different levels of risk aversion? To help answer a question such as the posed earlier, the survey included a question to measure the risk disposition. Based on the work of Raijman (2001), we adapt three statements concerning the risk disposition and asked respondents about their degree of agreement with the Likert scale of 5 levels (from 1 ‐ "I totally disagree" to 5 ‐ "I totally agree"). The Figure 1 illustrates the results obtained in each claim:

The perceived risk of starting a business (claim 1) recorded 54.00% of negative responses (i.e., the sum of responses 1 ‐ "I totally disagree" and 2 ‐ "I somehow disagree");

The taste for challenges (claim 2) is assumed by 80.00% of respondents;

The work and perceived responsibility to own a business (claim 3) recorded 53.60% of positive responses (i.e., the sum of responses 4 ‐ "I somehow agree" and 5 ‐ "I totally agree").

We only found a significant dependence between the statement 2 ("I like challenges ...”) and the students’ course (χ2 (4) = 19.135, p <0.01). Figure 2 presents the answers differences by course. Although the economics students register 63.63% of positive responses, the option "I totally agree" just recorded 24.24% of the responses to the item and the option "I disagree somehow" registered 21.21% of responses. Meanwhile, engineering students agree clearly with the statement and record into the option "I totally agree" 66.36% of responses.

681

Tomas Xavier, Filipa Vieira and Cristina Rodrigues 1. Start my own business is risky, I may lose everything (-)

28,10%

2. I like challenges. Many of the best moments of my life occurred when I was struggling to achieve a difficult goal 56,40%

25,90%

23,60%

20,10% 15,10%

10,80%

10,70%

6,40%

2,90% I totally disagree

I disagree somehow

I do not agree, nor disagree

I agree somehow

I totally agree

I totally disagree

I disagree somehow

I do not agree, nor disagree

I agree somehow

I totally agree

3. It is true that we are our own boss, but to manage our own business involves hard work and responsibility and just bring major headaches (-)

30,00% 23,60%

23,60% 13,60%

I totally disagree

I disagree somehow

9,30%

I do not agree, nor disagree

I agree somehow

I totally agree

Figure 1: Risk disposition Engineering students and "I like challenges..."

Economics students and "I like challenges..." 66,36%

39,39%

2,80% I strongly disagree

7,48%

4,67%

I disagree somehow

I do not agree, nor disagree

24,24%

21,21%

18,69%

12,12% 3,03%

I agree somehow

I strongly disagree

I totally agree

I disagree somehow

I do not agree, nor disagree

I agree somehow

I totally agree

Figure 2: Course and “I like challenges...” Once the statement "I like challenges ..." is more general and the other two statements are more specific about having your own business, it was decided to calculate an index of disposition to entrepreneurial risk. The index was calculated as the average response of the claims 1 and 3 with a correction of negative statements (Cronbach's Alpha of 0.439) and reflects the entrepreneurial risk disposition: the higher the value, the higher the disposition to take risks to own a business. The Table 5 summarizes the index considering students’ gender, course and self‐employed parents. Table 5: Index of entrepreneurial risk disposition Index of Entrepreneur Risk Disposition

min

Máx

Male

113

3,00

Female

3,00

3,39

Course

Engineering

107

3,00

2,95

Economics

3,50

3,47

Self-employed Parents

Yes

107

3,00

3,32

3,00

107

3,00

3,07

Gender

Total

682

Median

Mean

Tomas Xavier, Filipa Vieira and Cristina Rodrigues The analysis of the results shows that:

when considering gender, the respondents females have a higher average index of entrepreneurial risk disposition;

when considering the course, economics students have a greater average index when compared to their engineering colleagues;

when considering the previous experience of students’ parents, students with self‐employed parents have a higher average index in relation to peers without entrepreneurial parents.

The Mann‐Whitney tests confirmed the differences identified for gender (p <0.01), course (p <0.05), and self‐ employed parents (p<0.10). It is interesting to note the seeming contradiction of economics students, which, although indicating a lower entrepreneur intention (see previous results) are the ones that have higher index of entrepreneurial risk disposition! The survey also included a set of statements relating to personality characteristics of the respondent, including three statements of self‐efficacy, three statements of endurance, one statement of autonomy, and three statements of skills (Likert scale with 5 levels). The Table 6 summarizes the results including the percentage of non‐response (Do not know / Do not answer). Table 6: Personality traits and skills I totally agree

Do not know / Do not answ er

Positive (%)

25,71%

60,71%

5,00%

86,43%

2,14%

21,43%

72,14%

0,00%

93,57%

2,14%

0,71%

29,29%

67,86%

0,00%

97,14%

4,29%

2,14%

0,71%

25,00%

67,86%

0,00%

92,86%

5. I am extremely driven to achieve results

2,14%

3,57%

4,29%

22,86%

65,71%

1,43%

88,57%

6. I am always persevering to reach my goals

7,86%

2,86%

5,71%

31,43%

52,14%

0,00%

83,57%

7. I prefer other people to decide for me (-)

50,00%

18,57%

9,29%

12,86%

7,86%

1,43%

20,71%

8. Financial services are complicated and confusing for me (-)

17,86%

18,57%

8,57%

38,57%

15,00%

1,43%

53,57%

9. I am pretty confident about my ability to technical decision

4,29%

5,00%

0,71%

24,29%

65,71%

0,00%

90,00%

10. My technical knowledge is very good

2,14%

5,00%

2,14%

35,71%

55,00%

0,00%

90,71%

I totally disagree

I do not I disagree agree, nor I agree somehow disagree somehow

2,14%

3,57%

2,86%

2. If I decide to participate in creating a business, I am confident that 0,71% I will succeed

3,57%

3. When I start something new, I know that I will be successful

0,00%

4. I adapt my plans to changing circumstances

1. I have a lot of self confidence

The results suggest high levels of self‐efficacy, with all three statements to register percentages of positive responses from a minimum of 86.43% (statement 1) and a maximum of 97.14% (statement 3). Interestingly, the statement that registers the highest percentage of responses "I totally agree" (72.14%) is the statement 2 "If I decide to participate in creating a business, I am confident I will succeed". The statement 1 recorded the highest percentage (5.00%) of non‐response (Do not know / Do not answer). In terms of endurance, the responses obtained in statements 4, 5 and 6 indicate good levels of endurance, with high percentage of positive responses ranging from 83.57% (statement 6) and a maximum of 92.86% (statement 4). Autonomy was measured with only one claim (statement 7) and records 20.71% of positive responses as opposed to 68.57% of negative responses. Since it is a negative statement, the negative responses indicate good levels of autonomy. The skills were measured with three statements comprising a financial component (statement 8) and a technical component (statements 9 and 10). The financial statement is negative but noted 53.57% of positive responses and only 36.43% of negative responses, which indicates an area of knowledge to improve. In the

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Tomas Xavier, Filipa Vieira and Cristina Rodrigues technical component, positive responses were greater than or equal to 90.00%, which indicate good technical levels perceived. To explore the personality traits and skills, we tested differences in mean considering the variables gender of the student, course and self‐employed parents. The Table 7 summarizes the results. To simplify the analysis it signaled statistically significant differences obtained with Mann‐Whitney Tests. Table 7: Mean profile of personality traits and skills Gender Male Female mean mean

Students' Course Engineering Economics students students mean mean

Self-employed Parents Yes No mean mean

1. I have a lot of self confidence

4,40

4,76 ***

4,48

4,44

4,50

4,46

2. If I decide to participate in creating a business, I am confident that I will succeed

4,61

4,59

4,69

4,33

4,67

4,59 ***

3. When I start something new, I know that I will be successful

4,63

4,64

4,63

4. I adapt my plans to changing circumstances

4,47

4,63

4,64

4,06 *

4,42

4,52

5. I am extremely driven to achieve results

4,51

4,37

4,52

4,36 ***

4,63

4,44

6. I am always persevering to reach my goals

4,20

4,04

4,26

3,88

4,30

4,13

7. I prefer other people to decide for me (-)

2,05

2,22

2,15

1,88

2,34

2,01

8. Financial services are complicated and confusing for me (-)

3,15

3,11

3,24

2,84

3,24 ***

9. I am pretty confident about my ability to technical decision

4,55

3,89 *

4,71

3,48 **

4,64

4,36

10. My technical knowledge is very good

4,40

4,22

4,49

3,97 *

4,58

4,30 ***

Mann-Whitney Test. *p<0.01; **p<0.05; ***p<0.10

When analyzing the gender, the females students show a greater degree of general trust (statement 1), but a lower degree of confidence in the technical decision (statement 9) compared to male students. Both statements report significant differences. When analyzing student course, engineering students have higher levels of adaptability (statement 4 ‐ "I adapt my plans ..."), higher orientation to results (statement 5 ‐ "I am always persevering to reach my goals ") and higher technical knowledge (statements 9 ‐" I am pretty confident ... "and 10 ‐" My technical knowledge is very good "). The four statements have differences statistically significant. Considering the entrepreneurial experience of parents, students with self‐employed parents have more security in relation to the success of an entrepreneurial project (statement 2 ‐ "If I Decided to participate in ..."), minor difficulties with financial issues (statement 8 ‐ "Financial services are complicated ...") and better perceived technical knowledge (statement 10 ‐ "My technical knowledge is very good"). The three statements report significant differences.

5. Conclusions Entrepreneurship has been recognized as a critical factor in promoting innovation and productivity, creating employment opportunities and contributing for economic development of a country. Promoting entrepreneurship should be perceived by East Timor as a key opportunity to increase the number of individuals with initiative to create jobs, i.e., entrepreneurs who take responsibility for the creation of jobs for the labor force and therefore for the country's economic development . Since entrepreneurship is a new word for the Timorese people, what is the existent predisposition? The present work aims to analyze the entrepreneurial predisposition of East Timorese university students. Given their training, these students have a potential of entrepreneurship that has not been yet recognized. With this investigation, it is intended to explore it and thus contribute to a further discussion on the topic of entrepreneurship in East Timor.

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Tomas Xavier, Filipa Vieira and Cristina Rodrigues With a total of 140 answers considered valid, the sample consists mainly of male individuals (80.7%), mostly engineering students (70.2%), with an average age of 22.07 years. Preliminary results have identified the existence of some critical factors, including the lack of familiar example, the existence of a high entrepreneurial intention simultaneously with a low predisposition to entrepreneurship. Students present a high risk disposition in general and the calculus of an index of entrepreneurial risk disposition confirmed the existence of differences among students’ gender, course and entrepreneurial experience of parents. In terms of personality traits and skills, students Timorese have high levels of self‐efficacy, autonomy and endurance. The financial skills may represent a future concern, because students generally indicate the existence of problems. Our suggestion would be the curriculum inclusion of a course on entrepreneurship and finance. The technical skills are high since East Timorese students present themselves confident. During the analysis were also explored possible differences concerning students’ gender, course and entrepreneurial experience of parents. Gender analysis reveals that female students present higher entrepreneurial risk disposition, higher confidence in general but lower technical confidence. For student course analysis, answers reveal a distinction between engineering and economics students and highlight the apparent contradiction of economics students with low entrepreneurial intention but a high index of entrepreneurial risk disposition (it requires further research to understand the causes of this contradiction). The entrepreneurial experience of parents also resulted in some interesting differences, for instance, in the personality traits and skills such as the ability to own a business, the confidence level of success and the perceived financial and technical skills. The results already analyzed of the EmpreendeTIMOR survey indicate a high potential entrepreneur among East Timorese university students. The ongoing research gives an important contribution to the theme of entrepreneurship in East Timor. As the entrepreneurship is a new social priority in East Timor and the Government intends to increase the private sector, we believe that the National University of Timor Lorosa’e should take a leading role in promoting entrepreneurship among its students, namely with the inclusion of subjects on this topic in their course curriculum. The challenge is launched!

Acknowledgements The first author would like to thank the scholarship granted by the East Timor Government and the National University of Timor Lorosa’e. The authors also wish to acknowledge the support of CGIT and Algoritmi R&D Centre, two research centres at the University of Minho, Portugal. This work is supported by FEDER Funds through the Operational Programme Competitiveness Factors – COMPETE, and National Funds through FCT ‐ Foundation for Science and Technology under the Projects FCOMP‐01‐0124‐FEDER‐022674 and Pest‐ OE/EME/UI0252/2012.

References Askun, B. and Yildirim, N. (2011) “Insights on entrepreneurship education in public universities in Turkey: creating entrepreneurs or not?”, Procedia Social and Behavioral Sciences, Vol 24, pp 663–676. Carayannis, E. G., Evans, D. and Hanson, M. (2003) “A cross‐cultural learning strategy for entrepreneurship education: outline of key concepts and lessons learned from a comparative study of entrepreneurship students in France and the US”, Technovation, Vol 23, pp 757–771. Curteis, H. (1997) “Entrepreneurship in a growth culture”, Long Range Planning, Vol 30, No. 2, pp 267‐155. DNE (2010) Timor‐Leste Labour Force Survey 2010. Direcção Nacional de Estatística de Timor‐Leste. Drucker, P.F. (2006) Innovation and Entrepreneurship, Harper Business. Durand, F. (2009) História de Timor‐Leste, da Pré‐história à atualidade, Lidel. Heertje, A. (1982) Schumpeter’s Model of the Decay of Capitalism, in: H. Frisch (ed.), Schumpeterian Economics, Prager Publishers, Sussex, UK, Chapter 5. Hisrich, R. D., Peters, M. P. And Shepherd, D. A. (2009) Empreendedorismo. Traduzido por Teresa Felix de Sousa, 7ª ed., Porto Alegre: Bookman (in Portuguese). Kuratko, D.F. (2005) “The Emergence of Entrepreneurship Education: Development, Trends and Challenges”, Entrepreneurship Theory and Practice, Vol 29, No. 5, pp 577‐597. Lowe, R. and Marriott, S. (2006) Enterprise: Entrepreneurship and Innovation. Concepts, Contexts and Commercialization, Elsevier. Laspita, S., Breugst, N., Heblich, S. and Patzelt, H. (2012) “Intergenerational transmission of entrepreneurial intentions”, Journal of Business Venturing, Vol 27, pp 414‐435. OECD (2009) Measuring Entrepreneurship. A Collection of Indicators. OECD (2011) Report on International Engagement in Fragile States: Democratic Republic of Timor‐Leste.

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Tomas Xavier, Filipa Vieira and Cristina Rodrigues Oosterbeek, H., Van Praag, M. and Ijsselstein, A. (2010) “The impact of entrepreneurship education on entrepreneurship skills and motivation”, European Economic Review, Vol 54, pp 442–454. Raijman, R. (2001) “Determinants of entrepreneurial intentions: Mexican immigrants in Chicago”, Journal of Socio‐ Economics, Vol. 30, pp 393–411. RDTL (República Democrática de Timor‐Leste) (2012) Programa do V Governo Constitucional 2012‐2017 (in Portuguese). RDTL (2010) Programa Estratégico de Desenvolvimento 2011‐2030 (in Portuguese). Sarkar, S. (2010) Empreendedorismo e Inovação, Escolar Editora. Souitaris, V., Zerbinati, S. and Al‐Laham, A. (2007) “Do entrepreneurship programmes raise entrepreneurial intention of science and engineering students? The effect of learning, inspiration and resources”, Journal of Business Venturing, Vol 22, pp 566–591. UNDP (2006) Relatório nacional de Desenvolvimento Humano de Timor‐Leste 2006. O caminho para sair da pobreza. Programa das Nações Unidas para o desenvolvimento (in Portuguese). Oosterbeek, H., van Praag, M. and Ijsselstein, A. (2010) “The impact of entrepreneurship education on entrepreneurship skills and motivation”, European Economic Review, Vol 54, pp 442‐454. Van Praag, C.M. (1999) “Some classic views on entrepreneurship”, De Economist, Vol 147, No. 3, pp 311–335. Vieira, F.; Rodrigues, C. (2012) “Entrepreneurial intentions of engineering students”, Proceedings of the 7th European Conference on Innovation and Entrepreneurship (ECIE 2012), Santarém, Portugal, September Von Graevenitz, G., Harhoff, D. and Weber, R. (2010) “The effects of entrepreneurship education”, Journal of Economic Behavior & Organization, Vol 76, pp 90–112. Wong, P. K., Ho, Y. P. and Autio, E. (2005) “Entrepreneurship, Innovation and Economic Growth: Evidence from GEM data”, Small Business Economics, Vol 24, pp 335–350. Yildirim, N. and Askun, N. (2012) “Entrepreneurship intentions of public universities in turkey: going beyond education and

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PhD Research Papers

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Marketing Support of Innovative Projects Gulnara Chernobaeva Omsk State University, Omsk, Russia ch_g@bk.ru Abstract: Marketing in today's economic environment is, as we know, not only a system of tools, techniques and technologies for the formation of the desired reactions of market subjects to certain ideas, products or services. Today marketing is a comprehensive management philosophy which allows us to achieve the goals while meeting the requirements of not only consumers but also the other members of the marketing environment, including the government, competitors and the society as a whole. Developing environment is continually improving rather the marketing tools themselves than the technology of their use and is also expanding their application fields. One of the new, insufficiently examined directions of marketing tools and technologies use is the project activity of enterprises. Numerous companies are trying to use effective project management technology in the process of sustainable innovation development that can significantly improve the competitiveness of the enterprise. In this case innovative projects are being implemented not only in the production of new high‐tech products, but also in the sphere of implementation of effective technologies of various intra‐organizational systems management that support the whole enterprise development. Modern innovative projects not only focus on the material development of the individual enterprise and society at large but also on the intellectual and spiritual one. It is possible to create the conditions of formation of such diverse nature of innovation environment by using the tools of internal marketing, provoking the emergence of ideas. But innovative activity requires successful implementation of ideas which provides additional value, and it is already the prerogative of the external marketing technologies. Innovative projects are to ensure sustainable development of the company as a whole while creating the appropriate company image in the market. One of the main tasks of project marketing is a careful integration of all marketing tools that accompany the emergence of a new value as a result of project activity, with the company image already created or only being formed. The integration technology should take into account the characteristics of a marketing project support we identified. These include the need to also provide a multi‐level marketing impact on the target audience, the location of sources of information about the project activities and its results, both inside and outside of the project team, the prevalence of internal marketing tools, the need for continuous marketing support at all stages of the project life cycle. Developing the integration of marketing tools to increase the effectiveness of project activities, as well as providing innovative development by competent marketing support for any project, implemented by the company, is nowadays a significant step in the development of the theory and practice of both marketing and project management. Keywords: innovative projects, support of project, marketing of project

1. Introduction In modern environment great attention is given to multilevel innovative development strategies. Competitiveness of many industrialized countries is achieved by the national competent implementation of innovative programs. Developing countries have a greater potential in the global market by implementing not raw material, but the innovative component development. Regions increase their level of investment attractiveness, developing innovative potential. And, of course, companies applying for long‐term success of the market cannot do without the use of at least one of the vectors of innovation development as a fundamental. One of the main distinguishing characteristics of innovations that emphasize a definition of invention, innovation and other similar concepts is an extension of the concept of "final process". This extension assumes that innovation is not just that until the moment when it is successfully implemented and has started to benefit. The current experience of innovative development of Russia indicates that a significant part of inventions never finds their practical implementation in the market. Throughout the 2000s domestic expenditure on research and development in Russia has been steadily growing. According to Leonid Hochberg (2013), spending in this area has increased from 48 billion rubles in 1999 to 485.8 billion rubles in 2009 and in 2010 Russia entered the top ten countries in terms of similar spendings. In 2012, according to the Dow Jones, Russia entered the top five among European countries for investment in innovation ( Medvedev 2013).

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Gulnara Chernobaeva In 2006‐2007 less than a third of indicators scheduled for these years in the current Strategy for the Development of Science and Innovation in Russian Federation was reached. In 2008‐2011 it was about 40% (Podrez, Kondratyev 2013). The researchers say (Byasov 2003, Bizhanova 2009, Abdullaev 2013) that the problem is not the lack of invention and innovation in Russia, but in an efficient, profit‐oriented multilevel management. Inefficient management of innovation may be associated with a predominance of state financing of innovations over private, and with the laws and corruption difficulties of the implementation process of innovation, and the motivational system of innovation destroyed during “Perestroyka” period in the early nineties. But the main problems are, in our opinion, the problems of intercompany management of innovation processes that determine not only the effectiveness of the development, but also the implementation and use of the results of innovation. The use of project management methods, coupled with innovation‐oriented marketing management processes would allow us, in our opinion, to solve some of the inner nature problems of both organizations creating innovations and those consuming their results. Modern Russian managers of small and medium‐sized enterprises traditionally note the high level of generation at its companies of various kinds of innovative ideas. On average, 40% of them experienced difficulties when using the tools of project management for the establishment of productive innovative activity, and 58% by the results of our study in 2011‐2012 do not use all the marketing tools to maximize the impact of innovation. Problems of marketing support, taking into account the features of the management of innovation‐based design approach, unfortunately, is not dedicated to a holistic integrated studies. But today, achieved great results in the study of the theory of the different types of innovation, their nature, characteristics of the innovation process, evaluation of innovative potential of scholars such as Schumpeter (1934), Peterson (1972), Brown (1995), Trifilova (2003, 2005), Bessant and Tidd (2007, 2009), Glazev (2003,2010,2011), Gokhberg (2007,2009,2013). The set of basic and applied research focused on marketing and innovation. Back in 1973, Peter Drucker proclaimed: "Because the purpose of business is to create a customer, the business enterprise has two and only two basic functions: marketing and innovation" (Drucker, 1973). And today is a special marketing innovation engaged Christensen and Bower (1996), Christensen (1997), Gupta and Lehmann (2004), Gupta and Mina (2008), Day (2011), Kotler (2012). Various aspects of project management are the focus of Archibald (1976, 2003), Raza (1994), Baguley (1999), Fischer (2000), Tovb and Tsipes (2003), Voropaev (2006) and other well‐known scientists. Unfortunately, the problems of marketing support of projects in general and of innovative projects in particular have been reflected neither in any marketing theory, nor in any theory of project management yet. At the same time, since 2007 the issues of projects marketing support have been raised at annual PMI conferences. And the theme "Marketing and projects sales" is one of the five major trends in management. Effective management of the creation and implementation of innovative projects requires the development for later use of an integrated technology for their marketing support. One of the stages prior to the creation of such technology is the step of determining the characteristics of innovative projects marketing support process. These features will allow us to establish clear requirements to technological characteristics of the process of project marketing support. The goal of the work presented in this study is to determine typical characteristics of marketing support for all kinds of innovative projects and consideration of the significance of the identified features on the example of marketing communications.

2. Project management of innovation activity The essence of project management of innovation activity is to represent any desired changes in the current system as a project of long‐term investment in real assets, the implementation of which is associated with the

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Gulnara Chernobaeva expenditure of time and money [Tidd, Bessant 2009, Fathutdinov 2008). The process of these changes carried out according to the specific rules within your budget and time limits is a project management. In today's environment, many system changes are innovative. This is due to the expansion of the typology of innovation. Thus, in accordance with the third edition of Oslo Manual (2010), innovation is the end result of innovation activity, being embodied in the form of new or improved products (goods, work and services), production process, marketing or organizational method in business, workplace organization and external relations. Thus, today seven types of innovation are distinguished: technological (process, product), marketing, organizational, environmental, strategic, managerial and aesthetic. The principal difference of project management lies in the fact that all the work within the innovation cycle is planned and executed as a single comprehensive work program by a specially created group of performers with a high degree of control centralization (Fathutdinov 2008). An important feature of the innovative project methodology and project management is their goal orientation to obtain the final result (often a commercial one), taking into account possible risks and within the limits of imposed restrictions on the timing of its implementation and budget. Project management methodology is based on a number of organizational principles that improve innovation. These principles include (Tidd, Bessant 2009, Fathutdinov 2008): selective control; the target orientation of projects to provide the final goals; the completeness of the project management cycle; the phasing of innovation processes and project management processes; the hierarchical organization of innovation processes and their management process; multi‐variant approach in the formulation of management decisions; system approach; complexity; provision (equilibrium). The principles of project management provide a detailed analysis of the internal and external conditions of its implementation, risk analysis and the development of design thinking in a team that implements the project, planning works, carried out by the project manager and those responsible for the implementation of its separate stages. Marketing approach to the organization of innovative project activity contributes to the implementation of many of these principles.

3. Project marketing support features Marketing of innovations is a systematic approach of manufacturers to the management of producing innovations, and approach of intermediaries in managing the implementation of innovations, as well as buyers’ approach to the management of purchased innovations. Marketing researchers have identified specific characteristics of marketing activities associated with the typical characteristics of the innovation and the innovation process with the innovative environment features of the company, the specificity of market research and others. We have identified features associated with the project nature of innovations management, but not depending of the type of innovation:

Marketing support of innovative project must simultaneously provide a multi‐level marketing impact on the target audience.

In organizing the marketing support of innovative projects the tools of internal marketing are particularly important.

Marketing support of innovative projects should be carried out continuously at all stages.

These features of marketing support of innovations, in our opinion, should be included in the marketing mix of the project in an existing marketing policy of the enterprise through the careful integration of all marketing tools that accompany the emergence of a new value as a result of project activities, with the already created image of the company or the one in the stage of formation.. From the point of view of the project management process, more correct will be the question not of "inclusion", but of the initial development of the marketing of any type of project, aimed not only to bring the

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Gulnara Chernobaeva results of the project activities to the consumer, but also to the creation of the complex, enhancing and developing in the right direction the already existing image of the enterprise, facilitating the achievement of its business objectives. We will explain the first two of these features of innovative projects marketing support on the example of one marketing complex tool unit ‐ marketing communications.

3.1 The multiple levels of marketing influence audiences Today, speaking of project marketing, it is common to recall a set of classic marketing tools, the impact of which is directed at end‐users of the innovation project, proposed by the market. But, as we noted above, the user of the results of project activities is increasingly becoming a developing organization itself. As a result, the main audiences of marketing influence will be employees of the company as consumers of a new product. The third‐level audience will be the representatives of the project team. In this case, the marketing impact on them will increasingly be aimed at motivating innovation, organizational and other types of activity. Depending on the audience orientation, the set of marketing tools for supporting of the innovative project will also change. It should be borne in mind that most of the recipients of specific marketing information are simultaneously its distributors. The success of any project is laid on the stage of defining its objectives, the specific final states, which will be sought by all project stakeholders in the implementation of project activities. On early stages marketing tools already help to identify the true value of the project activities, whether it be a new product, suitable for display on the market, or organizational changes aimed, for example, at improving internal business processes. The importance of the orientation of the target subjects of project management is not of any doubt. But the subject multiplicity of project activities, pursuing sometimes multidirectional goals, spread to the external and internal project environment conflicting information. This causes lack of communications coordination, from a marketing standpoint, and substantial harm both to the process and the result of specific project activities and the organization as a whole. The main results of the negative impact of mismatched communication can be divided into two groups:

Violation of project restrictions on time, budget and outcome.

Breaking the marketing image of the company.

These results are interconnected. The violation of project commitments, as a result of the delays, budget shortage and so on, will undermine the formed image or will form a new negative image of the company. Depending on the audience, receiving the project results, either external or internal marketing environment will accumulate the negative effects of such marketing. The violation of project commitments to third parties will not only prevent the formation of customer loyalty, but also contribute to the spread of negative information about the executive company to potential customers and representatives of other external contacts audiences. In carrying out projects aimed at improving the internal environment of the designing organization, the negative results of the project activity will lead to the formation and proliferation of internal conflicts. The parts of the organization, whose activities will depend on the implementation of the project, for any deviation in time and the result will be forced to make adjustments to their operational and sometimes strategic plans, provoking dissatisfaction of not only members of this unit, but of the units who are dependent on the activity of the first. The need to divert funds to increase the budget of the project from pre‐defined areas of use will also provoke discontent within the company. Emerging internal conflicts of different levels and character always provoke employees to spread into the external environment negative information that destroys already formed steady company image. Violation of the integrity of a company's image in the minds of employees will prevent the consolidation of efforts of subjects of project management to achieve results.

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Gulnara Chernobaeva In project practice comprehensive assessment of the results is carried out in terms of the satisfaction of all stakeholders of the project ("all participants and a larger number of different project stakeholders" (NCB IPMA 2006)). From a marketing perspective, it is possible to actively influence the formation of satisfaction by using marketing communications. By forming this kind of marketing communications, you have to understand clearly the different directions of the objectives of the project stakeholders and the degree of satisfaction with the achievement of the goal. The normative document of the Russian national certification program for project management, fixing the national requirements for the competence of experts, identifies the subjects of project management with project stakeholders and defines them as "persons or groups of persons, legal persons or companies and their associations, as well as the authorities concerned in the implementation of the project, or are under the influence of the project " (NCB IPMA 2006). Let us consider the impact of the purposes of the main subjects of the project management on the nature and the format of marketing information about the project and the parent company that is disseminated into the environment. It should be noted here that the distribution of the control subjects in five groups mentioned below may depend on the type, scale, shape and phase of the project life cycle. 1. Subjects related to the project by a property or financial interests. The main subject of the project management is traditionally a customer carrying a full legal and social responsibility to the community for the project as a whole. The success of the project for the customer is an effective use of the result of the project in the company or in the market. This is the main sender of deliberate marketing communications aimed at creating an image of the project activities and ensuring the readiness of potential users of the project product to take a novelty. In this case, the customer has to take into account the need to plan for all the project marketing complex, including marketing communications, at the stage of initiation. 2. The subjects involved in the project on the terms of the contract. The project manager has the authority traditionally defined by the contract with the customer. The leader has the task of coordinating activities throughout the life cycle of the project "to achieve certain goals in the project and outputs on the set time, budget and quality requirements" [2, C. 37]. The leader of the project carries a large responsibility, in terms of marketing, for the formation of the organizational culture of the project, contributing to the distribution into the external environment (the parent organization and its environment) of the information on the process and the potential outcomes of the project. Marketing communications forming the image of the company as a whole, as an implementer of major and important projects, are unintended and therefore are hard to control. The project manager can only create the conditions for their occurrence and distribution keeping the project team assigned to the task, and as a result, forming the satisfaction of the members of the project team. As you know, a satisfied employee always spreads into the environment positively stained information about the company and about the project he or she is working on. Contractors, subcontractors, designers and suppliers perform on a contract basis various activities throughout the project life cycle. Satisfaction with the results of this group of subjects depends on the clarity of their goals, and on the effective organization of interaction, and on compliance with customer financial obligations. As well as the project team, this team will be a source of unintentional marketing communications. The recipients of the same information will mostly be potential participants in future projects. 3. Subjects who are consumers of the project. We have already noted that the consumers of the results of the project can be from both the external and internal environment of the organization. Their goal is to meet with the outcome of the project previously unmet requirement or satisfy a higher level need, previously addressed by other product. Information, determined by two levels of satisfaction with the result of the project: satisfied (the product meets expectations or exceeded them) and dissatisfied (product exhibits a negative discrepancy to the expectations) will extend through both intentional and unintentional communications in the external environment.

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Gulnara Chernobaeva 4. Subjects implementing licensing functions in the process of project management. Public authorities and their representatives and organizations that ensure the project activities of various kinds of documentation, depending on the nature of the project, one of the first to receive information about the planned course of the project and its outcome. Information on the issuance of permits can be used for building marketing communications that form the willingness of potential customers to accept the result of the project. But the representatives of regulatory authorities, the purpose of which should be to provide all kinds of legality of project activities and outcomes, making sure in compliance with all requirements become important sources of both formal (e.g. posting information on their websites, in response to requests from entities involved in the project on the basis of the contract) and formalized marketing communications. 5. Subjects receiving indirect damages or benefits in the process of project management or use of project results. This set of subjects is identified in the marketing terminology with community groups and managed through activities of public relations (PR). Affecting the interests of these groups by carried out project activities we challenge them to distribute deliberate marketing communications of a particular character into the environment, depending on the degree of contradiction of project activities with the public interest. This distinction between the objectives of the main subjects of the project management and the nature of distributed by them to the external environment marketing information that forms the image of the company and its projects, allows us to talk about the need to develop not only a complete system of integration of marketing communications of innovation projects, but of all the tools of the project marketing support complex.

3.2 The need for continuous marketing support at all stages of the life cycle of an innovation project Managers of the project or organization usually split the project into phases to provide better management with relevant references to the ongoing operations of the performing organization. The combination of these phases makes the project life cycle. Thus, the concept of "life cycle of the project" can be interpreted in the following way: the life cycle of the project is the time from the idea to the completion of the project, which can be divided into the corresponding phases or stages. The name and number of successive phases of the project, in practice, are determined on the basis of the technology works and control requirements of the organizations involved in the project. Traditionally, the same is divided into four phases: conception, development, implementation, completion (Barkalov, Voropaev, Sekletova 2005). Many studies are devoted to the peculiarities of project management of various types, including innovative ones, at different stages of the project life cycle [Barkalov, Voropaev, Sekletova 2005]. Specificity of marketing support of innovative projects is particularly evident in marketing communications. Let us consider the features of marketing communication support for innovative projects. 1. The conceptual phase, which holds all the work associated with the formation of the concept of the project. Successful implementation of this phase involves the implementation of procedures for the collection of data to analyze the current state of the organization, to identify the actual need for the project and the possibility of investment support. This analysis allows us to make a declaration of intent, which serves as the basis for the formation of a set of alternatives, the criteria for their evaluation, selection and approval of the project concept. It is necessary to consider as mandatory such criteria as " prestigiousness" and " compliance with marketing strategy". With developed concept of the project, it is important to convey its essence with the help of marketing communications to key stakeholders of the project and the companies, forming the loyalty of the internal

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Gulnara Chernobaeva audiences to the design process and its outcome. In the case where the result of the project activity is a new product, it is necessary to evaluate the possibility of integration of the product with the existing product line with the prevailing image of the company in the market already at the stage of initiation. It is also necessary to think of the possibility of using the already existing communication policy of the company to promote the future project, to determine the levels of integration of communication tools a separate project with existing ones. The company must take into account the possibility of the communication effect, aimed at enhancing the image of the company through the promotion of new results of project activities. 2. The development phase involves the formation of a complete set of construction documents. At this stage the complex list of works, forming a whole complex of indirect marketing effects, is being made. On the one hand, the very design assignment must contain blocks of marketing works, the whole procedure of determining the project support marketing communications. This unit of work is to provide the deliberate creation and distribution in the environment of effective marketing communications aimed at audiences of different levels and ensuring the achievement of overall business objectives of the organization through the achievement of project objectives. These marketing communications project, as planned, are manageable. On the other hand, the formation of a complete set of construction documents requires continuous close cooperation between key stakeholders of the project. Understanding of the project as a set of interrelated activities by itself determines the internal consistency of unintended marketing communications, the sources of which may be the subjects of the project. Interconnectivity also determines the flow of information, which bears the character of the communication between the environment and the environment of the project organization. In the marketing support of the project special importance is attached not to planned marketing communications that define a set of basic and synthetic communication tools of marketing (advertising, sales promotion, personal selling, event planning and public relations, exhibitions, sponsorship, product placement, etc.), but unintentional communications. Under the unintentional marketing communications we understand a poorly controlled process of transmitting information, not realizing initially marketing functions, but which influence the formation of the image of the company. For example, the communications that occur within the project team, between the team and the sponsors, directors and performers, originally have only the function of providing project activities by relevant information. This is intentional communications, which by definition are not marketing, but also perform marketing functions on motivating the project team as the company in general, and the current project. This transformation will facilitate arising in the process of obtaining necessary for the organization of project activities satisfaction completeness, timeliness, relevance, timeliness of information. Unintended, but very important from the point of view of marketing, will be distributed during the informal meetings with representatives of the project participants external to the project environment, the information about the conflicts in the project team, for the purposes of uncertainty, and the questioning of the other. 3. The implementation phase involves the materialization of our ideas in the form of a product or changes. If the results of the project were the organizational changes, the implementation phase will involve the use of marketing communications to reduce counteraction to the changes in the implementation process. At the same time marketing character of internal communications will be driven by the formation of the company's image, that is not afraid of changes that define improvement, such as business processes. Increased efficiency as a result of changes in the business processes can not affect the quality of company products or services and the subsequent activity of multidirectional contact audiences. Any project is at the intersection of different media ‐ social, technological, organizational, business, political and cultural. Changes in each of these can lead to a change of the project requirements or objectives. Therefore, most of the subjects of the project, and especially the project manager have to carry out the implementation of the project in terms of conflicting interests in the project and a different understanding of the project. It is the integration of marketing communications at this stage of the life cycle of the project should help to reduce the level of environment proneness to conflict. The integration of the marketing principle of mutual needs of all members of the project allows to simplify the processes of coordination of project activities, even in a dynamic environment. Different groups of the project are to be integrated with each other and contribute to the formation of consistent perceptions of objectives and results of the project in all its phases.

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Gulnara Chernobaeva 4. The phase of completion, on which acceptance testing is carried out. At the same time we need to confirm that we received the result, which is thought of within the concept of the project and convince users of the project in its feasibility. Even the undeniable benefits of the implementation of the results of the project can be questioned because of the reluctance of users to make extra effort for the development of a new product, process ‐ any project results.. It is in the phase of completion, when we can see the result of successful marketing communications support of the project, which is expressed in a significant decrease in the level of anti‐implementation of the results of the project. This will greatly facilitate undertaken in this phase of the project life cycle staff training for the operation of the innovation project. In the meantime, it is time for preparing the documentation describing the launch of the project. And here we can say that the success of most products of the project will depend on properly designed and executed operation instructions, provisions for implementation and other documents that form the outcome of the project and have an impact on the image of a company that cares about the multilevel comfort of consumers. Successful completion of the implementation phase of the project will not only affect the evaluation of the impact of a particular project, but also create the possibility of new projects. The support of a project by marketing tools at all stages of its life cycle should ensure consistency of marketing tools for each stage of the project with life cycle stages of other parallel ongoing projects, and life cycle stages of the organization and its products. While defining the basis of integration of marketing tools projects, we can talk about horizontal integration, understanding the need for it under the cumulative effect of the communication to the time determined by the end (result) of the project. The problem of marketing support for the project at various stages of its life cycle requires deeper consideration. It is advisable to classify marketing tools, used for the support of the project, more accurately, identify the factors affecting the use and marketing tools, and determine the dependence of marketing tools and management processes of typical accessories of the project. We plan to develop exactly these directions in the framework of our future research.

4. Conclusion As a result of the work, presented in the research, we have identified three key features of marketing support of innovative projects of any type. Marketing support must be carried out continuously at all stages of an innovative project life cycle and take into account the high level of multi‐directional impact of marketing tools and key value of internal marketing tools to generate innovative environment of the project team and the organization as a whole. These features allow us to formulate requirements to the technology of innovative projects marketing support, reducing the levels of operating, subject and technological project risks. Integration focus on projects marketing support that is inherent not only to innovative projects, will reduce the level of investment risk as well. The identified key features contribute to the formation of a criteria system of assessing the effectiveness of innovative projects marketing support .Analyzed subjective multidimensionality of marketing influences will enable to develop a more accurate and causing adequate response set of marketing tools that takes into account the specificity of each group of subjects of the project activity. It is the formation of complex technology, based on the identified features of innovative projects marketing support that will be the focus of our future research.

References A Guide to the Project Management Body of Knowledge (PMBOK Guide), 2004 Ed. Network Square, PA: Project Management Institute. Arkhipenkov, S. (2009) Lectures on software project management. Moscow. Abdullaev, T. (2013) “Russia has become a leader on investment of technology projects”, [online], Russian newspaper, www.rg.ru/2013/05/20/innovacii‐site.html Barkalov S., Voropaev V., Sekletova G. (2005) Mathematical foundations of project management. Moscow: Higher School.

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Gulnara Chernobaeva Bizhanova, D. (2009) “Innovative development in the XXI century: quality project management”. Journal of Innovation Management, No. 4, pp 250‐254. Byasov, K. (2003) “The main aspects of the development of the investment strategy of the organization”. Journal of Financial Management, No. 4, pp 21‐25. Brooks, R.F., Lings, I.N. and Botschen, M.A. (1999) “Internal marketing and customer driven wave fronts”. The Service Industries Journal, Vol.19, No 4, pp. 49‐67. Brown, S., Eisenhardt, K. (1995) “Product Development: Past Research, Present Fathutdinov, R. (2008) Innovation Management. Sanktpiterburg. Findings, and Future Directions”. Academy of Management Review, Vol. 20, No. 2, pp. 343‐378. Flipo, J‐P. (1986) “Service firms: interdependence of external and internal marketing strategies” Journal of European Marketing, Vol. 20, No. 8, pp. 5‐14. Gerasimov, V. and Cherednikova, L. (2007) Project management: objectives, methods and tools. Siberian Academy of Finance and Banking, Novosibirsk. ICB – IPMA Competence Baseline Version 3.0. (2006) International Project Management Association. Mazur, I. (2010) Project management, Moscow. Mazur, I., Shapiro, V. (2009) Project management: international approach. Directory of professional, Moscow. Medvedev, D. (2013) “Russia entered the top five European investment in innovation”, [online], Gazeta.ru, www.gazeta.ru/science/news/2013/04/17/n_2859325.shtml. Oslo Manual ‐ Guidelines for Collecting and Interpreting Innovation Data (2010), 3rd Edition. Moscow. Podrez, T., Kondratyev, A. (2013) “Russia has to spend on research in 10 times more, but there is no result”, [online], Market: Business Newspaper, www.marker.ru/news/3231 Schultz, Don E., Tannenbaum, Stanley I., Lauterborn, Robert F. (1993), Integrated Marketing Communications: Putting It Together & Making It Work. NTC Books: Lincolnwood. Tidd, J., Bessant, J. (2009) Managing Innovation: Integrating Technological, Market and Organizational Change. John Wiley & Sons Ltd. England. Wiedman, M. (2005) “Simulation in project management”. Journal of Project and Program Management, No. 1, pp 18‐26.

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Public and Private Sector Approaches to SMME Development in the Ethekwini Municipality Anneline Chetty Ethekwini Municipality, Durban, South Africa Anneline.chetty@durban.gov.za Abstract: Small, Medium and Micro Enterprises (SMMEs) are considered to be the engines of growth of any economy. In the light of recent economic events and the recession that is surging rapidly across the globe, more and more attention is being focused on SMME development and support. This study is unique in that it analyses SMME development and support within the EMA from various perspectives within a single study. The objectives of this study were to investigate the awareness and experiences of SMMEs with regards to their support and development and also to critically examine the attitudes and perceptions of service providers (both public and private) towards SMME development and support. Some of the key findings indicate that SMME respondents were more aware of local government and the services they provide than any other tier of government. Keywords: small, medium and micro enterprises (SMMEs), entrepreneurship, public sector, private sector

1. Introduction Every successful entrepreneur, according to Ericksen (2004), is an inspirational case in point and illustrative of the spirit that turns successful visions into lucrative realities. Ericksen (2004: 1) believes that entrepreneurs are “absorbed in a process that economist Joseph Schumpeter describes as creative destruction, tearing down old ways to provide new responses to the needs and wants of the marketplace”. However, Ericksen (2004) argues that in‐spite of this all entrepreneurs reach a point when they recognise that they cannot do it by themselves and that they need help to turn their vision into a thriving business. It is at this point that they turn to either the private or public sectors for such assistance. It is therefore the aim of this study to critically analyse public and private sector approaches towards the provision of Business Development Services (BDS) to Small, Medium and Micro Enterprises (SMMEs) within the eThekwini Municipality Area (EMA) for the purposes of turning SMMEs into entrepreneurs who will becomes the lifeblood of the economy. This Paper will discuss the key findings from research conducted with the groupings of SMMEs as well as the public and the private sector officials/ representatives.

2. Study area The eThekwini Municipality is the largest port and city on the east coast of Africa. It has a population of over 3 million people with a growth rate of 2.3%, and is South Africa’s second largest city (EM, 2005: 9). The municipality is responsible for an area of over 2 297 square kilometres, including 98 kilometres of coastline. It is also Africa’s premier port (EM, 2005: 9). It is very evident that economic empowerment and growth has become a priority not only for South Africa but for the eThekwini Municipality. Economic empowerment also provides opportunities for greater and broader economic participation for the majority of unemployed and underemployed citizens (EM, 2002a). SMMEs represent a sustainable, important vehicle to address the challenges of job creation, economic growth and equity within the EMA. Despite the fact that there is in existence an array of organisations which provide support to SMMEs, at the centre of the City’s development challenge is the need to strengthen the economic base of the City. Whilst the per capita income of R19 943 per annum is higher than that of South Africa as a whole, it is far less than that of comparable middle income countries (EM, 2002a: 8). In fact, it has declined at a rate of 0.34% per annum between 1990 and 1999 resulting in declining standards of living (EM, 2002a: 8). The eThekwini economy is currently growing at a slow pace of 1.8% per annum compared to a healthy rate of 3%. In addition, the City faces a severe and increasing unemployment situation with estimates placing unemployment levels between 30 and 40% of the population and since 1997 there has been a net loss of formal jobs of 1.5% per annum, that is, 40 000 jobs in total (EM, 2002a: 8).

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Anneline Chetty In the light of the above discussion, and given that the last 14 years of government enterprise support in South Africa has been disappointing and unimpressive with programmes not reaching their target groups, Rogerson (2006) argues that there is now a need to revolutionalise the SMME support structure within South Africa.

3. Research objective This study was motivated by the existence of three problems associated with SMME development identified by various authors as evidence in the literature such as Rogerson (2001b, 2004b); Miehlbradt, A.O. and McVay, M. (2003a); Tanburn, J.; Trah, G. and Hallberg, K. (2000) and the authors experience:

A lack of awareness and co‐ordination of SMME support and development services

A lack of capacity within institutions to provide efficient services for SMMEs

Minimal impact of existing programmes targeting SMMEs

The objective of this study was therefore to:

Critically examine the capacity of the public and private sectors to offer integrated SMME support and development within the EMA.

4. Research methodology In order to accomplish the objectives of the Paper, the research methodology of the study comprised of a comprehensive approach made up of both secondary and primary research methods. In this study, both qualitative and quantitative research methods were employed in the collection of relevant data, aiding in the provision of a comprehensive understanding of SMME development and support in South Africa. Literature on evaluation and applied research techniques tends to support the combined use of qualitative and quantitative methods to achieve the most accurate results (Bernard and Renz, 1998). A qualitative approach is deemed to be the most appropriate methods to be used when dealing with people’s attitudes, perceptions and opinions. In terms of a quantitative approach, the researcher made use of questionnaires as a tool to gather data. The Statistical Package for Social Sciences (SPSS) was used to analyse the data. In terms of a qualitative approach, the researcher made use of semi‐structured interviews to gather data from the officials of both the public and private sectors. To the best of the researcher’s knowledge, this was the first study that examined systematically the views and concerns of SMMEs as well as private and public sector officials/ representatives. This permitted comparisons to be made and therefore contributed significantly to the body of knowledge on SMMEs in South Africa.

5. Key findings In investigating the capacity of the public and private sectors to provide integrated support to SMMEs, it was necessary to understand the levels of SMMEs’ awareness of and use of support services offered by the private and public sectors as well as their experience of such services offered.

5.1 SMMEs The findings reveal that an overwhelming majority (72%) have never accessed local government support for their business while only 24% of SMMEs had accessed local government support. Of those SMMEs who did access government services, only 16.6% thought the services were excellent while an overwhelming majority (68.4%) of SMMEs indicated that the level of service was average to poor. The results correlate closely with the findings of the study conducted by Bloch and Kesper (2000 cited in Rogerson, 2001b) where it surfaced that 57% of emerging SMMEs interviewed in Gauteng and 70% in the Western Cape had never had contact with or even heard of any government support institution. The most critical areas of support identified are access to finance, business linkages, information dissemination and capacity building. These are also important areas of support that have been identified by the SMME Strategy proposed by the Business Support Unit (EM, 2007b). Some of the programmes identified in this strategy include having business sensitive regulations, conducting research on SMMEs, building infrastructure and business premises. In addition to the above, the strategy also includes an access to markets programme, business linkages and a franchise opportunity programme. Access to finance, creating a one‐stop‐shop, and developing incubators and hives are among the priorities of the Strategy. While the Strategy has synergy with what has been expected from local government, the greatest challenge that will be experienced is in the

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Anneline Chetty implementation of the Strategy. Inadequate resources and inexperienced staff are some of the reasons cited for the non‐performance of public sector staff. In addition to the above, Berry et al (2002) argue that the main reasons why government incentive schemes targeting SMMEs have not been used extensively are lack of information about their existence, red tape accompanying applications and discouragement by dismal experiences of other applicants. The Blueprint Strategy and Policy (PTY) LTD (2005) study highlights the fact that although little research has been undertaken to specifically assess the effectiveness of new and restructured institutions providing support to South Africa’s SMMEs, there are indications that the originally well‐intended policy measures suffer from sub‐optimal implementation. Furthermore, Terblanche (2002) argues that that South Africa is not a friendly environment for small business since it appears that small business equals informal business which is not necessarily the case. Terblanche (2002) argues that it is this misconception that has cost the government millions of rands in failed projects and programmes. Miehlbradt and McVay (2003a) argue that there is an increased acknowledgement that public sector organisations have not proved to be effective providers of BDS to SMMEs; in particular, government organisations are viewed as insufficiently ‘business‐like’ or ‘close’ to SMMEs in terms of their cultures, staffing or structures. In addition, Bear et al (2001) argues that subsidies for State provided business support have created a set of market distortions that hinder the development of private sector provision. This has in turn led to the private sector being undermined in relation to providing such services. The shift needed, according to Rogerson (2006), is towards an emphasis upon being business‐like and demand‐led at the institutional level and focusing intervention strategies toward facilitating transactions between SMME clients as opposed to beneficiaries. Rogerson (2006) argues that the core challenge is to develop low‐cost service products and delivery mechanisms in order to match the needs and willingness to pay of the smallest clients. The intention was further to investigate the role that SMMEs thought that the private sector should be playing in their support and development. The most significant roles for the private sector identified by respondents were facilitating access to finance (35.6%) and facilitating access to skills and markets (20.4%). As discussed previously, Lever (1997) believed that in many countries SMMEs receive almost all of their support services from the private sector. These include training, the supply of raw materials and equipment, access to information and marketing services, which are provided without any subsidy and are therefore self‐sustaining. Lever (1997) is of the view that the expansion or reproduction of these services through private sector channels is very appealing in terms of reaching far more SMMEs than could be reached by overly subsidised, generic government programmes. South Africa has a distance to go before SMMEs can truly embrace the culture of making use of the private sector to provide BDS since South African SMMEs are too heavily dependent on government supported programmes. The two key organisations from which SMMEs in the sample sourced business development services are the public and private sectors. The average number of respondents who accessed BDS from the public sector and private sectors is 17 (6.8%). The most popular service sourced from the public sector was management and business skills training (12%). The most popular services sourced from the private sector were advertising services (13.6%) and accounting services (14%). The average non‐response rate to these questions is extremely high (82.4%). This is clearly indicative of the fact that the respondents were neither aware of the benefits of BDS nor made use of them. These results contrast with international studies (Bliss and Polutnik, 2001) which indicate high awareness levels of BDS. This meant that internationally efforts can be concentrated on improving the quality and value of BDS offerings as well as marketing skills of existing BDS providers rather than educating SME managers about the definitions of services. Here in South Africa, the various types of BDS as well as its benefits need to be marketed more effectively so that the awareness levels of SMMEs of BDS as well as their usage of BDS increases dramatically in order to promote growth in their business. The results reveal that SMMEs in eThekwini view a very different role for the private sector as opposed to the role played by the different tiers of government. They believe that the private sectors should be providing opportunities to conduct business and increase flexibility in accessing funds. In addition to this, skills development and market linkages should become the responsibility of the private sector. There appears to be a clear distinction about the understanding of the roles played by the various tiers of government. Respondents also appeared to have a far greater understanding of the role played by local government than the roles played by provincial and national government.

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5.2 Public and private sectors These results were derived from the semi‐structured interviews held with officials from the local, provincial and national tiers of government as well as private sector service providers. These chapters first looked at the target groups that were interviewed. It then investigated the organisational capacity of the different tiers of government. It looked at the training opportunities within the organisation to improve the capacity of individuals who are responsible for SMME development as well as the customer care service offered to SMMEs. From the findings it is evident that in the public sector, the majority of the respondents were within a managerial (38%) and technical (47%) capacity in their respective organisations while in the private sector there were a higher percentage of respondents who occupied the technical level (50%) of the organisation than the managerial (36%) and the supervisory (14%) levels. An investigation into the qualifications of the officials who participated in this study indicated a very high level of tertiary education among the private sector respondents relevant to the area of expertise in which they were offering the service. In the public sector, however, while all of the officials interviewed had matriculated, only 26% of individuals had degrees with only 12% with postgraduate qualifications while private sector respondents identified qualifications which included ICT related degrees, Bachelor of Administration, Bachelor of Commerce degrees, degrees in Marketing, and Education and Training diplomas. This implies that majority of the public sector officials, while educated at some level (matriculation); do not necessarily have the expertise on providing developmental support to SMMEs. The public and private sector officials were questioned on any relevant legislation that they were aware of which related to Small Business Development. The findings revealed that only 14% of public sector respondents were aware of relevant small business legislation while an overwhelming majority (86%) were either not aware of relevant small business legislation. In contrast to this, 70% of private sector respondents indicated a higher level of awareness of small business legislation and were more aware of specific regulations than public sector respondents. In terms of organisational capacity, respondents were questioned on whether their organisation had a vision or mission statement and found that 55% of the public sector respondents indicated that they did have one while 70% of the private sector respondents indicated that they did have a mission or vision statement. It is critical that everyone in the organisation is knowledgeable about their vision or mission statements since it is the foundation upon which their organisation is based and it drives their operations. The higher percentage of respondents who acknowledged a vision or mission statement within the private sector places them in a far more advantageous position than the public sector. The intention of the section on training was to determine the extent to which the respondents within the public and private sector were equipped to provide the relevant support and development to SMMEs. In both the public and private sectors the majority of the respondents (70% and 80%, respectively) agreed that they should be exposed to structured programmes to impart skills development and professionalism to those who are tasked with offering services to small businesses. In terms of training received, only 30% of the public sector respondents indicated that they received training while 60% of the respondents in the private sector indicated that they received training. In addition, only 30% of the respondents in the public sector indicated that they were involved in identifying their training needs while 75% of the private sector respondents indicated that they were involved in identifying their training needs. Similar results were obtained when questioned on training received in relation to changing legislation where only 20% of the public sector respondents received training while 60% of the private sector respondents received training. Clearly the capacity of the public sector is not being developed adequately (especially when compared to training levels in the private sector) as evidenced in the responses. In terms of customer care, the methods of customer in‐take programmes that were in place to offer services, as well as after‐care programmes were investigated to establish the extent to which the progress of SMMEs were being monitored and evaluated. Findings from the public sector respondents reflected an ad hoc system of in‐take (business perception surveys, assessment, interaction with clients and a needs analysis survey) as opposed to the private sector where a co‐ordinated, systematic approach to client in‐take was identified. A

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Anneline Chetty significant proportion of respondents from the private sector obtained clients through individual assessments and computer analysis following individual investigation. In addition, the respondents were questioned about the extent to which they were able to respond to clients’ needs to which an overwhelming majority (70%) of the respondents from the public sector did not believe that they were able to respond to their clients’ needs while a significant proportion of respondents (65%) from the private sector indicated that they were able to respond to their clients’ needs. The findings reveal that the private sector had several programmes in place to meet the needs of their clients. The most significant procedure in place is individual sessions with clients which respondents believed resulted in the most valuable information. After‐care programmes as well as the monitoring and evaluation of SMMEs performance and progress are considered to be an essential element in the customer care process. A significant majority (60%) of public sector respondents indicated that they did not have after‐care programmes. In contrast to this, a significant majority (70%) of private sector respondents indicated that they did have after‐care programmes. Examples of methods for conducting after‐care were through site visits, mentorship programmes and “care 4 u” call centres which were designed to assist with client problems. According to Steel and Webster (2001), dependable performance measurement and monitoring provides a sound foundation for institutions to enhance the design of instruments in reply to client demand. In terms of challenges and suggestions for change, a significant portion of public sector respondents (62%) identified over‐regulation as a problem. This correlates strongly with the problems identified by the private sector respondents who indicated that there was too much red tape by government and believed that over‐regulation of the sector presented SMMEs with a number of constraints including time and money. A crucial factor to development was lowering the regulatory burdens on SMMEs thereby creating a more enabling environment within which to operate which is essentially about making markets work. Government must ensure that inappropriate legislation, regulations and administrative requirements do not prevent markets from operating effectively. Many of the respondents (64%) identified a lack of capacity and an understanding of small business issues as a critical problem they experienced. While government often directed their focus at training SMMEs, insufficient attention was focused on the training of officials who offer support to SMMEs. Existing skills development initiatives for public sector officials who offer SMME support services need to be evaluated and benchmarked. This should involve all the relevant stakeholders that are engaged in this field and ensure that this area of expertise is fully understood and documented. A gap analysis needs to be performed and the identified gaps should be addressed in terms of skills intervention strategies. One of the most significant changes that respondents identified was the improved understanding and access to business development services (75%). According to Steel and Webster (2001), the search for a new model for BDS is based on the collective acknowledgment that traditional interventions have proved to be futile in providing quality, affordable BDS to a large segment of the target population of small enterprises. They believe that there is a general feeling that publicly‐provided and publicly‐funded services have not achieved their objectives hence the need for BDS. From the above discussion, clearly the private sector appears to be far more efficient and effective than the public sector in their capacity to deliver services to SMMEs. This argument is supported by Maharaj (2003) who believes that current public debate on the competence and efficacy of SMME support dedicates too little attention to the actual or potential role of private sector institutions. He believes that aside from those bodies which have conventionally served the small business sector, that is, chambers, sector associations, conventional training bodies and NGOs active in the SMME support scene, specialised private sector service suppliers like accounting firms, marketing agencies, and legal consultants are of increasing importance. Maharaj (2003) argues that with the altering business environment of South Africa, demanding new services such as outsourcing and specialisation triggered by globalisation, private service providers will play a crucial role. These private service providers will be essential in strategic areas such as facilitation of market access, technology transfer and systematic provision of business information. Maharaj (2003) further argues that national bodies should assist these markets to expand (through accreditation of renowned business service providers) instead of hindering them through the provision of rather unstipulated subsidised services. The Municipalities are in the best position to be able to provide services to SMMEs through the establishment of public‐private partnerships. It is therefore a key recommendation of this study that the national and provincial tiers of government who are responsible for providing services to SMMEs should redirect their

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Anneline Chetty resources both in terms of staffing and finding to Municipalities who in turn should establish partnerships with the private sector who is in the best position to offer BDS to SMMEs. This recommendation is supported by Rogerson (2006) who purports that the private sector approach suggests that BDS are most effectively delivered to small enterprises by other small enterprises and should be on a transactional basis rather than subsidised through a variety of means, including vouchers.

5.3 Recommendations It is clear that the issue of "one size fits all" for SMME development identified by Lever (1997) needs to change in South Africa. This argument is supported by Berry et al (2002), Rogerson (2004b; 2006) and Tanburn et al (2000) who identified government programmes as being too generic and in most cases not meeting the needs of SMMEs. Lever (1997) argues that we need to develop specific responses for specific needs and the SME market needs to be clearly defined in terms of size, sector, and business cycle and gender specific requirements, if applicable. Lever (1997) believes that business support organisations need to be more visible and need to market themselves more broadly. Lack of co‐ordination and duplication of services have been identified as key challenges in relation to providing SMME services and support. It is therefore the recommendation of this Paper to establish a SMME Coalition Hub (SCH) similar to a one‐stop‐shop concept proposed by the Municipality and the SMME Alliance Park proposed by Sigma International (2006). The SCH should be set up by the Municipality through a public– private partnership. Public‐private partnerships, according to Esek (2008), are regarded as the new economic paradigm for sustainable development today. Esek (2008) emphasises the need to recognise a mutual interdependence and that governments at all levels are challenged to keep pace with the demands of their constituencies. Esek (2008) argues that sometimes government revenues and capacity is not sufficient to meet the demands and local governments need to look beyond their traditional structures to increase their capacity to meet the changing needs and demands of the environments in which they operate. The SCH should initially be subsidised but mechanisms need to be put into place to ensure long‐term sustainability. This means that local government should obtain resources from the other two tiers of government and help to pay for the costs of setting up the SCH. When the Hub is operational, government should slowly reduce the subsidy to the Hub until it can be sustained through the payment of services by SMMEs.

6. Conclusion Wherever you go in the world entrepreneurs are seen as the drivers of the world economy. David and Kalalo (2004) argue that whether they are driven by a necessity or by a desire to seize business opportunities, entrepreneurs provide opportunities to millions of people. Ericksen (2004) asserts that perseverance is essential for the reason that entrepreneurship is not an event. He further argues that it is a learning process and that part of the process is the ability to fail, to learn from failure and to seek the next opportunity. Ericksen (2004) indicates that entrepreneurs not only benefit their families and their communities, but the SMME sector and the country’s economy as well. Those who choose to walk the path of entrepreneurship need to know that they have the support of the most important stakeholders in the economy, the public and private sectors. SMMEs without reservation play a fundamental role in the economic development of nations. Tecson (2004) argues that while they hold a lot of promise towards contributing meaningfully to the world economy, living up to this promise remains a challenge for SMMEs. However, it should be borne in mind that SMME development occurs in a very dynamic and globalising context (Tecson, 2004). Whether SMMEs continue to be important to the economy is largely dependent on the extent to which they able to significantly contribute to keeping alive the vitality of the economy. Tecson (2004) believes that this would require that SMMEs push beyond the growth frontiers by achieving high levels of growth and productivity in their businesses through the various support mechanisms available to them. These mechanisms should ensure that such support services are both more accessible and more beneficial to their businesses. Both the private sectors and public sectors should step up their support mechanisms as suggested in this Paper. According to Tecson (2004), it is becoming apparently clear that SMMEs are finding themselves in a new and rapidly globalising context. Tecson (2004) argues that in order to take advantage of this trend instead of being engulfed by it, a brand new class of SMMEs must be fostered. For this, according to Tecson (2004: 82), “a world class support environment is needed!” Achieving a world class support environment requires hard work and political commitment. The public sector operating within the EMA needs to recognise and acknowledge its limitations and seek out

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Anneline Chetty private institutions which have the expertise to deliver on the recommendations outlined above. The setting up of a SCH should be based on the principles of inclusiveness and transparency and ensure that serving the needs of the SMMEs are at the top of the agenda. SMMEs are viewed as the engine of growth of any economy and ensuring that maximum support is given to them to thrive and succeed will have a positive overall impact on the economy and quality of life of society.

References Bear, M.; Gibson, A. and Hitchins, R. (2001). A guide for agencies on the emerging market development approach to BDS; Micro‐enterprise Best Practices – Technical Note 2. http:www.seed.org th Bernard, N. and Renz, J. (1998). Efficient methods for qualitative spatial reasoning, in Proceedings of the 13 European Conference on Artificial Intelligence. http://www.cs.washington.edu Berry, A.; von Blottnitz, M.; Cassim, R.; Kesper, A.; Rajaratnam, B. and van Seventer, D.E. (2002). The economics of SMMEs in South Africa, Unpublished draft paper for Trade and Industrial Policy Secretariat, Johannesburg, www.tips.org.za Blueprint Strategy and Policy (Pty) Ltd. (2005). Support for SMEs in the South African Chemicals Sector, Unpublished report. Bliss, R.T. and Polutnik, L. (2001). SMEs' demand for Business Development Services in Bosnia and Herzegovina, Study prepared for Southeast Europe Enterprise Development (SEED). http:www.seed.org Bowman, S. (2005). The Conscious Evolution of organizations ‐ Raising your organisations profile, http://www.lifemastery.com.au David, M.A. and Kalalo, M.A.C. (2004). Entrepreneurship degree programmes in the Philippines, SGV review, Entrepreneurship Issue 2004, Manila, Philippines Ericksen, G.K. (2004). What’s luck got to do with it? SGV Review,Entrepreneurship Issue 2004, Manila, Philipines Esek (2008). Public‐private partnerships, Esek publication http://www.esek.co.za. eThekwini Municipality (EM) (2002a). Integrated Development Plan 2003 ‐ 2007. eThekwini Municipality (EM) (2005). The Draft Economic Development Strategy (DEDS), unpublished document prepared by the Economic Development Unit. eThekwini Municipality (EM) (2007b). A Draft SMME Strategy for SMMEs within the EMA, report prepared for the Business Support Unit. Freedman, E (2005). Client intake best practices, Freedman Consulting Inc. http://www.freedman.com. Lever, A. (1997). The hidden strengths and potential, women's business associations ‐ Organising for success, Economic Reform Today 2: 4‐9. Maharaj, A. (2003). Sustainable private sector participation in water supply and sanitation? An investigation into South African experience with international comparative case studies, University of KwaZulu Natal, unpublished Ph.D. Thesis. Miehlbradt, A.O. and McVay, M. (2003a). Developing commercial markets for Business Development Services: BDS Primer for Fourth Annual BDS Seminar, Turin, Italy, Small Enterprise Development Programme of the International Labour Organisation, Geneva. Miehlbradt, A.O. and McVay, M. (2003b). Business Development Services: Testing the guiding principles: BDS Update for Fourth Annual BDS Seminar, Turin, Italy, Small Enterprise Development Programme of the International Labour Organisation, Geneva. Parker, D. and Kirkpatrick, C. (2005). Privatisation in developing countries: A review of the evidence and the policy lessons, The Journal of Development Studies 41 (4): 513‐541. Rogerson, C.M., (2001b): Growing the SMME manufacturing economy of South Africa: evidence from Gauteng province, Journal of Contemporary African Studies, 19, 267‐291. Rogerson, C.M. (2004b): The Impact of South African Government’s SMME programmes: A ten year review (1994‐2003), School of Geography, Archaeology and Environmental Studies, University of the Witwatersrand, Johannesburg Rogerson, C.M. (2006). The market development approach to SMME development: Implications for Local Government in South Africa, School of Geography, Archaeology and Environmental Studies, University of the Witwatersrand, Johannesburg. Sigma International. (2006). Draft SMME Strategy for eThekwini Municipality, unpublished document prepared for Business Support Unit, eThekwini Municipality. Strategic Partnerships for Business Growth. (SBP) (2005). Counting the Costs of Red Tape for Business in South Africa The Bureau: Johannesburg. Steel, W.F and Webster, L.M. (2001). Business Development Services for Small Enterprises: Guiding principles for donor intervention, prepared for the Committee of Donor Agencies for Small Enterprise Development. Tanburn, J.; Trah, G. and Hallberg, K. (2000). Business Development Services for small enterprises, prepared on behalf of the BDS Working Group, 2000 Edition for the Committee of Donor Agencies for Small Enterprise Development, World Bank Group. Tecson, G.R. (2004). A Helping Hand ‐ Support Environment for SMMEs, SGV review, Entrepreneurship Issue 2004, Manila, Philipines. Terblanche, B. (2002). A myth that’s cost us millions, Mail and Guardian 28 June 2002.

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Factors Influencing an Upscaling Process of Grassroots Innovations: Preliminary Evidence From India Ann De Keersmaecker1,2, Prabhu Kandachar2, Vikram Parmar2,3, Koen Vandenbempt1 and Chris Baelus1 1 Design Sciences, Product Development, University of Antwerp, Antwerp, Belgium 2 Industrial Design Engineering, Delft University of Technology, Delft, The Netherlands 3 Venture Studio ‐ Center for Innovative Business Design, Ahmedabad University, Ahmedabad, India ann.dekeersmaecker@uantwerpen.be p.v.kandachar@tudelft.nl v.s.parmar@ahduni.edu.in koen.vandenbempt@uantwerpen.be christiaan.baelus@uantwerpen.be Abstract: People within low income markets have often shown their ability to identify their own problems and generate solutions. “Grassroots innovations” are ideas for products and services that respond to the constraint‐based context and limited internal resources. Some of the grassroots innovators have converted their idea into a business. Upscaling a grassroots innovation has the potential to contribute in the regional socio‐economic development and if nurtured properly, can be a significant force to empower local communities through inclusive development and job creation. Although grassroots innovations have potential to become a commercial success, only in a limited number of cases there was the ability to introduce the innovation in the market and do commercial activities. This paper focuses on the exploratory research carried out to identify and understand the factors that can influence an upscaling process of grassroots innovation. The research was conducted in two states in India, Gujarat and Rajasthan, by interviewing grassroots innovators and observing their innovations. Experiences of a selected list of organisations in India that are related to supporting grassroots innovators are taken into account in the research. These interviews revealed several opinions, needs, concerns and broader insights about the grassroots innovations. The findings were then transcribed, processed and structured. The analysis points out critical factors that influence the upscaling of grassroots innovations in India. Research had revealed that upscaling of grassroots innovations is often influenced by factors such as a lack of awareness on design and business approaches, poor entrepreneurial skills and a lack of start‐up facilities in the given context. The current research contributes to this. We found that motivation of grassroots innovators, their perception and approach towards upscaling, overcoming isolation in local markets, possibilities to receive needed support and overcoming institutional formalisations are critical factors. Keywords: grassroots innovation, entrepreneurship, upscaling, inclusive development, design efforts, emerging economies

1. Introduction For over more than 20 years, efforts are made to recognize grassroots innovations created in lower income markets (Gupta et al. 2003). Grassroots innovations are need‐based products or services that are created by individuals or groups within local communities. Grassroots innovations are often created in a resource constrained context typical of emerging economies and lower income markets (Kandachar and Halme 2008; Krämer and Belz 2008; Prahalad and Mashelkar 2010). The innovations can address unsatisfied, sometimes collective needs (Butkeviciene 2009; Onwuegbuzie 2010) and challenges faced by citizens of such resource constrained regions. Thereby, grassroots innovators enable means of overcoming challenges that respond to local conditions (Onwuegbuzie 2010). Grassroots innovations are similar to frugal innovations (Pansera 2012), which are popular in India and other countries in the global south, characterized by solutions that are low‐cost, robust, easy to use and efficient. In contrast with frugal innovations targeting at large populations, grassroots innovations target at the moment at the innovator himself and/or a small and local population surrounding them, but with potential for larger populations. The general trend in literature is the claim that grassroots innovations can contribute to a shift towards socially sustainable systems of consumption and production (Monaghan 2009), to a sustainable development in a country (Dutz 2007; Onwuegbuzie 2010) and to social change (Butkeviciene 2009). Grassroots innovations can support the development of the people in the developing countries, providing a source of growth which hold potential for delivering economic development and inclusive innovation by improving local productivity, create more employment and income‐earning opportunities (Dutz 2007),

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Ann De Keersmaecker et al. fostering social inclusion and empowerment and finally satisfy human needs (Butkeviciene 2009; Church 2005; Dutz 2007; Monaghan 2009; Onwuegbuzie 2010; Subba Rao 2006; Vinanchiarachi 2006). Furthermore, social impacts on a larger scale can be identified, such as entrepreneurial awareness‐raising, education and promotion, changing the attitudes of local policy‐makers, activating and engaging people and communities, and developing new ways of working towards social sustainable development (Church 2002, 2005). Although the potential for inclusive development is described, it remains unclear how these grassroots innovations can be upscaled effectively. Without upscaling effectively, the potential broader benefits of the grassroots innovation can be lost. In practice, several attempts are carried out to upscale grassroots innovations. Although some examples of upscaled grassroots innovations are described, there is no formal investigation and documentation reporting the process of their upscaling (De Keersmaecker, Parmar, Kandachar, Baelus and Vandenbempt 2012). This explorative research focuses on identifying factors that influence this upscaling. Thereby, the research contributes to the understanding of the capabilities of the grassroots innovator himself/herself, and barriers and enablers for upscaling grassroots innovations.

2. Research questions and methodology In order to understand how grassroots innovations can be upscaled, this explorative research seeks to identify factors influencing the upscaling of grassroots innovations in rural areas in India. The research conducted existed of two stages. First, preliminary desk research was carried out to create an initial overview of influencing factors. The desk research revealed three categories of factors that can influence upscaling of an innovation: context related factors, innovator related factors and innovation related factors (Table 1). This categorisation is based on a conceptual framework, integrating the array of variables defined in diffusion research to clarify their influence on an actor’s decision to adopt an innovation (Wejnert 2002). Table 1: Categorization of factors influencing upscaling of grassroots innovations before data collection Isolation: awareness and reachability Possibility to receive resources Freedom to operate

Motivation Entrepreneurial skills Social status Technical design decisions Business plan related decisions User related decisions

Context related factors Connectedness with buyers, producers, distributors, financial and business development services and policy processes Available resources: knowledge on engineering, business, design and financial, infrastructural and social resources (employees) Formality of the business (influencing the possibility to finance the business) and intellectual property rights Innovator related factors Improving livelihood, economical drivers, escaping from poverty, social responsibility, … Entrepreneurs are mean‐driven (as opposed to goal‐driven) and focus on achieving control without relying on predictions Caste system, being respected by others in the neighbourhood Innovation related factors Use of materials, production method, performance optimization, … Target market, distribution method, financial plan, marketing, positioning towards competitors, … Including the latent and active needs

The overview of influencing factors functions as a basis to outline a semi‐structured questionnaire to prepare for the second research stage, the field research. The questionnaire was prepared in a way that also factors not defined by the desk research could be revealed. Therefore open‐ended questions included questions pointing at the motivation and goals for innovating and doing the business, pointing at the grassroots innovators’ role in upscaling and the opinion about the current upscaling process. By using contact summary sheets, main concepts, themes, issues and questions can guide the researcher during the interview (Miles and Huberman 1994). The interviews were conducted in the states Gujarat and Rajasthan in India interviewing grassroots innovators (n=5). The grassroots innovators were visited at their small factory or workshop. Interviews were conducted by one researcher, in collaboration with a translator speaking the local language (Hindi and Gujarati), translating between the researcher and the grassroots innovator. Interviews were conducted following standardized qualitative research protocol (George and Bennett 2005; Yin 2003). Besides the questionnaire focussing on the influencing factors for upscaling, the grassroots innovation and the innovators’ work environment were

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Ann De Keersmaecker et al. studied and observed to have supplementary, intangible information. Furthermore, organisations in India that are related to supporting grassroots innovators are taken into account. Interviews with these organisations took place in their work environment. All these interviews revealed several opinions, needs, concerns and broader insights of the context. The interviews were transcribed, analysed and content‐coded. The data was analysed based on the transcriptions, the diary of the researcher containing reflections written down during field research and photographs made during the visits of the grassroots innovator and the organisations related to supporting. All these paraphrases and reflections were brought together and categorized. Later on, the factors detected during the analysis were compared with the factors defined during desk research. Reflection on this comparison led to the preliminary identification, specification and refinement of factors that influence the upscaling of grassroots innovations in India. Research and preliminary findings presented in this paper are nevertheless subject to limitations. First, conducting interviews with a language translator, some information may have been lost or is misinterpreted by the translator, the interviewee or the interviewer. This issue has been triggered by discussing and reflecting with the translator on insights and thoughts immediately after every interview. Second, discussing the activities of the grassroots innovator or the supporting organisation can be tensed. The interviewee wants to prove better than in reality, or can only recollect vague memories. Verifying every statement on its correctness is not possible, but using the triangulation method comparing statements during the interviews and between different data collections helped interpreting them. Third, some grassroots innovators can react hesitated because they are confronted with an interviewer coming from another culture and with a different gender. The researcher tried to create trust and a relaxed atmosphere. Last, the research is based on a limited number of cases. Although this is a condition to provide the depth required to generate rich descriptions of factors influencing upscaling, generalizability of case findings is limited. The purpose, however, is to illuminate opportunities and threats for upscaling grassroots innovations, in order to generate an in‐depth and rich understanding of factors that influence this process.

3. Cases The cases researched are a combination of grassroots innovators and their innovation (Table 2 and Figure 1), and organisations related to upscaling of grassroots innovations in India (Table 3). Selecting the grassroots innovations was done based on purposeful sampling. In dialogue with National Innovation Foundation (NIF, www.nif.org.in), an organisation supporting grassroots innovators, grassroots innovations were selected based on experiences with upscaling. The organisations related to supporting grassroots innovators are either supporting effectively, supporting commissioned by another organisation, or seeking on how to support grassroots innovators. The research is focussing on India because there is a considerable segment in the Indian market where grassroots innovations can enter. This segment exists of low income communities in resource constraint environments. Although work has been done, this market segment in India is hardly been addressed. This research can contribute to serving Indian low income markets in resource constraint environments. Furthermore, India is an ideal environment to study grassroots innovations, because the Government of India has declared in 2010 the ‘Decade of Innovation’, and has set up of a National Innovation Council (NInC, www.innovationcouncil.gov.in) wherein a track is focussing on grassroots innovations, considered to nurture innovation in India. Table 2: Description of grassroots innovations (the names used are pseudonyms) Grasroots innovation

Bio‐mass gasification

Cooling unit

Ploughing the field

Stripping cotton

Threshing crops

Industry

Energy

Household appliances

Agriculture

Novelty of the innovation

New technology, existing market

Existing technology, new market

New technology, new market

New technology, existing market

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Ann De Keersmaecker et al. Grasroots innovation

Bio‐mass gasification

Cooling unit

Ploughing the field

Stripping cotton

Threshing crops

Development phase

Start‐up firm, market phase, product improvements

Established frim, creating new product lines

Selling products, no official established firm, product optimization

Established firm, seeking for growth

Selling products, established firm, product optimization

B2B

B2C

B2B

15 products

175 products

15 products

17 products

25 products

Relative of the innovator

Innovator & product manager (trainee)

Innovator

Business marketing Sales number last year Informant

Figure 1: Pictures of grassroots innovations (from left to right & from up to down showed in similar order as Table 2) Table 3: Description of organisations related to supporting grassroots innovators (the names used are pseudonyms) Organisation supporting Indian grassroots innovations Related to Indian government

Supporting organisation

Organisation supporting in Technology transfer in Asia

Small Indian design company

Big international design company

Type of organisation

Intergovernmental organisation

Private organisation

Motivation for support

Searching on how to support Surveying organisations supporting formal start‐ups

Social motives

Searching on how to support

Redesign of a grassroots innovation

Redesign of some grassroots innovations

Engineering, business, IP, …

Support start‐ups

Type of support

Organisation supporting Indian start‐up entrepreneurs Related to an Indian university

4. Findings and reflections After data analysis, factors influencing upscaling of the grassroots innovation are grouped (Table 4). Categories were restructured, where Innovator and Innovation related factors are brought together because they are interrelated. Furthermore, the factor Social status became Social context and all Innovation related factors are shifted to Design skills. New detected influencing factors and additional insights are showed in Table 4 and are described hereunder.

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Ann De Keersmaecker et al. Table 4: Categorization of factors influencing upscaling of grassroots innovations after data collection Context related factors Isolation: awareness and reachability Possibilities to receive support and resources Freedom to operate Social context Entrepreneurial skills Design skills Motivation

Connectedness with potential markets Strategies to receive support Formality of the business (influencing the possibility to finance the business) and intellectual property rights Joint families with own cultural behaviour Innovator and Innovation related factors Entrepreneurs are mean‐driven (as opposed to goal‐driven) and focus on achieving control without relying on predictions Technical, business and user related decisions Interest to grow the business, acquiescence when others are copying, external encouragement to upscale

4.1 Context related factors 4.1.1 Isolation: awareness and reachability First, grassroots innovators are isolated from the market. The grassroots innovation is often only produced and sold in the local context because the innovator is not aware and/or cannot reach potential markets. Not every grassroots innovation is scalable to an outer and cross‐sectorial context; it depends on the need in that market and the supply and service chain available to reach that market. In case the grassroots innovation is scalable in another market (even from local to regional or national), this can mean a potential for upscaling, and will need an extra effort in the upscaling process (Figure 2). In most interviews, upscaling was perceived locally by the grassroots innovator, and the market outside his immediate vicinity was not seen as a potential market. Even if the grassroots innovator is already aware of a potential new market out the local context, he is often not familiar with how to reach and approach the market.

Figure 2: Upscaling process Second, the grassroots innovator is in some cases not aware of the advantages and the possibilities to get support in upscaling his product, especially on the level of design. Besides awareness of support and resources, reachability appears to be an issue. Except for NIF, most organisations related to supporting are targeting the middle and upper class, and expecting to pay the fees, travel to and consult with the organisation, apply for the administrative procedures, etc. This is a barrier for the grassroots innovator to invoke support, although we found that his need and willingness to learn and/or collaborate to improve his business are clearly evident. 4.1.2 Possibilities to receive support and resources Dependent of the capabilities of the grassroots innovator, and the typicality’s of the grassroots innovation itself, case specific support is needed. There is not one generalizable need of the grassroots innovators, every innovator has his own problems and needs while upscaling his innovation. One grassroots innovator needs more support with understanding the market and user needs, the other with technological and production optimization or with improving the distribution channels, etc.

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Ann De Keersmaecker et al. Support can be given in several ways to the grassroots innovator. During the field research, possibilities to build up and obtain knowledge are detected. The different scenarios of support offered are shown in Table 5. Table 5: Scenarios for support Scenario Exchanging support between grassroots innovators

Consulting a supporter

Partnership with external business organisation

In practice Exchange of experiences and best practices Some profit making grassroots innovators open their workshop for others Supporters help with engineering and/or designing the innovation, or do market research Supporting organisations provide a compensation for the supporter, or support happens on a voluntary basis Collaboration by involving an established organisation during redesign, and seeking for collaboration in retailing

Findings Accessibility to the workshops is complicated because grassroots innovators are living in isolated villages

The grassroots innovator should be involved actively, thinking and performing with the supporter, if not, support is not utilized effectively Venture capitalists and organisations showed their interest Partnering with business partners or retailers and negotiating proper agreements seems difficult

Studying these scenarios, it became clear that there needs to be a learning process for both the grassroots innovator and supporter or partner to learn from each other’s expertise and context. The exchange of broader knowledge of the supporter, local knowledge of the grassroots innovator, and work executed together could give the ideal mixture of insights to upscale. It is stated that grassroots innovators have experiences, knowledge and deep understanding about what works in their local environments and what matters to local people (Agarwal 1983; Gupta et al. 2003; Onwuegbuzie 2010; Seyfang and Smith 2007). Thus, a bilateral collaboration and learning process would be required to bring together technology, market and user insights to upscale the grassroots innovation. During the research, it was observed that outsourcing a redesign activity, and then returning an optimized concept to the grassroots innovator was not effective. There needs to be a learning process for both grassroots innovator and supporter because they come from different backgrounds, not being aware of each other’s context. Formulating needs for support and making proper agreements between supporter or partner and grassroots innovator on the scenario for collaboration could help to make the support effectively deployed. 4.1.3 Freedom to operate Most grassroots innovations are filed for patenting with support of National Innovation Foundation. Anyhow, some grassroots innovations appears to be copied. Furthermore, a grassroots innovator mentioned that his customer provides rental services with a purchased product during low seasons. Although National Innovation Foundation offers support in controlling and executing intellectual property rights (IPR), grassroots innovators resign themselves in the situation, that is being copied. Most grassroots innovators rather respond to this by innovating further, expanding their product and service portfolio. The grassroots innovator himself sometimes sees little value in these patents. Thus, these patents do not play a major role in creating barriers for the grassroots freedom to operate, what has an influence on the upscaling process. Furthermore, formality of the business is an important aspect in terms of freedom to operate. Most grassroots innovators start selling their products without having a formal venture. Under a certain level of income, this is tolerated in India. When they grow further, most innovators are capable of forming their own venture, but struggle with administration and regulations to comply with the law. Depending on whether a firm is formal or informal, there are significant overall differences between how they finance their business, use bank accounts, and whether the entrepreneurs have loans for their businesses (Leino 2009).

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Ann De Keersmaecker et al. Furthermore, some grassroots innovators are aware of quality controls and see value to apply for certificates because it can enhance selling numbers by convincing the customer of the quality. Applying for regulations like the ISO certificate (International Organization for Standardization) seems possible, but takes a lot of research to be accepted. Patents, formalisation of the business and quality certificates can all influence the process of upscaling. 4.1.4 Social context Grassroots innovators are living in close communities and joint families and they have their own cultural and social values. Most observed grassroots innovators worked together with relatives and close neighbours. This can make it more difficult to be critical towards labourers and their quality of work, and makes the openness towards externals more difficult. By staying in close circles, it is more difficult to learn and exchange experiences. Collaboration with partners outside the local context takes time because of cultural differences, social status, language barriers, accessibility, etc. In most cases, social values within the company were respected, creating a corresponding work environment. Nonetheless, in one case, aspects of child labour, defraud and deception were detected. These aspects have an influence on the social context and are most of the time not controlled and condemned by an executive power. In the end this leads to stagnating collaborations, influencing upscaling of the grassroots innovation.

4.2 Innovator and innovation related factors 4.2.1 Entrepreneurial skills As every entrepreneur, grassroots innovators respond to an opportunity or challenge, inspired by the needs of people. During the research, it was recognized that some grassroots innovators were able to see a market opportunity, face time and financial limits for prototyping, diversify their product range, search for a unique selling proposition, and seek to create service and/or price competition. These activities are not well‐structured or organised, but this is linked to an entrepreneurial skill; being open for opportunities (Sarasvathy 2008). Another recognized entrepreneurial skill is being aware of the risks, evaluating whether the downside of the risk is acceptable. Some grassroots innovators start selling their product when it is still in prototyping phase, anticipating on the reactions of customers, and later on acting accordingly. Furthermore, grassroots innovators find solutions for various situations, remaining flexible and where needed leverage contingencies. For example, grassroots innovators arrange advance payments to purchase raw materials, organise distribution on the account of the customer and offer services like guarantees and after sales services, expecting that they will meet their promises, and otherwise anticipating on the situation. In their local context, some grassroots innovators are capable of forming partnerships, and rely on human agency, which are all individual entrepreneurial skills (Sarasvathy 2008). Some entrepreneurial skills are thus detected, but it is not possible to generalize this for all grassroots innovators, and to state that entrepreneurial skills are at its best. Upscaling is a process where entrepreneurial skills such as collaboration, partnerships, anticipating on unforeseen circumstances are needed. 4.2.2 Design skills Referring to technological design decisions, the grassroots innovator obtains technological skills by self‐ education, observing other techniques and machines, and testing by trial and error. In some cases engineering support could optimize the product. The grassroots innovator uses local materials and in some cases finds the balance between second hand spare parts and new spare parts in order to meet the quality requirements. In one case, the grassroots innovator shifted to a larger city to have better resources nearby, like materials, and to strengthen their connectivity with customers and to expand commercial network.

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Ann De Keersmaecker et al. Similarly to Jugaad innovation (Radjou, Prabhu, Ahuja and Roberts 2012), grassroots innovators use on‐the‐ ground‐feedback, rather than focus groups, to test the levels and acceptance of their innovation and make design decisions. They have a demand driven approach, responding to articulated needs of the market, and listen to customer feedback adapting their innovation accordingly. Furthermore, the grassroots innovator creates product alternatives depending on the customer’s price/performance requirements, and sometimes make individual customized products. However, grassroots innovators are less aware of needs of potential users, especially outside their local context, what influences the possibilities for upscaling. The business and marketing skills of the grassroots innovator are rudimentary. They rely on traditional methods like mouth to mouth communication and through advertising in the local newspaper, with minimal communication of the unique selling proposition. The customers addressed are mainly local. In our research, most of the grassroots innovators themselves articulated the need for marketing support. Sometimes, the grassroots innovations are exhibited at a national fair, bringing all grassroots innovations together. Rather than facilitating real marketing activities, these fairs create acknowledgement of grassroots innovators’ activities. Furthermore, we found indications that business‐to‐business (B2B) marketing in low income markets understands the potential of grassroots innovations better than business‐to‐consumer (B2C) marketing. B2B could be a better marketing avenue than B2C. This needs however further research. Design skills of the grassroots innovators are not at its best, and the innovator is aware of this lack of skills. He indicates the need for support on business level, to quest potential new markets and corresponding distribution channels. The entire market itself, its market potential, and market entrance strategies are in most cases not known and the grassroots innovator is not familiar with corresponding activities. Upscaling the grassroots innovation needs optimized design skills. 4.2.3 Motivation Motivation to create an innovation, start a venture around it and upscale, is off course needed. In the cases observed, different motivations were detected. Grassroots innovators were innovating and doing the business out of necessity, to earn their living, because they find joy in creating new things, because of social motives, to give something back to society, and help their neighbours. In the case of social motives, the grassroots innovator seeks for upscaling in his local context because he is attached to that environment. The motivation to upscale in another context can be different. The observed grassroots innovators show perseverance to persistence with the business, also in difficult times. It is already shown that entrepreneurs who stay in business when forced to formalize and adapt to severe competition are the ones with motivation, innovations and entrepreneurial incentives (Stokanic 2009). Furthermore, motivation to upscale is encouraged by attention from media and exposure through supporting organisations creating awareness and acknowledging and appreciating the grassroots innovators efforts. In contrast, in some other cases, the grassroots innovator is more interested in innovating and designing the product than doing the business around it because they do not enjoy the process of upscaling for various reasons (too much effort, upscaling is not as fun as inventing etc.) (Nair 2012). For those cases, it is unclear how the grassroots innovation could get upscaled in potential markets.

5. Discussion Understanding the influencing factors for the upscaling of grassroots innovations, it is important to understand what people perceive as upscaling. During the interviews, there existed a distinction in upscaling depending on the interviewee: local upscaling, and regional or national upscaling (as showed in Figure 2). In the context of grassroots innovations, local upscaling refers to focusing energies and resources on achieving greater impact in the same location where the enterprise was started. Regional and national upscaling refers to the growth in business by expanding a grassroots innovation to other geographic locations. Local upscaling of grassroots innovations is to some extent happening at the moment. This interpretation of upscaling is related to the isolation and the lack of awareness from potential markets as described before.

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Ann De Keersmaecker et al. In connection to the perception of upscaling, upscaling can be understood as doing the business, or let the grassroots innovation been copied. The research revealed in some cases acquiescence of the grassroots innovator when others are copying his grassroots innovation. Depending on the motivation, some grassroots innovators are fine with copying their idea, hoping that others can benefit from the product and its business too. This also imposes a new way of interpreting upscaling. Grassroots innovations copied by other entrepreneurs can improve organically, benefitting a larger population than when protected by IPR. Research is going on at the moment on how an innovation can be copied in an informal context, and can get optimised and embedded locally (Gómez‐Galvarriato Freer 2012). A concern while upscaling a grassroots innovation regionally or nationally is how to translate the innovation. In case of translating an innovation to another context, it needs to be assessed whether the local innovation could be replicated and/or should be customized (Soman, Kumar, Metcalfe and Wong 2012). In case of replicating, the grassroots innovation should be assessed on whether the innovation and its business are paramount and can be transcended in a new region and context, taking into account all factors that influence upscaling and that could be specific to the region where the grassroots innovation emerged, like production method, use of materials available providers and competitors, etc. In case the grassroots innovation should be customized as per the new region, it is a matter of assessing whether the investment in customizing by redesigning to the new context, culture, norms and practices, is worth the effort. Therefore, it is important to evaluate the feasibility of upscaling in another region and context taking into account the components of the grassroots innovation that should be adapted or modified.

6. Conclusion Research had revealed that upscaling of grassroots innovations is often influenced by factors such as a lack of awareness on design and business approaches, poor entrepreneurial skills and a lack of start‐up facilities in the given context (De Keersmaecker et al. 2012). The current research contributes to this. We found that motivation of grassroots innovators, their perception and approach towards upscaling, overcoming isolation in local markets, possibilities to receive needed support and overcoming institutional formalisations are critical factors. Furthermore, as assumed before, most grassroots innovations are addressing the lower income markets, although not directly. Grassroots innovations are addressing these markets indirectly by creating employment and functioning as an example for others to innovate. With this preliminary evidence, it is recommended to focus further research on validating the research insights with more upscaled and not upscaled cases. An additional avenue for research is investigating which factors are determinative in influencing an upscaling process of grassroots innovations and the causal links between these factors in order to understand how the upscaling process can be influenced effectively.

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Ann De Keersmaecker et al. Kandachar, P. and Halme, M. (2008) Farewell to pyramids: how can business and technology help to eradicate poverty? In P. Kandachar & M. Halme (Eds.), Sustainability Challenges and Solutions at the Base of the Pyramid: Business, Technology and the Poor, UK: Greenleaf Publishing. Krämer, A. and Belz, F.‐M. (2008) Consumer integration into innovation processes, a new approach for creating and enhancing innovations for the base of the pyramid. In P. Kandachar & M. Halme (Eds.), Sustainability Challenges and Solutions at the Base of the Pyramid (pp. 214‐241), UK: Greenleaf Publishing. Leino, J. (2009). Formal and Informal Microenterprises: The World Bank. Miles, M. B. and Huberman, A. M. (1994) Data Management and Analysis Methods, London: Sage Publications. Monaghan, A. (2009) "Conceptual niche management of grassroots innovation for sustainability: the case of body disposal practices in the UK", Technological Forecasting & Social Change, 76, 1026‐1043. Nair, A. K. (2012) Grassroots Innovations In A. De Keersmaecker (Ed.). Onwuegbuzie, H. (2010) Sustainable Development Strategy Using Indigenous Knowledge and Entrepreneurship. Lagos: Lagos Business School & Pan‐African University. Pansera, M. (2012) "Eco‐innovation as a Development Tool: Evidence from Latin America and Asia", Paper presented at the Third International Conference on Degrowth: Ecological Sustainability and Social Equity, Venice. Prahalad, C. K. and Mashelkar, R. A. (2010) "Innovation's Holy Grail", Harvard Business Review, 2‐10. Radjou, N., Prabhu, J., Ahuja, S. and Roberts, K. (2012) Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth San Francisco: Jossey‐Bass. Sarasvathy, S. D. (2008) Effectuation: Elements of Entrepreneurial Expertise, Cheltenham: Edward Elgar Publishing. Seyfang, G. and Smith, A. (2007) "Grassroots innovations for sustainable development: towards a new research and policy agenda", Environmental Politics, 584‐603. Soman, D., Kumar, V., Metcalfe, M. and Wong, J. (2012). Beyond Great Ideas: A Framework for Scaling Local Innovations. Rotman Magazine, Fall 2012, 50‐55. Stokanic, D. (2009). Entrepreneurship on the margin between informality and formality: The textile industry in South‐West Serbia. Budapest: Central European University, Department of Socialogy and Social Anthropology. Subba Rao, S. (2006) "Indigenous knowledge organization: an Indian scenario", International Journal of Information Management, 26, 224‐233. Vinanchiarachi, J. (2006) Grassroots Innovations Serving as Rural Growth Impulses In n. f. edited (Ed.), International Association of Management of Technology. Beijing. Wejnert, B. (2002) "Integrating Models of Diffusion of Innovations: A Conceptual Framework", Annual Review of Sociology, 28, 297‐326. Yin, R. (2003) Case Study Research, Design and Methods (Third ed.), United States of America: Sage Publications.

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Collective Entrepreneurship, a Solution to Conflicting Institutional Logics in the Entrepreneurship Process? Frédéric Dufays HEC‐ULg Management School, Liège, Belgium F.Dufays@ulg.ac.be Abstract: The entrepreneurship literature increasingly acknowledges the collective dimension of entrepreneurship. However, little is known about the antecedents and the drivers of this collective entrepreneurial dynamic. The aim of this conceptual paper is to integrate two theoretical approaches to entrepreneurship, i.e. network theories and neo‐ institutional theory, in order to contribute to the understanding of collective entrepreneurship. More precisely, it attempts to answer the question: How does collective entrepreneurship develop to overcome conflicting institutional logics bearing previously unconnected social networks? In the large stream of literature that examines the entrepreneurship process with a network lens, the structural‐hole argument is one of the most powerful. Structural holes are the voids between unconnected subparts of the social network. Hence, they constitute opportunities for information and control benefits. Therefore, entrepreneurs bridge structural holes and take advantage from the resources associated with the various parts of the network that were previously unconnected (Burt, 1992). It has also been argued that “sensing “entrepreneurial opportunities” is (…) perhaps embedded in broader institutional dynamics involving competing logics” (Marquis & Lounsbury, 2007: 801). Indeed, different parts of the social structure (network) may embed different identities, and under certain conditions, different institutional logics. Bridging structural holes can therefore imply for the entrepreneur to face competing logics. When this is the case, the entrepreneurial process may result in the creation of a hybrid organisation. The question of how to deal with conflicting logics has given rise to a series of research. It has mostly been assumed that one logic will end up as dominant and hide the other logics. Another possibility is that the institutional field experiencing conflicting logics will fragment. Under certain conditions, there conflicting logics may be managed in different ways (Pache & Santos, forthcoming): decoupling, compromising, logics combination through selective coupling. Our proposition is that bridging distinct institutional logics by bridging two distinct networks may lead to entrepreneurial opportunities. The consequent conflict in logics may be best embraced by collective entrepreneurship, and more precisely by an entrepreneurial team, which we understand as an association of bridge‐builders. We argue that the organisational outcome of the entrepreneurial process in terms of logics configuration will depend on structural and individual factors with respect to the team members. Keywords: collective entrepreneurship, institutional logics, structural holes

1. Introduction Despite growing evidence, the myth of the heroic lone entrepreneur has a long‐standing tradition in the entrepreneurship literature both because of ideological and cognitive convenience (Drakopoulou Dodd & Anderson 2007). Contrasting the mainstream literature, the collective dimension of entrepreneurship is increasingly explored (e.g.: Gemmel, et al. 2012; West 2007), attempting to answer early calls for research on the topic (Kamm, et al. 1990; Davidsson & Wiklund 2001). Collective entrepreneurship is also said to lead to more successful ventures, for instance in terms of market capitalization and revenues (Kamm, et al. 1990). However, still little is known about the antecedents and the drivers of this collective entrepreneurial dynamic. This paper aims to explore one potential reason for adopting such a dynamic by integrating insights from entrepreneurship, network and institutional theories. Collective entrepreneurship embraces various acceptations (for a review, see Burress & Cook 2009; Johannisson 2004). Among these, an important body of literature emphasizes the role of the entrepreneurial (social) network (Grossetti & Barthe 2008; Jack & Anderson 2003; Ulhøi 2005), arguing that entrepreneurship is a process that is embedded in social relations (Granovetter 1985; 2000). Other scholars restrict the definition of collective entrepreneurship to entrepreneurship in team (Ben Hafaïedh 2006). We elaborate on both conceptions by contending that the structural position of entrepreneurs, as well as the institutional logics bearing the various sub‐parts of the social network can trigger the formation of an entrepreneurial team when the latter are distinct. The remainder of this paper is organised as follows. Collective entrepreneurship is first introduced. Then, the role of structural holes with regard to entrepreneurship is discussed. We suggest that one way to explain the potential benefits of brokering between groups is to use the institutional logics approach. Subsequently, the discussion section brings together insights from these theoretical streams to put forward a model and a series

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Frédéric Dufays of propositions. In conclusion, the main contribution of this paper and suggestions for future research are exposed.

2. Theoretical background 2.1 Collective entrepreneurship Broadly speaking, two main arguments can be found in the literature regarding definitions of collective entrepreneurship. On the one hand, some scholars suggest that all entrepreneurship is collective, as the entrepreneur mobilizes her social network along the entrepreneurial process and has to deal with multiple constituencies (Dubini & Aldrich 1991; Jack & Anderson 2003). On the other hand, it is argued that most entrepreneurship is collective because undertaken in teams (Kamm, et al. 1990), which are some “crystallized” form of collective entrepreneurship (Chabaud & Condor 2009; Larsson & Starr 1993). Besides, other understandings/forms of collective entrepreneurship exist. These are said to differ in terms of governance structure, of ties between entrepreneuring units, of agency (individual or collective), of basis of involvement (economic or social commitment) (Johannisson 2004). Examples of other types of collective entrepreneurship include:

family entrepreneurship and copreneurship (Carsrud & Brännback 2012);

collaborative entrepreneurship – i.e. organisations from different industries partnering for continuous innovation (Ribeiro‐Soriano & Urbano 2009);

cooperatives (Defourny & Delvetere 1999; Stryjan 2006);

and community entrepreneurship (Haugh 2007; Johannisson 1990).

Regarding entrepreneurial teams, most research effort has been put on team functioning and the relationship between team composition and organisational performance (e.g. Beckman, et al. 2007; Montgomery, et al. 2012). In contrast, fewer scholars have studied the entrepreneurial team formation process (Ben Hafaïedh‐ Dridi 2010). In general, two main entrepreneurial team formation processes are depicted: (1) a strategic and instrumental dynamic, which considers the team as a bundle of resources and whose members should be selected in function of the critical needs of the project (Ucbasaran, et al. 2003); and a socio‐psychological dynamic, which draws on the similarity‐attraction theory (Ruef, et al. 2003). It appears that both approaches may be used to constitute entrepreneurial teams depending on the goal of forming a team (Chabaud & Condor 2009), and that the degree of use of one or the other approach may evolve according to the stage of the team formation process (Ben Hafaïed‐Dridi 2010). In addition, teams may evolve over time depending on the project necessities and team dynamics (Condor & Chabaud 2012). The reasons why entrepreneurship is undertaken collectively remains however underexplored. We suggest that bridging theoretical approaches of social network and institutional theory may help to make sense of the two approaches identified above in the team formation process.

2.2 Social networks and structural holes In the abundant literature on entrepreneurship and social network, Burt’s (1992) structural hole argument is among the most powerful (Hoang & Antoncic 2003; Kilduff & Tsai 2003). This argument takes as starting point the voids between unconnected subparts of the social network, which are defined as structural holes. These constitute opportunities for information and control benefits. Therefore, entrepreneurs bridge structural holes and take advantage from the resources associated with the various parts of the network that were previously unconnected (Burt 1992). It is argued that the more unconstrained the ties of an entrepreneur, the more benefits she can take out of bridging these ties (Aldrich 2005). Burt (2004) completed his theory by demonstrating that people connecting different groups, that is, those that bridge structural holes, are more likely to have “good ideas” because they are more familiar with alternative ways of thinking and behaving. Indeed, he observes that opinion and behaviour are more homogeneous within than between groups. Hence, brokering between groups offers the possibility to select or synthetize and generate ideas that are valued by all groups (Burt 2004). More recent studies validate this proposition and show that structural holes are linked to creativity and innovativeness (Rodan 2010) as well as have strong positive effect on performance (Aarstad 2012). In their study on the origin of structural holes, Zaheer and Soda

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Frédéric Dufays (2009) nuance this relationship by showing that homogeneity rather than diversity in the network content enhances performance because it allows the creation of efficiency routines. It has also been argued that “sensing “entrepreneurial opportunities” is (…) perhaps embedded in broader institutional dynamics involving competing logics” (Marquis & Lounsbury 2007: 801). Hence, Burt’s “good ideas” may refer to ideas that fit several institutional logics.

2.3 Institutional logics Institutional theorists have proposed the concept of institutional logics to denote the socially constructed principles that guide social action. In other words, they are the assumptions, beliefs, and rules by which individuals confer meaning to their social reality. Institutional logics shape rational behaviour and, in turn, individuals and organisations can shape institutional logics (Friedland & Alford 1991; Thornton & Ocasio 2008). The question of competing institutional logics has given rise to a series of research, both at the macro level and at the organisational level. It has mostly been assumed that one logic will end up as dominant and hide the other logics (Thornton 2002). Other outcomes include the fragmentation of the institutional field experiencing conflicting logics (Purdy & Gray 2009) and the cohabitation of two competing logics through collaboration of actors (Reay & Hinings 2009). Under certain conditions, organisations may use different tactics to manage the conflict between logics that manifest themselves within the organisation: decoupling (Meyer & Rowan 1977), compromising (Oliver 1991), logics combination through selective coupling (Pache & Santos forthcoming). Relatively few studies use the institutional logics approach at the individual level (e.g. Zilber 2002). Depending on their socialization, individuals take some rules, meanings, and assumptions for granted (Meyer & Rowan 1977). Individuals may also embrace several institutional logics (Pache & Chowdhury 2012). This tends to happen especially when they evolve within several social spheres and embody compound identities. For example, “family founders” entrepreneurs have been found to adopt several logics due to their social context, i.e. a blend of family logics and entrepreneurial logics (Miller, et al. 2011).

3. Proposition of model On the basis of the reviewed literature, we propose a model explaining one among several entrepreneurial team formation dynamics (figure 1). We restrain this model to a team composed of two individuals (A and B) for the sake of clarity and consider the entrepreneurial process only up to the creation of an organisation, even though entrepreneurship can be understood as a broader phenomenon (Wiklund, et al. 2011).

Figure 1: Collective entrepreneurship through social network and institutional logics bridging

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Frédéric Dufays Individuals are embedded in a network of interpersonal relations. It has been observed that, because people prefer cognitive consonance, they tend to keep in touch with others sharing the same education and social status, as well as the same – or similar – meanings and values. Hence, different parts of the social structure may embed different identities (Mehra, et al. 1998; White 1992) and eventually different institutional logics (Breiger & Mohr 2004; Lin 2001; Mohr & White 2008). In turn, individuals tend to enact the dominant institutional logic of the environment – hence, the social network – in which they are embedded through socialization (Berger & Luckmann 1991/1966). In our model, individual A is embedded in a network bearing the institutional logic α. Hence, A is socialized and enacts the dominant logic α. The same reasoning applies to individual B with regard to the institutional logic β. It is assumed that A and B are previously unconnected, such that a void exists between them. We have seen that structural holes generate entrepreneurial opportunities. As a consequence of this unconnectedness between the two networks, we observe two distinct institutional logics – i.e. logic α and logic β. The complementarity thereof may create entrepreneurial opportunities (Marquis & Lounsbury 2007; Spedale & Watson forthcoming). Distinct logics, although complementary, also entail a potential of conflict, with which the entrepreneur will have to deal throughout the entrepreneurial process if she wants to exploit this opportunity. Hence, the conflict in logics will act as a constraint for the entrepreneur. We argue that one way to deal with the conflict in logics is to form an entrepreneurial team composed of individuals representing the different institutional logics. This is, A and B will pair in order to manage the conflict in logics arising from the structural‐hole bridging. Proposition 1: The association of bridge‐builders, i.e. two or more entrepreneurs connecting their distinct and previously disconnected networks, may lead to the formation of an entrepreneurial team. Proposition 2a: If bridging a structural hole results in bridging distinct institutional logics, the complementarity of these logics may result in an entrepreneurial opportunity for the entrepreneurial team. Proposition 2b: If bridging a structural hole results in bridging distinct institutional logics, the dissimilarity and potential for conflict between logics acts as a constraint for the entrepreneurial team. Logics α and β will thus complement each other to form an opportunity and compete throughout the entrepreneurial process. We propose that two types of factors are likely to influence the outcome of the entrepreneurial process with regard to the type of organisation that is created and the institutional logics configuration: structural and individual factors (Spedale & Watson forthcoming). First, the structure of the network in which each team member is embedded is likely to influence the way in which logics conflict and can be managed, as well as the team formation process (Aldrich & Kim 2007). Indeed, as Giddens (1984) argues, the relational structure is both enabling and constraining. In this case, the network structure will determine the degree of freedom of the individual with regard to the expected conformity to the institutional logic. Consequently, a denser network, in which all nodes are connected together will not allow for deviation from the established norms and values (Degenne & Forsé 1999). Second, individual factors such as education and socialisation are presumed to have an impact on the team formation through the complementarity of competences and resources of individuals (Chabaud & Condor 2009). Seo & Creed (2002) use the concept of praxis to depict the action of individuals trying to make sense from institutional contradictions. They suggest institutional change to result from collective action instigated by agents facing misaligned interests with existing social arrangements. Greenwood & Suddaby (2006) also argue that elites, because of the centrality of their network, are more likely to be confronted to contradicting institutional logics by bridging organisational fields, and therefore become institutional entrepreneurs. Hence, we suggest that individuals who have been exposed to different institutional logics are more likely to develop practices that are consistent with these various logics. We propose that, depending on these factors, the entrepreneurial process may result in the creation of three types of organisations, which can be differentiated according to the way the conflict between logics is managed (Pache & Santos 2010; Pratt & Foreman 2000). First, the conflict may end up in the organisation coupling with one logic only – this is, α or β. This case would see the emergence of a dominant institutional logic through the entrepreneurial process. As a consequence, our team A+B would disembed from one

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Frédéric Dufays network. The second potential outcome in terms of logics configuration is the cohabitation of institutional logics within the organisation. Here, this organisation would correspond to such strategies as (selective) decoupling (Meyer & Rowan 1977; Pache & Santos forthcoming) and combining (Tracey, et al. 2011). Both α and β would then partially be enacted in the new organisation. The last case would see a new hybrid institutional logic γ emerging from the entrepreneurial process and embedded in the new organisation. This outcome relates to a compromising strategy (Oliver 1991). Proposition 3: The entrepreneurial process’ outcome with regard to organizational enactment of institutional logics depends on structural and individual factors with regard to the members of the entrepreneurial team. Proposition 3a: The entrepreneurial process is more likely to result in one dominating logic when one of the previously unconnected networks is dense whereas the other is loose and when only one member of the team has previously been exposed to the institutional logic in which the other member is embedded. Proposition 3b: The entrepreneurial process is more likely to result in a cohabitation of institutional logics when both previously unconnected networks are dense and when no member of the team has previously been exposed to the institutional logic in which the other member is embedded. Proposition 3c: The entrepreneurial process is more likely to result in the emergence of a hybrid institutional logic when both previously unconnected networks are loose and when both members of the team have previously been exposed to the institutional logic in which the other member is embedded. Proposition 3 and the related sub‐propositions are summarized in tables 1 and 2 below. These are schematized cases in order to illustrate our argument. It is likely that exposure to institutional logics would better be described by a spectrum ranging from little to strong exposure, rather than a Manichean view such as the one put forward. Table 1: Structural factor (density of network) effect on entrepreneurial process' outcome with regard to institutional logics B’s network dense B’s network loose

A’s network dense Cohabitation One dominant logic

A’s network loose One dominant logic Hybridisation

Table 2: Individual factor (prior exposure) effect on entrepreneurial process' outcome with regard to institutional logics B previously exposed to α B not previously exposed to α

A previously exposed to β

A not previously exposed to β

Hybridisation

One dominant logic

Cohabitation

It should be also noted that collective entrepreneurship is by no means a guarantee to end up with a model in equilibrium. Conflict between institutional logics may endure after the creation of the organisation, in the same way as the conflict remains latent at the field level, whatever the short‐term outcome of the institutional logic conflict (van Gestel & Hillebrand 2011). Suggesting potential benefits and pitfalls of each organisational outcome could also be made on the basis of the extant literature but falls beyond the scope of this paper.

4. Conclusion The main contribution of this paper is to complement the social network theory with insights from institutional theory, with regard to collective entrepreneurship. It attempts to explain how collective entrepreneurship develops thanks to and/or in spite of conflicting institutional logics borne by previously unconnected social networks. To do so, we have reviewed extant literature on structural holes and on institutional logics. We then proposed a model in which the entrepreneurial opportunity arises from a structural hole and the complementarity of distinct institutional logics. The conflict arising from these distinct logics acts as a constraint on the entrepreneurial process. Depending on individual and structural factors, we suggest three possible entrepreneurial outcomes with respect to logics configuration.

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Frédéric Dufays Future research should aim at empirically testing the model and the theoretical propositions derived thereof. Case studies could be conducted based on a theoretical sampling to explore each box of the tables 1 and 2. We suggest social entrepreneurship to be a promising field for testing the model for at least three different reasons: involvement of distinct institutional logics, importance of social network, and frequency of collective entrepreneurship. First, scholars agree on two elements when defining social entrepreneurship: it places social goal first; it involves an economic activity of goods or service provision (Seymour 2012). These two basic elements involve distinct institutional logics bearing social entrepreneurship, which may result in logic combination, compromise, or conflict. Therefore, a social entrepreneur can be conceived as a bridge‐builder between different logics, typically the social‐welfare logic, the commercial logic, and the public‐sector logic (Pache & Chowdhury 2012). Second, social entrepreneurship is strongly embedded in a network of relationships (Mair & Marti 2006). Indeed, social entrepreneurs identify local social needs at the community level and try to develop solutions to fulfill these needs through resources they identify in their social interactions (Haugh 2007). Third, social entrepreneurship is often the result of a collective dynamics as it is undertaken by a coalition of actors (e.g. Schieb‐Bienfait, et al. 2009). It is argued that this collective dimension stems from the structure of the social enterprise on the one hand (cooperative legal form, involvement of stakeholders in the organizational structure) (Shaw & Carter 2007), or from the need to coalesce the necessary knowledge for innovation to create social value, which is spread among a variety of actors, on the other hand (Corner & Ho 2010).

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Innovations, Standards and Quality Management Systems: Analysis of Interrelation Raimonda Liepiņa, Inga Lapiņa, Jolanta Janauska and Jānis Mazais Riga Technical University, Riga, Latvia Raimonda.Liepina@rtu.lv Inga.Lapina@rtu.lv Jolanta.Janauska@rtu.lv Janis.Mazais@rtu.lv Abstract: Nowadays ability to design, manufacture and place into market new innovative products and services is more and more often considered as one of factors ensuring successful entrepreneurship, which also provides competitiveness. Historically standards were tools for facilitation of products turnover and development of manufacturing processes. After some time standards were considered as restrictions, which do not allow creativity and innovative activities in enterprise operations. Today standards can be used on voluntary bases and favour international trade. Quality management standards are a good tool how to adjust harmonized and well developed processes in enterprises. Mutual relationship between innovation and standards in relation with quality management systems is a relatively uncovered research area. The aim of this research is to reveal mutual relationships between innovations, standards and quality management systems. Research is based on gathered information about the influence of standards and quality management systems on innovation, and performed research. Research methods, such as analysis and synthesis of scientific literature, logical and comparative analysis, qualitative and quantitative research based on survey are applied in this research. The main results disclosed that application of standards and QMS facilitate business activities for promotion of new product development and application of innovative solutions by well‐recognized and attested activities. At the same time the link between innovations promoted by standards and QMS, the business’s development and competitiveness are prerequisites to mutual growth. The research results will encourage entrepreneurs not to avoid using the standards and QMS when seeking for innovative solutions. Keywords: innovations, quality management systems, standards

1. Introduction During the industrialization era, it was considered that requirement standardization is of great importance when planning to increase production and to manufacture products in large numbers. Thus, initially standardization fostered entrepreneurship development. With time, the role of international standards as universal requirements constantly increased, they became an important aspect of international trade promotion. With provision of the compliance of the entrepreneurial activities, product or service with international standards, generally accepted requirements are observed, the products manufactured or services rendered are recognized in other countries too in responseto mutual recognition. At the same time, it is believed that standards impose restrictions on entrepreneurship. Compliance with uniform international standard requirements means losing national culture differences, entrepreneurs cannot be innovative and use own methods or specific requirements, the activities and processes within the enterprise need to be fully documented etc., which does not result in the innovation emergence, and entrepreneurs can make only minimal changes in production technologies or have difficulties in developing new products, because they are subject to strict technical requirements of standards. Today standards can be used on voluntary bases and favour international trade. Standards used in field of product manufacturing are called harmonized standards, and their aim is to provide essential requirement compliance. They support manufacturers’ activities. Standards are also very well known to entrepreneurs as quality management standards. It is a good tool how to adjust harmonized and well developed processes in enterprises. In the 1990s, it became increasingly popular to implement a variety of quality management standards in enterprises of different industries in Latvia as well as certify implemented quality management systems (QMS) to provide reliability to enterprise activities. In the era of globalization, the enterprise competitiveness and its ability to offer innovative products and solutions to the market is increasingly important. These factors are related to the enterprise entry into new markets, consolidation and increase of the enterprise’s current market share, and attracting new customers,

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Raimonda Liepiņa et al. all of which are indicators of successful entrepreneurship. It is often believed that in order to develop innovative products, solutions, services etc., it is important to operate in a free and unrestrained environment that promotes creativity, thus leading to new ideas on the enterprise development issues. Another common view is that innovations appear as a result of continued and complicated research, and are linked to scientific research. Research process is often unpredictable, because not always the created innovations and solutions are practical, easily applicable, profitable, and adaptable to a large number of manufacturing processes, or demanded in the market. It is often believed that the ability to create innovative solutions is comparatively low in those enterprises that have implemented QMS, because the business operations are standardized and strictly documented, as well as homogeneous. However, in recent years more and more noticeable progress has been observed in those enterprises that have implemented QMS, especially in creation of innovative products. So it can be argued that possibly standardization does not impose restrictions on the enterprise, but on the contrary – it fosters development and implementation of innovative solutions. In this perspective, research has not yet been conducted. The aim of this research is to reveal mutual relationships between innovations, standards and QMS. Research is based on gathered information about the influence of standards and QMS on innovation, and performed research. Research methods, such as analysis and synthesis of scientific literature, logical and comparative analysis, qualitative and quantitative research based on survey are applied in this research.

2. Literature review 2.1 Innovation Nowadays, independent, ready‐to‐change and innovation‐lead enterprises are highly valued. Innovation is not something that happens only in a relatively small group of high‐technology industries, or something that is driven by a small set of industries or technologies. Industries that are regarded as ‘traditional’ or mature or ‘low‐tech’ often generate substantial amounts of sales from technologically new products and processes (Mytelka and Smith, 2001). Over the past few decades, the concept of ‘innovation’ has been often used in entrepreneurship, and it has been defined in several ways and oriented on several purposes (Anderson and King, 1993; Bikfalvi, 2007; Greve, 2011; Zheng, 2006; Zollo and Winter, 2002). Shumpeter is considered the founder of the theory of innovative processes (Gallis, 2007). He explains the concept of ‘innovation’ as follows: “Innovation consists of any one of the following five phenomena: introduction of a new good, introduction of a new method of production, opening of a new market, conquest of a new source of supply of raw materials or half‐manufactured goods, and implementation of a new form of organization” (Lambooy, 2005), thus emphasizing the importance of innovations in the manufacturing process on the basis of new discoveries. Also Porter has pointed to innovations as one of the fundamental processes in ensuring the company’s competitiveness (Porter, 1991). Latvian National Development Plan and Programme for Promotion of Business Competitiveness and Innovation 2007‐2013 (2007) contain the following definition: “Innovation is the process by which new scientific, technical, social, cultural or any other ideas, developments and technologies are implemented as a competitive product or service demanded in the market.” This definition highlights innovation as a process under which new products or services, which are also competitive, can be developed by consistently linking the necessary components. At the same time, the British government has recognized and uses the following definition: “Innovation is successful implementation of new ideas in new technologies, design and other practices, which is a key success factor for business process development...” (Lundval, 2010). It is more oriented on thinking about success and focused on proposing something new. Sears and Baba (2011) point out that in literature this term is used to describe both creative activity and products and results of such activity. Gilbert and Birnbaum‐More (1996) suggest that enterprises can gain competitive advantage by using optimal timing in the introduction of innovations. As a result, authors find out that there are two concepts about ‘innovation’. Firstly, innovation is a process through which you can reach the defined aims. It is a process of value creation. Secondly, innovation is a new

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Raimonda Liepiņa et al. outcome of the process that fits to consumers, and by using it the enterprise can make a profit. According that understandable why entrepreneurs and society sometimes concept of innovation comprehend diverse. Companies mainly use innovative ideas created by researchers or those ideas that are really effective and innovative, and that also do not need a lot of time and resources to be developed. In practice, part of good innovators is large manufactories, another part of good innovators is small enterprises which started their business not so long ago and find brilliant ideas how to create or offer something new. This means that the main prerequisite for creating innovation is a focus on innovation implementation and effective usage of existing resources and environment that shall contribute to innovation emergence. Authors conclude that the role of innovations in business is essential.

2.2 Standardization The concept of ‘standardization’ is characterized by a variety of definitions. The meaning of ‘standardize’ in the Longman Active Study Dictionary of English (1988) is: “To make alike in every case”, thus describing that result of standardization is something similar. A similar definition is also included in the MacMillan English Dictionary for Advanced Learners (2007). The Oxford Advanced Learner’s Dictionary of Current English (2000) includes the following: “Standardization – standardizing; making regular” that conform to the previous definition. Ebert and Griffin (2000) describe ‘standardization’ as “The use of standard and uniform components rather than new or different components”, that means that standards also can be a new opportunity, a new solution. Van der Staay et al. (2010) note that: “Standardization can control the undesirable effects of factors that may affect results and that challenge replicability from study to study”, thus meaning that standardization is essentially consensus‐built, aiming at achieving, assuring, and maintaining a high level of repeatability, compatibility and quality of an experiment, and enabling valid comparison between studies. Oakland (1993) has opposite opinion about it: “Standardization does not guarantee that the best design or specification is selected”. The Latvian Law on Standardisation (1998) defines the concept of ‘standardization’ as follows: “Standardization is a set of activities aimed at defining general and repeatedly applicable principles for solution of existing or prospective challenges and thus creating conditions for optimal regulation of a particular industry”, thus indicating possible challenges and optimal regulation through standardization. The authors believe that the above definition is very comprehensive in that it refers not only to the goal of adopting uniform and repeatedly exploitable solutions applicable in the long term, but also recommends adopting these solutions to optimally regulate the industry. However, none of the above definitions has indications of standardization as a promoter of innovations. After assessing literature, the authors have concluded that standardization envisages applying uniform requirements. It is also focused on the development of the industry and business activities, raising the level of quality while focusing on resource efficiency. Taylor believed that in order to increase the efficiency of production and to create a general business upswing it is necessary to streamline and standardize manufacturing methods. Such an approach existed in the era of industrialization and resulted in production increase. As a result, it can be concluded that very detailed and technical standards promote a uniform production, limiting innovation emergence. As mentioned by Violet (2010), the generally accepted definition of the technical standard specifies that it is a repetitive application solution for questions mainly related to the realms of science, technical subjects and economics, with the objective of achieving an optimum degree of order in a given context. Technical standards can be used to advantage to make this innovative solution safe to use and to make everyone involved responsible for the results. With the development and expansion of the European Union (EU), the role of standardization increased. For this reason, more and more international standards were developed and implemented in various areas, because in accordance with the requirements of international standards, it was possible to export products and services to other countries without restrictions. To promote entrepreneurship, standards to be applied to comply with specific requirements were recommended without hindering innovations and entrepreneurs were encouraged to develop their operations using a variety of methods. At the same time, standards became voluntary requirements instead of being mandatory. Thus it can be concluded that the change in the approach of mandatory use of standards to their voluntary use contributed to the business operations and decision making, and often also to the acceptance of innovative solutions.

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Raimonda Liepiņa et al. Over time, international standardization bodies have also developed their understanding of standards and more actively seek to involve all stakeholders in the standardization process. As mentioned by the CEN‐ CENELEC, nowadays standards facilitate innovation, and they have identified 10 things standards can do for innovation (Penny, 2010): promote innovation; further the creation of new markets; ensure quality of products; support research; enhance visibility; facilitate trade; strengthen regulation; increase safety and environmental protection; be universally recognized; accelerate time to market. At the same time, there are a number of obstacles between the research/innovations and standardization, e.g., lack of knowledge and understanding of the role and benefits of standardization, in adequate resources and incentives, etc. Therefore, an integrated approach aimed at raising awareness of the benefits of standardization in the research and innovation process; transferring research results and outcomes of innovation activities into standardization; fully exploiting the functions of standards for research and innovation activities in order to increase the competitiveness of the EU member states. We may conclude that definite and standardized processes are sustainable foundation for creation of innovations.

2.3 Quality management systems Researchers Kaplanand Norton (2008) explain management system as follows: “By management system, we’re referring to the integrated set of processes and tools that company uses to develop its strategy, translate it into operational actions, and monitor and improve the effectiveness of both.” These authors have stated unequivocally that the management system consists of a limited set of activities and processes that the enterprise can use to its advantage in order to develop its business activities. Thus, properly and effectively implemented management system contributes to the enterprise’s ability to manufacture products or render services at a level that meets or even exceeds customer expectations. The standard EN ISO 9000 (2007) defines it as follows: “Management system – a system for development and reaching the policies and goals”, thus clearly indicating the orientation of the system on promoting the enterprise’s activities and development. A number of definitions of the term ‘QMS’ can be found in literature. According to Juran and DeFeo (2010) QMS is organizational structure, processes, procedures and resources required for implementing quality management. Bergman and Klefsjo (2010) express the following view: “QMS is a tool for quality management and improvement of the enterprise’s products and processes”. German researcher Pfeifer (1996) describes QMS as a set of actions that provide tangible or intangible product quality compliance with certain technological and economic requirements. Analysis of the concept ‘QMS’ leads authors to the conclusion that the QMS standard implementation shall ensure that the enterprise operations will be consistently structured, they will be organized and traceable, and there will be continual improvement. In addition, after the adjustment of the enterprise environment, more time can be devoted to other activities that focus on customer satisfaction, new product development, and innovative solutions. In order to improve business performance, nowadays most enterprises introduce QMSs. In recent decades, more and more companies choose to implement QMS in accordance with the requirements of the standard ISO 9001 and certify it. The certificate is a testimonial to the other market players about the enterprise’s efficient functioning and reliability of its manufactured products and rendered services. Furthermore, some authors (Dong‐Young et al., 2012; Llach et al. 2010; Lopez‐Mielgo et al., 2009; Terziovski and Samson, 1999) noted that there is a link between quality management and innovations. Therefore, authors conclude that there are strong link between QMS and standards. Lot of QMS requirements are prescribed in standards. At the same time, well organized environment, processes, resources etc. (overall ‐ enterprise management system) favour creating of innovations and we can say that QMS promote innovations.

3. Empirical study in enterprises of Latvia Authors did research based on survey to verify if there is a link between standards, QMS and innovations in practice. Survey involved 58% of enterprises rendering services, 21% manufacturers, 17% traders and 4%

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Raimonda Liepiņa et al. representing other type of activity. Most of them are large and medium enterprises with more than 251 employees (26%) and enterprises in which the number of employees is between 51 and 100 (21%). Other enterprises distribution according to the number of employees is the following: 12% with 6‐15 and 12% with 151‐250 employees, 8% with 101‐150 employees, 7% with 1‐5, 7% with 16‐25 and 7% with 26‐50 employees. To acquire more information about enterprises, the respondents were asked to answer questions about enterprise structure, relation to innovations, usage of standards (if QMS is implemented), and about interrelation between innovations, standardization and QMS. Firstly, the authors acquired more information about enterprises structure and relation to innovations. Despite the fact that most enterprises are large ones and 17% of them are manufactories, 53% enterprises have no specific division or employee who is responsible for research and development (R&D) issues. 19% of them have a number of employees and 12% have one department dealing with the R&D. 8% have a number of departments and 8% have one employee for this case. The authors conclude that these enterprises do not pay attention nor involve deeply in research and development issues. 54% of respondents answered that the enterprise they represent is creating innovative products or solutions and 46% mentioned that it is not. Innovation management is an organizational system that consists of a set of interrelated elements and is focused on achieving certain goals, thus it is important to have one or more employees or departments in the enterprise. To quickly and efficiently produce new products and render services, the enterprise has to set up an innovation‐friendly environment. Secondly, the authors acquired more information about standards usage in enterprises. In 71% of cases, the enterprises use standards in their daily activities. The authors would like to focus on the fact that this research revealed that 75% of enterprises creating innovative products or solutions use standards in practice that affirm that standards are helpful for development and innovation process. The interconnectedness of research and development and innovations with standardization is also confirmed by links and mutual sequence established by international standardization bodies (Penny, 2011), which describes that this integration is the best in case if innovation and standardization goes consistently step by step. Thirdly, the authors asked respondents about the implementation of QMS, its type and its certification status in their represented enterprise (see Figure 1).

Figure 1: QMS implementation and certification in enterprises As can be seen from Figure 1, 57% of enterprises have implemented QMS. From those who have implemented it, 71% of QMS are certified, because the entrepreneurs think the best way how to be sure that system works properly is to certify it. That also provides credibility to the enterprise and its activities. 76% of enterprises have been certified according to the standard ISO 9001 requirements, 14% according to the standard HACCAP and 10% according to other type of standard in the field of conformity assessment. Among enterprises who create innovative products or solutions, 70% have implemented QMS, thus affirming that standard helps for innovation process, and in no case restricts this process. At the same time, when asked if standards support innovation process, 51% of respondents answered that it could be party true, 26% of respondents think that standards do not support this process and 23% think that standards support innovation process. Also other

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Raimonda Liepiņa et al. authors’ research supports the view that implementation of QMS in the enterprise fosters creation of innovations, only the question is which of QMS is most suitable in each particular case (Castillo‐Rojas et al., 2012). Management systems researchers Prajogo and Sohal (2001) also believe in that. That affirms the authors’ view that standards promote innovations, because quality management standards contain the same requirements that are considered to be the main drivers of innovation and implementation of QMS adjusting processes as productive environment for fostering innovation creation. Fourthly, to be sure about the correctness of the defined aim, the authors asked respondents several interconnected questions about this topic (see Figure 2).

Figure 2: Interrelation between innovations, standards and QMS As can be seen from Figure 2, innovation is important for the development of business activities thus in some cases it functions as adrive for further progress. The next step is to range and systematizethe environment, because a coordinated and monitored environment is important for development and successful performance. In every enterprise, it is much easier to do activities in a ranged environment, there the processes are identified and described, and aim of the enterprise is outlined and clear perspective for innovations creation is given. This is also approved by the survey results. Respondents evaluated that the next step is ‐ well organized environment promotes creation of innovations. To ensure proper environment, the enterprise can use QMS. That is not in conflict with promoting or allowing creation of innovations. Respondents also agree in this case that a systematized environment promotes creation of innovation. Fewer respondents chose the answers that innovations promote standardized solution creation and innovations are based on standardized solutions. That affirms that the links between standardization and innovation are indirect, through ranged and systematized environment. Also the authors would like to note that every successful innovation more or less follows standardizing. Out of that, the authors deduced that standards help to provide the necessary environment for innovation process and innovation creation and after creation of innovations the product or service is more or less standardized. Authors offer Figure 3 to explain the link between standards, QMS and innovations deeply. The authors note that according to Figure 3, first of all necessity for development and innovation in the enterprise needs to be identified. To be sure about the existing situation in the enterprise and rules regulating the particular sphere, it is necessary to deselect related rules and standards, and need for them in the enterprise. It is important that concrete aims are given and proposals are drafted for possible research areas, if necessary scientific research plan for realization of activities can be worked out. According to the aims and research field, it is necessary to determine rules, standards that can be used, and appoint concrete methods for activities performance. Also it is necessary to assess the environment and find the best solutions for innovations and research performance. For ranging and systematizing environment, appropriate QMS needs to be implemented. After that, there can be full involvement in generation of ideas and performing research process with the aim to create innovation as a product or solution. When something new is created, it is

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Raimonda Liepiņa et al. possible to look for opportunities how to produce more products like the prototype or how to render the same service, according to that need to identify the opportunity to standardize the created innovation. Innovation process is not finished with that, also it is necessary to provide mutual recognition for the created product or process that the enterprise can export products and offer services also to clients abroad. That can be done through international standards, incorporating the created requirements or solutions into them. The authors think that innovation process is successful only if it is done like continuous improvement, according to that research results need to be evaluated and necessity for development and innovations to be found.

Figure 3: Consecutive links between innovation, standardization and QMS The authors conclude that innovation facilitates review of the current standard‐based solutions, standards help to implement and maintain QMS in enterprise, QMS promote innovations. As a result strong link and mutual relationship between innovations, standards and QMS are effective and efficient in long‐term for business development and creation of innovative actions.

4. Conclusions In recent years innovations have been discussed much. The necessity for its implementation and importance in enterprises has become increasingly more common as innovations aim to increase the enterprise’s operational efficiency. However, the main prerequisite for creating innovations is the environment. Authors considered that there is a link between standards, QMS and innovations, because standardisation contributes to overall development of enterprises and countries, standards can be applied and mutually recognized internationally. Voluntary use of standards is particularly important; the entrepreneur can choose the most appropriate requirements and method to achieve the desired result. At the same time, using standards (especially quality management standards) can range and systematize the business environment, organize and coordinate processes in a very structured way, thus helping to carry out innovations. Simultaneously, implementation of QMS in the enterprise ensures that the activities will be structured sequentially, they will be well‐organized and traceable, and continual improvement will be used. If the enterprise environment is well‐organized, more time can be devoted to other activities, such as innovation process. The research results affirm that enterprises using standards in their routine activities also implement and use QMS for structuring the environment. In particular, 75% of the enterprises, that create innovative products or solutions, are using standards in practice. 70% of them have implemented QMS. That affirms QMS relation to innovation process. 51% of respondents answered that standards support innovation process partly, but survey results affirm that most enterprises creating innovative products or solutions actually use standards and it helps them to organize the environment, systematize processes, focus on the defined aims and create innovations. They use standards unitising their importance in innovation process. Authors also discovered consecutive links between standards and innovation process through the survey and proposed a consecutive solution how to realize it. Thereby the research has an indirect impact on society, and enterprises realize continuous development. As a result, the authors conclude that standardization and QMS contribute to the creation of innovative solutions, because if the enterprise environment is adjusted and its operations are

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Raimonda Liepiņa et al. structured, more time and resources can be devoted to innovations, thus favouring innovation process. Application of standards and QMS facilitate entrepreneurial activities for promotion of new product development and application of innovative solutions by well‐recognized and attested activities. At the same time the link between innovations promoted by standards and QMS, the enterprise’s development and competitiveness are prerequisites to mutual growth.

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Achieving Performance of Organization by Developing a Model of Innovation Management Andreea Maier1, Marieta Olaru2, Dorin Maier2and Mihai Marinescu2 1 Technical University of Cluj Napoca, Romania 2 The Bucharest University of Economic Studies, Romania maier_andreea@ymail.com olaru.marieta@gmail.com dorin.maier@gmail.com mihaimarinescu35@gmail.com Abstract: Today, any organization – regardless of the type of activity – must be prepared to face radical and continues changes, innovation becoming a condition of survival in a globalized market. The importance and the need for innovation result from its contribution to enhancing the productivity, competitiveness, economic performance and social objectives. Few managers have a wider vision which includes innovation, allowing a better performance of the activities. Companies need radical changes not only for products or services, but also for their business strategies. Unfortunately there is still no common understanding (and correct) of the term innovation among managers. Furthermore, not all managers are aware of the need for innovation. Under these conditions, increasing the adaptive processes of firms (through innovation) to meet the needs and performance requirements is difficult to accomplish in the absence of a systematic framework. To overcome this drawback, the authors propose a framework for innovation management, focusing on marketing innovation, product innovation, process innovation, networking innovation, human resources development in innovation, administrative innovation, strategic innovation and innovation of vision and policy. This framework aims to cover all the major components of a business system, to reach the real performance an organization. Among the many advantages of this framework include: the possibility of identifying the degree of innovation in any time and in any sector of the organization; creating an environment where innovation is a practice that occurs naturally and possible involvement in the innovation process of each stakeholder; analysis of ideas is not only to identify strengths and weaknesses, but also suggest ways to improve ideas such as ways to avoid pitfalls and increase the value of the idea. Keywords: innovation, innovation management, model for innovation management, organization’s performance, framework for innovation management

1. Introduction The innovation is considered as the growth engine of an organization, the process that adds value or comes with solutions to the problems in a new way. To measure the degree of innovation is necessary because through this, the organizations have the capacity to establish the extent to which the objectives were achieved, to evaluate their performance, and to elaborate the future initiative in order to improve their performance (Adamides, 2006; Bamber, 2000; Edwards, 2005; Lam, 2004). Innovation being something new has inherently some risks, it is hard to predict who will win or if there will be something to win. The creation and the development of new ideas need some risks taking, especially financial risks, based only on a hope of turning them into profitable innovations. Nevertheless, no meter how good the innovators are at the innovation game, many of the results of innovation processes will cost a lot of money and will not bring any gain. There are many unknowns when engaging in an innovation process, you never know what competitors plan to do, or what changes come on the market (Bessant, 2005; Drucker, 1985; Elenkov, 2005; Fagerberg, 2004). While there are a wide range of possible innovation objectives, nothing is guaranteed to be the right one to develop that will inevitably lead to success. It is therefore desirable to develop a framework for the innovation, which might be used to create changes, or to respond to the changes introduced by others. This is an approach that requires modest and disciplined risk taking, requires to accelerate learning so that when it is time for taking higher risks, you can turn to the information already learned. In this way, innovation reduces the overall risk for the future of the organization by creating new possibilities whose time may come. The approach of innovation takes into account in management practice worldwide (public sector, private sector, academic and the third sector). To achieve this, which is a transformation, we need a culture that values innovation, not just as an end in itself, but how it can improve business performance, favors economic

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Andreea Maier et al. growth, and enhance sustainable quality of life for all. To achieve growth, we need more than the creation of new ideas, new products, processes and services that lead businesses to create jobs and wealth. Innovation is the successful exploitation of these new ideas (Adams, 2006; Anastasiu, 2009; Anastasiu, 2012; Arpaci, 2010; Bessant, 2005; Drucker, 1985; Elenkov, 2005; Fagerberg, 2004; Maier, 2012; OECD, 2005, Olaru, 2011; Purcărea, 2011) Performance measurement is necessary because through it, the organizations have the capacity to determine the extent to which objectives have been achieved, to assess their performance, and develop future initiatives to improve their performance. The role of an organizational performance measurement system is to verify the organization's progress in achieving the targets, to notify individuals the aspects that are important to the success of the organization and the identification of areas requiring improvement. A performance measurement system enables the development of efficient and effective development strategy because no matter how favorable are the achieved results by the organization there is always room for improvement (Gavrea, 2010; Pearce, 2004; Rose‐Andersen, 2005; Sandvik, 2003; Stoleriu, 2009; Tidd, 2006; Uusitalo, 2010; Vachhrajani, 2008).

2. Stages of the innovation process in each type of innovation Innovation process can be seen as a process that takes place in five steps in each of the eight micro‐innovation systems (Figure 1). If we analyze the five steps of the model is clear that there are three distinct segments namely context (input), Research & Development (process) and selling (output).

Figure 1: Stages of the innovation process in each type of innovation (proposal of the authors) The first two stages, generating the idea and creating a base of ideas, equivalent with a database, define the context in which innovation starts. To generate innovative ideas there must be an innovative culture implemented within the company. Even if generating the idea is the first step of innovation, the storing of all good ideas into an innovative database, is a very important aspect that can bring multiple benefits for the organization. The next stages, the idea selection and the development and testing the idea, are the heart of innovation process. The third stage includes operations of filtration and selection of the best ideas given in the current internal and external context and gathering the necessary information for the next stage of the innovation process, where the ideas will be developed. The fourth stage, developing and testing the idea, is composed of two phases: the first phase is the phase where the resulted ideas from the selection stage of innovation is developed and prepared for testing; and the second phase where the developed idea is put to the test and prepared for the next steps of innovation. The fifth stage of innovation process, is the last step of the process, and consists of launching and commercialization the idea on the market, this represent the

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Andreea Maier et al. economic reward, as output of the innovation process, a stage where innovation process gains economic value for organizations that create and manage them.

3. The proposal of a framework for innovation management The result of a success innovation process is to create a new product or an improve one so the customer requirements to be fulfill and this will add value to the organization. In order to have a successful innovation process, organizations must have a simple but complete framework for managing the innovation, a framework that covers all areas of innovation. In this context, the final beneficiaries of the innovation management framework are organizations, so by using the QFD (Quality function deployment) method, we consider them the customers, and for them we have identified a set of requirements for innovation performance, presented in table 1. Quality function deployment (QFD) is a “method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.”, (Akao, 1994) as described by Dr. Yoji Akao, who originally developed QFD in Japan in 1966, when the author combined his work in quality assurance and quality control points with function deployment used in value engineering. QFD is designed to help planners focus on characteristics of a new or existing product or service from the viewpoints of market segments, company, or technology‐development needs. The technique yields charts and matrices. QFD helps transform customer needs (the voice of the customer [VOC]) into engineering characteristics (and appropriate test methods) for a product or service, prioritizing each product or service characteristic while simultaneously setting development targets for product or service (Akao, 1990; Börjesson, 2012; Hauser, 1988; Joseph, 2009). The 3 main goals in implementing QFD are (Akao, 1990):

Prioritize spoken and unspoken customer wants and needs.

Translate these needs into technical characteristics and specifications.

Build and deliver a quality product or service by focusing everybody toward customer satisfaction.

Since its introduction, Quality Function Deployment has helped to transform the way many companies (Akao, 1990):

Plan new products

Design product requirements

Determine process characteristics

Control the manufacturing process

Document already existing product specifications

We have chosen the QFD method, a method that already proved his potential, for a better satisfaction of the customer requirements, the organizations, and a better integration of these requirements in the general framework for innovation management. Table 1: Requirements for the innovation performance (proposal of the authors) Requirements Recovery rate of the capital / innovation Return of economic rate Rate of return of the investment Recovery of investment period Growth rate of turnover The rate of increase of the market The growth rate of new products Operating profit rate Asset recovery rates Operating profit margin Productivity rate Business solvency Financial internal rate of return

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Andreea Maier et al. For each of the eight innovation systems we have identified a number of indicators to measure it, and with these indicators, we have used a cascading Houses of Quality so the requirements of the customers, one of the critical success factors, can be translated from vague statements to defined attributes. Because of the large amount of data that we used and analyzed, a big number of indicators, many QFDs, and because of the limited space available in an article, we will present only the general scheme of cascading houses of quality (Figure 2).

Figure 2: The general scheme of Cascading House of Quality method (proposal of the authors) We started with ranking the customer requirements, using the AHP method. The analytic hierarchy process (AHP) is a structured technique for organizing and analyzing complex decisions. The AHP helps decision makers find one that best suits their goal and their understanding of the problem. It provides a comprehensive and rational framework for structuring a decision problem, for representing and quantifying its elements, for relating those elements to overall goals, and for evaluating alternative solutions. Users of the AHP first decompose their decision problem into a hierarchy of more easily comprehended sub‐problems, each of which can be analyzed independently. The elements of the hierarchy can relate to any aspect of the decision problem—tangible or intangible, carefully measured or roughly estimated, well‐ or poorly‐understood— anything at all that applies to the decision at hand (Saaty, 2008). With the innovation performance requirements and the indicators of Vision and Policy innovation, we form the first QFD. The next step is to use the indicators of Strategic Innovation and formed the second QFD. Further on the third, fourth and fifth QFDs were formed using the indicators for the Networking innovation, HR development for innovation and Administrative innovation. The results from these three QFDs we used them to form the sixth QFD together with the indicators of the Process innovation. From this six QFD we continued to the indicators of Product innovation and formed the seventh QFD. In the end, we form the eighth QFD, with the indicators of marketing innovation. After completing, the cascade houses of quality, we have obtain a set of the most important indicators to measure the innovation performance at organizational level. We have selected from all indicators the top five indicators for each type of innovation (table 2). The final list of indicators were set by analyzing the eighth QFDs and choosing the most important indicators in relation with the performance requirements of the innovation, so we proposed a number of 40 indicators to measure the innovation in an organization. Having this reduced set of indicators, we integrated them in to the general framework for innovation management, presented in Figure 3.

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Andreea Maier et al. Table 2: The final set of measuring indicators for innovation performance (proposal of the authors) Indicators for marketing innovation The number of significant changes made to the design and packaging of products The number of new customers Number of innovations on for increasing market share The percentage of increase in profits as a result of innovations in marketing Innovation in marketing profitability (profit/capital invested obtained) Indicators for product innovation The amount of revenue generated from the new product The profitability of the investment in the development of a new product Number of products with the latest technological innovations Sales of new products Number of products, technologies products and techniques with demonstrable impact Indicators for process innovation New methods of cost reduction New method of reduction the time to meet clients or suppliers Speed adoption of the latest technological innovations The rate of change in processes, techniques and technologies Process efficiency (ratio between effort and result) Indicators for networking innovation The number of new products and services developed within the network The profitability of network Number of cooperation between universities and industry To what extent there is co‐financing within the innovation network Interconnectivity between company goals with those of the network Indicators for HR development for innovation The number of researchers in the company The number of people participating in all aspects of the innovation efforts/total company employees The degree of training of the people involved in business research Continuous training of staff involved in business research Stimulation of staff research Indicators of administrative innovation The number of managers of innovation The number of managers involved in the innovation process The number of new ideas coming from inside the organization New methods for assessing issues relating to innovative process New methods of evaluating the economic value of intellectual property rights Indicators of strategic innovation The novelty of business model The effectiveness of business model The maturity of the strategic alliances with selected competitors The maturity of the company's innovation strategy Indicators for policy and vision innovation The frequency of analysis/review of the company's vision The frequency analysis of the innovation of company policies The number of hours allotted for proper substantiation of the innovation policies of the company The degree of originality of the vision business/niche The uniqueness "Value Proposition" of the company

For creating a complete framework for innovation management, we have started from a proposed model of innovation management (Brad, 2008; Maier, 2012). We have pointed out the key components of this model in order to use them in achieving a framework to manage innovation at the organizational level. The purpose of this framework is to identify the true performance of an organizational by covering all major components of a business system. Five horizontal macro innovation systems are involved in this model of innovation management: individual innovation system, organizational innovation system, regional innovation system, national innovation system, and communication innovation system. In order to achieve the objectives all five micro innovative systems need to be interconnected and work together. Each of the five macro‐innovation system itself consists of a set of eight micro‐innovation systems that are vertically integrated as: vision and policy innovation, strategic innovation, networking innovation, human resources development for innovation, process innovation, product

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Andreea Maier et al. innovation and marketing innovation, all this leading to innovation performance (Brad, 2008; Chetty, 2010; Chiaroni, 2011; De Jong, 2006; Dickson, 1998; Freel, 2005; Galanakis, 2006; Julien, 2004; Kafouros, 2008; Leitner, 2010; Li, 2011; Lin, 2010; Luecke, 2003; Olaru, 2011; OECD, 2005; Purcărea, 2011; Stoleriu, 2009). The model shows that all stakeholders should innovate to achieve high level of performance for the overall system. For each category of stakeholder the specific solutions for each innovation system must be developed (Maier, 2012; Brad, 2008).

Figure 3: The proposed framework for innovation management (proposal of the authors) The proposed framework for innovation management in an organization, have in the center the innovation performance. In order to achieve the innovation performance we need to divide general innovation in small parts, each part dealing with one side of innovation. We proposed eight parts where innovation is present at the organizational level: marketing, product, process, networking, HR development for innovation, administrative, strategic and vision or policy. These are the components where the need for innovation, which can be translated into market advantage for the company, can and must be present. For each of these eight parts we propose a measuring system, consist of specific indicators. A company can start to use this framework by measuring the degree of innovation, using the innovation indicators, in every sector of the organization. After the degree of innovation is established the managers can take measures to improve their innovative potential and thus reaching their innovation performance. Innovation performance leads to multiple benefits like customer satisfaction, society satisfaction and to employee satisfaction also.

4. Conclusion In the current economic context, where markets become more sophisticated and demands companies to produce their products more quickly and with higher quality, as the customer requirements are increasing, innovation is the way to ensure the survival and development of organizations.

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Andreea Maier et al. Even if in the literature the number of papers regarding innovation is increasing, there still are managers that do not understand the innovation process, or they do not know how innovative the companies are, or in which sector of the organizations measures must be taken. In this context, by proposing a set of indicators for measuring innovation, the degree of innovation in any sector can be identified and the innovation performance can be measured. By measuring the innovation performance, the week points of innovation can be seen, so mangers can take measures to improve the degree of innovation. Beside the advantage of obtaining the degree of innovation at any time and in any sector of the organization, the framework for innovation management has other advantages, such as: setting up of an environment where innovation is a practice that occurs naturally; creating ways of improving ideas, in order to increase the potential added value they might bring. The framework presented in this paper contributes to the development of theoretical and practical knowledge of innovation management in an organization.

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Integrating Concepts of Creativity and Innovation ‐ a key to Business Excellence Dorin Maier1, Marieta Olaru1 and Andreea Maier2 1 The Bucharest University of Economic Studies 2 Technical University of Cluj Napoca, Romania dorin.maier@gmail.com olau.marieta@gmail.com maier_andreea@ymail.com Abstract: Awareness, becoming more pronounced in the last decade, of the need for innovation has translated into higher performance management requirements. The current economy situation compels companies to adapt, seeking new avenues of performance and the use of creativity can cause significant changes by finding more efficient ways to develop and execute their work. The advantage of the organizations in a globalized economy is innovation, and the base for innovation is creativity so we can say that the existence of a performance organization lies in its creativity. Creativity is the engine of innovation and the key factor for personal, occupational, entrepreneurial and social development and the welfare of all individuals in society. Creativity is seen as the process of generating ideas that will lead to innovation in order to obtain performance. This paper deals with integrating, in a specific framework, the concepts of innovation and creativity, based on a mix between innovation management and creativity management, in predicting the organizational performance. This study aims to improve the understanding of the relationship between innovation and creativity and to achieve two major objectives. The first one is related to analysis of the link between innovation management and creativity management, thus creating a bridge between creativity and innovation, which are often approached separately. The second objective of this study is to analyze the impact of integrating innovation management and creativity management, which have been considered as primary sources of competitive advantage. This paper contributes to the development of theoretical and practical knowledge of management of an organization in order to systematically improve the level of innovation and creativity. Keywords: creativity, innovation, innovation management, creativity management

1. Introduction In today’s economy, characterized by uncertainty, risk and dynamism, creativity as an innovation driver becomes a vital source of competitive advantage for companies. Considerable evidence suggests that creativity makes an important contribution to organizational innovation, effectiveness and survival. Therefore, encouraging creativity is a strategic choice that firms have to make. Both creativity and innovation involve the generation of novel ideas, yet the two concepts are not identical. While, according to some authors, creativity is usually associated with the generation of new ideas as an end to itself, innovation emphasizes the application of new ideas to address particular problems. As reported by Amabile: “All innovations begins with creative ideas. We define innovation as the successful implementation of creative ideas within an organization. In this view individuals and team's creativity is a starting point for innovation; creativity is a necessary but not sufficient condition for the innovation". As creativity is an important source of organizational innovation and competitive advantage, organizations are increasingly seeking to foster it (Nayak, 2011). In order for an organization to remain relevant and to compete in pursuit of its mission, managers of organizations must pay attention to both ends of the process, generating frequently creative ideas and through an innovation process to realize the potential value of those ideas (Martins, 2002).

2. Current approaches regarding creativity and innovation Today's competitive environment requires organizations to follow complex performance dimensions, especially in creativity and innovation (Brad, 2008). Creativity and innovation are closely related constructs that share significant overlap in characteristics. However, in essence, creativity is the generation of novel and useful ideas, primarily at the individual level. Innovation is the process by which these ideas are captured, filtered, funded, developed, modified, clarified, and eventually commercialized and/or implemented. Creativity is that fuels the innovation pipeline (Martins, 2002).

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Dorin Maier, Marieta Olaru and Andreea Maier The challenge for an organization to gain competitive advantage is to exploit market opportunities and innovation, to deliver what the customer wants in the quickest, most efficient and economic way. Innovation in the current economy is about everything that has an impact on customer satisfaction and needs extra value: technologies, products and customer service. Studies in the field, such as (Zhao, 2011) considers creativity as a thinking process that helps generate ideas, while innovation is focused on the practical application of ideas. Innovation is the only way that organizations can create more value (Dobran, 2009). Armed with limited resources to adopt new ways of working and due to increasing pressures and market fragmentation, SMEs must seek ways to increase their competitiveness (Leitner, 2010). Creativity and innovation are two key management philosophies, which have been applied successfully in large organizations in the private sector. Is it possible that creativity and innovation in SMEs are equally successfully applied? So far, the two concepts have been separately addressed and most SMEs have not been able to obtain maximum profit from their integration. This paper aims to study the importance of integrating creativity and innovation and explore ways to integrate them so that effective management of innovation, combined with creativity principles, provides a framework which will determine the success of an organization. Creativity Today, a large number of companies are in an accelerated process of organizational and management changes, redefining the place and role which they have on the market (Leitner, 2010). With increasing competition, survival and development of companies are possible only when enough efforts (including financial aspects) are being done to provide products that fully satisfy customers, this being a fundamental strategic objective for each company (Dobran, 2009). Creativity is important in a good part of organizational life. Creativity enables organizations to anticipate change, create new technologies, products, and new operational methods. Creativity grows best in a dynamic and tolerant atmosphere (Leitner, 2010). Creativity has been conceptualized as: (a) the individual personality traits that facilitate the generation of new ideas, (b) the process of generating new ideas, (c) the outcomes of creative processes, and (d) the environments conducive to new ideas and behaviors. These perspectives led to multiple definitions of creativity. For Martins and Terblanche (2003), it is the capacity to generate new and valuable ideas for products, services, processes and procedures; for Sternberg (1999), the ability to produce work that is both novel (i.e., original) and appropriate (i.e., useful); for Amabile (1996), the set of qualities of products or responses that are judged to be creative by appropriate observers. Creativity is a complex and diffuse construct, difficult to define (Dobran, 2009). Creativity and innovation involves the translation of our unique gifts, talents and vision into an external reality that is new and useful. Creativity refers to all activities that involve the generation of ideas. Innovation refers to the implementation of viable business ideas generated as a result of the organization's creativity‐supporting culture and structure. There is no one definition of creativity and innovation that everyone can agree with. Creativity researchers, mostly from the field of psychology, usually claim that being creative means being novel and appropriate. We are interested in creativity and innovation for durable product design. In this context creativity and innovation should lead to the development of novel design concepts which provides desired durability without compromising other attributes of the product (Goel, 1998; Alves, 2007; Filipczak, 1997; Lock, 1995, Cobîrzan 2012) The three basic questions need to be answered in order to understand creativity are: How, Who, and When (Martins, 2002).

How is related to the process, receiving the most attention, focuses on the mechanisms and phases involved as one partakes in a creative act.

A second aspect of creativity is the creative person(s). Who deals with the personality traits of creative people, the dynamic group role of cross‐functional teams and organization.

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When creativity and innovation are applied in terms of the product development cycle is very important for its usefulness and value.

Creativity is a psychic process by excellence human which consists in combining in an original form the knowledge gained through study, observation and experience, a combination that leads to the development of a product, a result, useful to the society, a certain period of time (Rabontu, 2010). Innovation Innovation, a dominant factor in maintaining global competitiveness, is a subject frequently discussed in scientific literature (Ko, 2010; Legardeur, 2010; Li, 2011; Vachhrajani, 2008; Sikdar, 2010; Mitussis, 2010; Wu, 2008; Damanpour, 2006). The notion of „innovation” from an economic point of view was analyzed for the first time by Austrian scientist J. Schumpeter (Leitner, 2010) in the first decade of the twentieth century in his work „The Theory of Economic Development” (Mohini, 2004 ), where innovation is defined as "all changes in order to implement and use new types of products, means of production and transportation markets and forms of organization of production" (Hidalgo, 2008). Within innovation, as it is defined by Schumpeter, it is accepted that there are five types of activities: the creation of a new product or substantial improvement of an existing one, the introduction of new production methods, opening of a new market, developing new sources of raw materials, and creating / changing an industrial company. Lately, it may allow the emergence of the sixth activities: creating a new image of the organization (Butlin, 2004). According to the domain researches(Brad, 2008 Brad, 2007 Chakravorti, 2003 Byrd, 2003; Silverstein, 2005; Ettl, 2006; Luecke, 2003; Mohr, 2005; Bessant, 2005; OECD, 2005; Chesbrough, 2003; Milbergs , 2007, Aciu 2011, Edwards, 2005; Anastasiu, 2009; Anastasiu, 2012; Olaru, 2011; Purcărea, 2011; Stoleriu, 2009), positioning innovation at work in a proper way requires an understanding of the determinants of innovation (Figure 1).

Figure 1: Determinants factors of Innovation (proposal of the authors)

The leaders should promote innovation in an entrepreneurial culture within the organization, being personally involved in establishing and implementing clear and relevant methods for supporting innovation. Leadership is particularly important in the context of innovation, the nature of innovation and the plan to achieve this objective must be communicated clearly and repeatedly. Leaders must have a vision for innovation and be able to share it.

Organizational infrastructure if it does not support innovation, then innovation cannot be a strategy to achieve performance. Areas of interest include organizational infrastructure, of its objectives, strategy, performance management and innovating their support. Organizational infrastructure must support innovators, especially when taking out a new product on the market is a vital moment for the future of the organization.

Innovation management tools can be defined as a set of tools, techniques, and methodologies to support the innovation process and help companies to face new challenges.

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The contribution of knowledge to innovation must be managed and protected. Knowledge management is concerned with the identification, translation, sharing and exploitation of knowledge within an organization. One of the key issues is the relationship between individual and organizational learning, managers must understand new processes, products and businesses.

Innovation is the specific instrument of a business manager, the means by which it operates change as an opportunity for a different business or different services (Drucker, 2002), is a transformation process of ideas and the opportunity to put these ideas into practice, a rationally planned process (Arpaci, 2010), an non‐linear and interactive evolutionary process, that requires a intensive communication and cooperation between different actors (Aouad, 2010), a process in which the organization creates and defines problems and then actively develops new knowledge to solve them (Caloghirou, 2004).

3. The characteristics of creativity and a framework proposal for integrating the creativity and innovation in SMEs Both creativity and innovation play vital roles for businesses to stay competitive on the market. Both concepts are mutually dependent ‐ an organization must be innovative in solving problems and for this it must start the first phase, the creativity, in order to deliver a sustainable innovation, as it can be seen in Figure 2. However, both creativity and innovation are the pillars that support the competitiveness of a business. Such integration will provide to the enterprise the ability to be creative and the potential to innovate in market competition.

Figure 2: The main characteristics of creativity that lead to innovation (proposal of the authors) In case of creativity we have identified a number of characteristics that influence the creative potential of an organization. One of the characteristics refers to the creativity techniques, that can enhance the creative potential of a task and for this is necessary to establish the techniques needed for task like generating, evaluating and selecting. Another characteristic of creativity is the knowledge management, based on the fact that the ability to be creative is closely related to the person’s knowledge, so is very important to know what knowledge is needed to support a particular creative task. The resource allocation aspect is another characteristic that managers of an organization have to consider when dealing with a creative task, so is very important to establish who should perform every task and how much time and budget are needed to resolve the creative task. Another important characteristic of creativity is regarding the creative freedom, so the freedom of a creative person in order to carry out a task need to be established. This freedom may conduct to a higher creative

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Dorin Maier, Marieta Olaru and Andreea Maier potential but in the same time at greater risk that a creative task would not be ready on time or remain in the initial budget, time and budget being two of the most important constrains of the creativity. The motivation characteristic for creative task is another characteristic that influences the creativity, knowing that motivation is the most important factor that influence the creativity of a person and the creative capacity of the persons is the base for organizational creativity. In this term is important to know what incentive motivates the creative people, what are the needs of creative people, what kind of feedback they expect. All the characteristic of the creativity, if they are well understood and applied within an organization, will conduct final to innovation and if the innovation process is carried out the chances of success for the company will increase significantly. Knowing that a relationship exists between creativity and innovation, why shouldn’t be an integrated framework available? The present approach uses the principles of innovation and creativity to create an integrated framework. Seven factors determine the success of creativity and innovation in an SME, as shown in Figure 3. If creativity is defined as a brilliant idea, then, according to Figure 3, the innovative activity represents bringing creativity on the market, transforming it into something profitable.

Figure 3: Integrated framework for creativity and innovation (proposal of the authors) In the proposed integrated framework of creativity and innovation the authors of this paper, take into consideration the most important factors that influence both creativity and innovation, thus influencing the integrate framework. One of the first factors that determine a company to be creative and to innovate is the customer needs. For any organizations understanding the needs of internal and external customers, improving customer service and flexibility in customer service, must be a priority and therefor fostering creativity and innovation is essential to their ability to offer high quality products and services. Understanding the need for creativity and innovation, as a condition of survival in today’s economic context, can be done only with the management support that has a specific role in promoting creativity and innovation. The management can open communication between employees, managers and different departments. The tolerance of mistakes made in the creativity and innovation process, the allocation of resources and

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Dorin Maier, Marieta Olaru and Andreea Maier equipments and the adaptation of rules and regulations are another aspects that are very important for proper development of creativity and innovation and which depend on the management support. The factor strategy and policy, consist of the vision and mission of the company towards customers and marketing and towards integrating the core values with activities, results and employees. Also the reaction of the company to changes and the future perspective of knowledge management are part of the strategy of an organization. It is important within a company that all employes have a clear image of the final result, of the purpose of their work, especially in the case of creativity and innovation, the final purpose of the work is a characteristic that can make a person to overcome the obstacles that will meet during the period of generating the new idea and placing on the market. Another factor that influences the degree of which creativity and innovation are promoted within the company is trust relationships. Having a high degree of trust between employees and managers make peoples to feel emotionally safe and this should lead to an atmosphere in which creativity and innovation can be developed. To generate new ideas a behavior that encourages innovation is important to exist in the organization, this conduct to the encouragement to generate ideas, selling good ideas, giving credit for ideas, encouraged to take initiative and to find new ways of solving problems. The existence of an innovative behavior is influenced by the working environment. In this working environment every conflict should be handled constructively in order to promote creativity and innovation. It is important for the employees find themselves and promote the creativity and innovation, and for this better work methods need to be developed. The concept shown in Figure 3 representing the two concepts integrated within a company. Creativity, that feature of thinking that uses the inventive experience and acquired knowledge, offering solutions and original ideas. It is possible to create real products or purely mental one, representing a breakthrough in social plans. The main component of creativity is the imagination but the real value creation also requires motivation, desire to achieve something new, something special. The innovation and the ability to create added value. This distinction is important because it enables a more nuanced analysis of the potential for companies to generate value for stakeholders (Maier, 2012; Alves, 2007; Filipczak, 1997; Lock, 1995) Business sectors current focus on creativity as a competitive tool is completed with an emphasis on innovation; creativity is necessary but insufficient. For managers, the following question arises: what should we focus more on: creativity or innovation? If we look at creativity as a criterion to withstand market, managers must learn how to manage creativity and innovation at the same time. Creativity is usually associated with the generation of new ideas as an end to itself, innovation emphasizes the application of new ideas to address particular problems (Martins, 2002).

4. Conclusions There is an obvious connection between creativity and innovation, for some the concepts are the same, for others there is a clear distinction between these two concepts. It is clear that without creativity there cannot be innovation, but also without the process of innovation, creativity will not bring the added value for the organization. Creativity in relation to innovation, in an organization, can bring significant advantages in today’s economic environment. A creative organization can come with new ideas and concepts that through innovation process can continually develop new products or services, thereby surviving and evolving will be possible regardless of the economic context. Creativity and innovation can be harmoniously implemented; each of them has a unique role in determining the performance of different types of organization. SMEs ability to simultaneously integrate and capitalize both creativity and innovation will determine their competitiveness and sustainability. Therefore, companies must learn how to exploit the potential benefits arising from integrated creativity and innovation, and the

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Dorin Maier, Marieta Olaru and Andreea Maier challenge will be to develop an integrated model of innovation and creativity management, dedicated to SMEs.

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Dorin Maier, Marieta Olaru and Andreea Maier Nayak, C. (2011), A model of creativity and innovation in organization, International Journal of Transformations in Business Management, Vol. 1, No.1. Olaru, M., Stoleriu, G., Langa, C. (2011), An innovative evaluation model for SMEs global performance in relation with the efqm excellence model, in: Editor Costache Rusu, Proceedings of „The 7th International Conference on Management of Technological Changes” ‐ MTC , 1‐3 September 2011, Alexandroupolis, Grecia, indexed in the ISI Web of Knowledge, ISI Proceedings Database, www.isiwebofknowledge.com Organisation for Economic Co‐operation and Development (OECD), (2005), Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, The Measurement of Scientific and Technological Activities. Purcărea, I., Olaru, M. (2011), Paving the Path for Innovation: the case of Romanian SMEs, În Proceedings of „The 6th European Conference on Innovation and Entrepreneurship ‐ ECIE 2011”, 15‐16 September 2011, Aberdeen, Marea Britanie, Published by Academic Published by Academic Publishing International, http://www.academic‐ conferences.org/ecie/ecie2011/ecie11‐home.htm, indexed in the ISI Web of Knowledge, ISI Proceedings Database, www.isiwebofknowledge.com Rabontu, C. (2010), Creativitatea si inovarea‐ posibilitati de contracarare a crizei economice, Analele Universității “Constantin Brâncuşi” din Târgu Jiu, Seria Economie, Nr. 3 Sikdar, A. (2010), Getting the customer interested in your innovation: role of distribution and promotion strategies, Business strategy series, vol 11, pg. 158 – 168. Silverstein, D., DeCarlo, N., Slocum, M. (2005), In‐sourcing Innovation: How to Transform Business as Usual into Business as Exceptional, Breakthrough Performance Press. Longmont Stoleriu, G., Olaru, M., Purcarea, I. (2009), Developing an innovation‐oriented organizational culture for Romanian Small and Medium, in: Editor Costache Rusu, Proceedings of the „The 6th International Conference on Management of Technological Changes”, 3 ‐5 September 2009, Alexandroupolis, Greece,, Vol. 1, pp.417‐ 420, indexed in the ISI Web of Knowledge, ISI Proceedings Database, www.isiwebofknowledge.com Vachhrajani, H. (2008), A symbiosis of Quality and Innovation : Creating an integrated model for SMEs, QUALITY Striving for Excellence, National Centre for Quality Management, vol. 5, nr. 6. Wu, H., (2008), When does internal governance make firms innovative?, Journal of Business Research, vol. 61, pg. 141–153. Zhao, F. (2011), Managing Innovation And Quality of Collaborative R & D, The Centre for Management Quality Research, RMIT University

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Entrepreneurs’ Access to Public Finance as a Gendered Structure Case Finland Petra Merenheimo University of Lapland, Rovaniemi, Finland petra.merenheimo@ulapland.fi Abstract: This paper discusses entrepreneurs’ access to finance in the context of Finnish public investment funding. Due to the growing economic relevance of SMEs and the rising proportion of female entrepreneurs worldwide, this access has become the focus of increasing attention. A significant number of studies have identified and reported that female entrepreneurs use less financing than male counterparts. Efforts by governments to provide financing in areas such as the SME sector that are considered risky by banks are a relevant topic for research. In this paper, I study access to finance from the constructivist structural and the gender perspective. Using Pierre Bourdieu’s concepts of field and capital, I explore the principles of Finnish direct and indirect public investment funding that construct SMEs’ access to finance. My data comprise legislation and guidelines for public funding, the application forms for two investment funding instruments (Development Aid for Small and Medium Sized Companies (SMEs) and Employment‐Based Investment Aid), and regional statistics (for Lapland) on funding and gender‐based segregation of entrepreneurship. The findings reveal hierarchical power relations between physical over non‐physical assets and technological over non‐technological; these relations construct restricted access to finance. The study uses regional funding and segregation statistics to show that the effects of such a structure are gendered and explains the gender gap by means of the Bourdieusian concept of capital. Gender is discussed from the segregation perspective only. Keywords: access to finance, Bourdieu, gender, segregation, government funding

1. Introduction This paper discusses the access of entrepreneurs to finance as a gendered structure in the context of Finnish public investment funding instruments. Due to the growing economic relevance of small and medium‐sized enterprises (SMEs), and the rising proportion of female entrepreneurs worldwide, increasing attention is being paid to the access of women entrepreneurs to financing (Alsos et al. 2006: 667, Carter et al. 2006: 72). In Finland, the percentage of female entrepreneurs rose to nearly 34% in 2007 (national statistics, stat.fi). Whilst this development has been viewed with satisfaction, the growth achieved by the companies of female entrepreneurs has not (see e.g. KTM 2005: 23). There has been further criticism of the small amount of funding they both apply for and receive, since funding is regarded as an instrument for economic growth. A significant amount of research has identified and reported that female entrepreneur use less financing than their male counterparts (e.g. Brush 1997; Orser et al. 2006; Carter et al. 2006; Pissarides 1999, Becchetti and Trovato 2002). Uneven resource allocation among entrepreneurs has been the focus of international attention; governments have been urged to take note of this fact (van Staveren 2002). Enterprises started with a low level of capital by women tend to underperform during their life‐spans (Marlow & Patton 2005). Research on women’s limited access to financing has begun to interest the policymakers who design agendas for promoting female entrepreneurship and those who supply finance in areas that banks regard as risky. As theoretical development around the area of gender and finance has so far been slow (Marlow & Patton 2005), public financial aid schemes are a relevant topic for study from the gender perspective. I approach gender by introducing contextual division of labour and labeling occupations and entrepreneurial activities as either female‐ or male‐dominated. Similarly to other Nordic countries, Finland has strong equality policies (Estevéz‐Abe 2006). Finland also has one of the highest rates of occupational segregation in Europe (Bettio and Verashchagina 2009: 33). I first introduce current research on gendered access to finance and the methodology and theoretical framework of this study and then describe the power structure of public investment funding and introduce the segregation figures for Lapland. The next section discusses access to finance as a gendered structure. The last section concludes the results and suggests their application for further research.

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2. Review on research Research on the gender gap in finance has been conducted from both the demand and the supply perspective. Most research has been on bank loans, whereas venture capital and government grants have been studied less. Research has shown that as a result of general occupational segregation, women’s business activities are concentrated in the service sector. This sector offers poor business prospects (Marlow and Carter 2004; Meager et al. 1994), is crowded (Marlow and Patton 2005) and requires little starting capital, which is also why women request less financing (Carter et al. 2006). Women’s occupational and salary history in the service sector equips them with limited collateral and the ability to service only small amounts of debt. This in turn affects their attractiveness to bank lenders (Marlow and Patton 2005: 725). Some scholars have found evidence of discriminatory lending practices (Buttner and Rosen 1989; Hisrich and Brush, 1986), whereas others have not (Eriksson et al. 2009; Orser et al. 2006; Watson et al. 2009). Fielden et al. have studied UK governmental grant schemes and argue that they are restrictive since they are based on a full‐time business model and entirely exclude the retail sector, in which many women start their businesses. They point out that such restrictions rely on a male model of entrepreneurship (Fielden et al. 2006: 34‐35.). Marlow and Patton (2005) argue that undervaluing of the feminine in society at large spills over into entrepreneurship and that the normative models of funding should therefore be questioned. Ahl and Marlow (2012) call for critical approaches to the reproduction of women’s subordination in entrepreneurship and note that blaming the victim for structural conditions that are beyond their control reinforces the hierarchy of masculine over feminine. Brush et al. (2009: 12) state that ‘social, cultural and institutional arrangements frame not only how many women perceive opportunities and make strategic choices, but also how these women and others view their business.’ The observations suggest that entrepreneurial growth and investment are conditioned by societal structures. For example Marlow and McAdam (2013) point out that women’s companies reflect the market norm in their sector rather than underperforming when compared with the companies of male entrepreneurs. De Clercq and Voronov (2009) have argued that entrepreneurs gain legitimacy for their actions by following the socially constructed norms and rules. Similarly, Chiasson and Saunders (2005) argue that in order to recognize opportunities, entrepreneurs have to understand contextual behaviour. Entrepreneurs must fit in to the structure to be recognized as legitimate actors. The ability to fit in is societally acknowledged and its lack can result in inequality between social groups. Marlow and McAdam (2013: 120) have observed that as long as women entrepreneurs are regarded as underperforming and failing to fulfil their entrepreneurial potential they need encouragement, education and advice ‘to achieve the entrepreneurial norms of their male counterparts’. These norms should be taken into consideration, since as Greene et al. (2000, as cited in Marlow and Patton 2005: 727) have noted, environments, practices and beliefs constructed by men can act as structural constraints on the access of women to funding. This second generation gender perspective explores institutional practices and processes that seem neutral and natural but have different consequences for male and female entrepreneurs (see Nelson et al. 2009).

3. Methodology In this paper I use Pierre Bourdieu’s concepts of field and capital to explore how access to finance is contextually enabled and constrained. I describe the structuring principles of the Finnish public investment funding field. Cultural capital means culture and education. In its institutionalized form, it is materialized through qualifications and certifications. At individual level, cultural capital is ‘external wealth converted into an integral part of the person’ (Bourdieu 1986: 244). ‘Because the social conditions of its transmission and acquisition are more disguised than those of economic capital, it is predisposed to function as symbolic capital, i.e., to be unrecognised as capital and recognized as legitimate competence’ (Bourdieu 1986: 245). Symbolic capital is any resource associated with ‘positive recognition, esteem or honour by other participants’ (Emiryaber and Johnson 2008: 12). Bourdieusian concepts allow exploration of skills that are conceived as legitimate (cultural capital) and as leading to acknowledged success (symbolic capital). The volume and structure of capital define the position of an actor in the power structure of the field. The structure and the distribution of the power define and explain the possible strategies of the agents (Bourdieu 2005: 102). Hence, the Bourdieusian approach enables the researcher to expose and question the societally distributed access to finance.

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Petra Merenheimo My case comprises two Finnish public investment funding instruments. The data consist of legislation on public investment funding (1345/2002 and 1336/2006), guidelines governing the granting process for employment‐ based investment funding, guidelines for applying public investment aid (TEM/414/00.35.05.01/2010), the views on funding of branch managers (TEM 2012), application forms and granting statistics from the Lapland region. Legislation is created by the social world (Bourdieu 1987: 839), which makes it an interesting source for revealing societal principles. ‘Although it is typically written neutrally, impersonally and in the in‐temporal present, and thereby signals objectivity and omnitemporality, it expresses the values of the society and presupposes the existence of ethical consensus.’ (Bourdieu 1987: 819‐820). I then compare regional (from Finnish Lapland) labour and entrepreneurial segregation statistics with the power structure of the field and with regional granting (Finnish Lapland). Since the instruments are intended in for use in regions facing economic challenges, they are a significant source of funding for Lapland, which suffers from high unemployment and a declining population. Gender is limited to the perspective of segregation. The study reveals the gendered and contextual principles of access to finance and its gendered effects. Such knowledge of groundings benefits our understanding of both male and female entrepreneurship (Brush et al. 2009: 18).

4. Funding instruments Finnish public investment aid is ‘an instrument for enhancing the functioning of the market, growth of companies and, in the end, the well‐being of society and its citizens (Koski and Ylä‐Anttila 2011, 3). It consists of tax relief, subsidies and direct funding. In this paper, I concentrate on two grant schemes: Development Aid for SMEs and Employment‐Based Investment Aid, which were the most significant in Lapland during 2008 amounting to 14.8 m€ and 2.5 m€ respectively (Centre for economic development, transport and employment ELY). The instruments represent two schemes that differ in their design and purpose. The overall aim of Development Aid for SMEs is to promote growth, employment and other economic goals by supporting companies and their competitiveness (1336/2006). It is a direct subsidy to the private sector, and not tied to any industries. According to law (1345/2002 §1), employment‐based investment aid is meant solely for construction, maintenance, basic improvement, expansion, restructuring or other kind of investment. The aid is granted to public sector entities and then allocated to the private sector after a process of competitive bidding. The instrument can thus be characterized as an indirect subsidy to entrepreneurs.

4.1 Investment as a physical and technical construct The Act on Development Aid for SMEs divides investments into tangible and intangible assets, and defines both categories precisely: tangible assets are acquired “land, buildings, machines and fixtures’, and “machinery and equipment” on long‐term lease (1336/2006, 4§). The category requires identification of material entities in investment plans; relatively large entities such as buildings for purchasing and relatively small entities such as machinery and equipment for leasing. Intangible assets are defined as “patent rights, licences, know‐how and non‐patented technical knowledge” acquired for technology transfer. Other intangible assets can be either posited into ‘business development enhancing activities’ (1336/2006, 4§) which is a minor funding category or excluded from all funding. ‘Business services’ are included in the funding guide. Although it is a branch with a clear service orientation, as many as 1 7 of the 16 sub‐branches are purely technical in character (TEM 2012). Other service‐oriented branches are directed to other funding resources, granted funding only for limited purposes, or not mentioned in the guide at all, as in the case of personal and beauty services. Non‐technological improvements are excluded from the definition of investment. The guidelines (TEM/414/00.35.05.01/2010) require eligibility for the development programs of the European Union. In Lapland, eligibility has been ensured with a definition of the funding policy by ELY centre, according to which eligible investments are ‘machines and equipment for tourism sector program services, construction of accommodation buildings and restaurants, industrial machines and equipment, industrial estates and 2 innovative projects, that is new technology and high‐risk endeavours’. The guidelines mention intangible investment as a separate category from tangible, but do not define them more concretely, whereas the conditions under which buildings can be bought and machinery leased are explained in detail. Even the 1 These 7 branches get 86% of the national funding granted on ‘business services’ (TEM 2012: 122) 2 http://www.ely‐keskus.fi/fi/ELYkeskukset/LapinELY/Yritystoimintateknologiajainnovaatiot /Documents/Avustusten%20linjaustaulukko%202011.pdf

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Petra Merenheimo funding category ‘other development efforts’ speaks of products and production methods. The intangible category is made virtually invisible in the guidelines. In the application form the cost estimate of the project explicitly lists buildings, land and machinery as tangible investments. Also the costs of ‘other development measures’ shall be specified more concretely into salaries, trips, raw materials, semi‐manufactured products and machinery. Intangibles are not specified. The system relies on the belief or illusio that if properly applied, public investment funding promotes national economic growth and the well‐being of citizens. This means that companies can acquire economic relevance by making investment. Explicit reference to some investment forms and exclusion of others reflects the hierarchical relation between investing in material assets or technology that possess strong economic relevance and investing in non‐technological assets, which occupy a less important position. Since economic relevance is explicitly related to material and technological investment, it creates an opportunity for companies to turn such investment into symbolic capital and to gain recognition for economic relevance. The symbolic character means recognition in advance, a ‘power in the form of credit, it presupposes the trust or belief of those upon whom it bears because they are disposed to grant it credence’ (Bourdieu 2005: 195). It can be assumed that to make use of the assets, such investment requires technological or manufacturing skills. This can be conceived as the cultural capital acquired by companies for their investment purposes.

4.2 Construction as enabler The act on employment‐based investment enables grants for general employment‐enhancing purposes, but restricts eligibility to construction related investments only (1345/2002, 1§). Employment shall be enhanced ‘both during and after the construction period and have permanent employment effects’ (1345/2002, 7§). Targeted investment in construction is expected to create permanent employment effects in other sectors. This principle has not been questioned, even though competitive regulations were changed to prohibit privileging the regional unemployed during the investment period, i.e. the unemployed construction workers. Enhancing construction sector employment is not the main target, anymore. Local authorities have to arrange open competitive bidding, and strong emphasis is now put on permanent regional employment effects after the investment period (HE 191/2001). However, long‐term employment opportunities are extremely difficult to estimate (Hynninen et al. 2007). The ear marked funding creates demand for the construction sector. Other sectors’ benefits remain dependent on the construction approaches, located in the future and thus risky. It seems that instead of treating unemployment in the building sector as a problem to be combated, the sector is considered an ‘engine’ for enhancing employment elsewhere in the economy, and therefore regarded as crucial. Creation of material facilities shall precede that of immaterial activities. This creates a hierarchy between the building sector and others; between the enabler and the needy. This principle treats building sector companies as a ‘primary source’ of employment and growth. This is an excellent example of how symbolic capital can be acquired ‘on credit’ (Bourdieu 2005); the risks of failure appear minimal since they are postponed to the distant future.

5. Segregation Occupational and entrepreneurial sectors in Lapland are divided into the male‐ and female‐dominated. Gender‐segregated data on grants are not available. Hence, the gendered effects of investment funding can be approached by comparing the segregation figures above with the industries that received the largest grants. Since many branches are combined in the national statistics, it is virtually impossible to compare the financing figures for Lapland directly with the entrepreneurial segregation statistics. In 2008 in the Lapland region, SMEs in the following industries were granted the most financial aid: One can estimate the gendered employment effects in the sectors receiving large amounts of money. In the manufacturing sector (wood, metal and other industry), 70% of the entrepreneurs and 79% of the total workforce are men, making it a male‐dominated sector (2007, stat.fi). In the 2007 national statistics, accommodation is in combined with the restaurant and retail sector; this means that women account for 62% women of all employees and 40% of all entrepreneurs (stat.fi). According to the National Audit Office (Dno: 361/54/01), much of Finnish investment funding in 1996‐1999 was granted to accommodation. The Office notes that in 2009‐2011 this was still true of the Lapland region and led to excess building rather than to support of immaterial investment. Thus the Office categorizes accommodation as a material capacity building activity in contrast to immaterial investment. One can also verify the nearly total exclusion of the largest

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Petra Merenheimo female branches from SME investment funding in Lapland: societal, health and personal services with a 71% female work force and 72% female entrepreneurs (national statistics 2007, stat.fi). In Lapland this category was granted €191,800 in 2008, €67,480 in 2009 and €107,760in 2010 (out of a total of 12‐19 million €). Table 1: Segregation in Lapland; the calculations are based on National Statistics, 2007 Employment INDUSTRY

PERCENTAGE OF FEMALE ENTREPRENEURS

PERCENTAGE OF FEMALE EMPLOYEES

PERCENTAGE OF MALE ENTREPRENEURS

PERCENTAGE OF MALE EMPLOYEES

Agriculture and forestry

28%

22%

72%

78%

Mining

11%

100%

89%

Manufacturing industries

29%

21%

71%

79%

Electricity, gas and water

22%

78%

Building

96%

94%

Wholesale and retail trade, accommodation and food services

40%

62%

60%

38%

Transportation and storage, tele‐ communications

11%

25%

89%

75%

Finance, insurance and other

37%

52%

63%

48%

Personal, health and social work

72%

71%

28%

29%

Table 2: The three sectors receiving the most SME grants in Lapland Source: ELY Lapland 2008

2009

2010

Wood industry 6.5 m€

Other industry 3.3 m€

Accommodation 2.4 m€

Other industry 2 m€ Accommodation (tourism) 1.7 m€

Tourist services 2.6 m€ Accommodation (tourism) 1.5 m€

Metal industry 1.6 m€ Wood industry 1.6 m€

6. Access to finance as a gendered structure Figure 1 illustrates the contextual access to public investment funding interpreted with the Bourdieusian concept of capital. Investing in physical and technological assets can equip companies with symbolic capital, thereby making them economically relevant, whereas investments in non‐material and non‐technological assets are not connected with symbolic capita but are construed as non‐relevant for economic growth. It is unlikely that cultural capital connected with such investments (e.g. certifications, work experience and other competence) can be effectively converted into economic capital. Access to finance is not equally available to all, but dependent instead on the participant‘s composition of field‐specific cultural capital. According to Bourdieu’s theory, ‘symbolic capital is revertible to economic capital’ (Swartz 1997). The dotted line in the figure illustrates this relation not analysed further in this paper. Occupational segregation divides men and women into divergent sectors, through which they gather diverse cultural capital that cannot be applied universally. Men’s qualifications in the example of Lapland stem from manufacturing, construction and telecommunications and women’s from personal, health and social care services and retailing; they represent the ‘5 Cs: caring, catering, cleaning, clerical and cashiering (Carter 2006, 43). In public funding, women’s qualifications seem applicable only to a marginal extent, whereas men’s qualifications match with the composition of the field’s cultural capital. Such a structure is gendered in the sense that it rests on practices of the male‐dominated sectors. Not surprisingly, the majority of funding is granted to male‐dominated branches such as manufacturing, and for construction related approaches. Structural privileging of some sectors over others follows the gender‐based division of labour. Female‐

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Petra Merenheimo dominated sectors lack economic relevance. This is based on hierarchical relations between the production, technological and non‐technological branches materialized as tangible and technology‐based investment definitions, which is in congruence with the principle of societal gender division, that is segregation. Non‐ technological immaterial investments and the related skills are not regarded as economically relevant. Thus access to finance rests on a male‐biased valuation of cultural capital. This observation is in congruence with the venture capital context in the USA, where the criteria for businesses suitable for investment reflect those that men have founded, including high‐technology companies (Nelson et al. 2009).

Economic relevance as symbolic capital

Material and technological investment

Male-biased access to finance

Male-biased cultural capital

Figure 1: Gendered access to finance DeClerq and Voronov (2009) argue that the more cultural and symbolic capital an entrepreneur possesses, the more dominant s/he is when entering the field. In order to gain access to finance, field participants must acquire access to the specific cultural capital either ‘in person or in proxy’ (Bourdieu 1986). They must be able to make use of field‐specific opportunities or to ‘follow contextual scripts’ as Chiasson and Saunders (2005) put it. Two aspects are of interest here: equality and growth. Concerning equality, this paper demonstrates that female applicants need not face discrimination during the application process. Investment as a physical construct and segregation together take care of the distribution of money for male‐dominated industries. Concerning the growth aspect, Marlow and Patton (2005: 725) point to a circle of disadvantage that affects women’s access to finance negatively: women’s subordination in wage‐work prevents them from personally amassing the funds needed to finance a business adequately and from having credit histories attractive to bank lenders. This leads to undercapitalization and low levels of growth. The tendency to reproduce self‐ employment further reflects the poor prospects of female entrepreneurship. This article exposes a clearly horizontally segregated society where investments based on women‐dominated intangible assets, such as caring know‐how, are societally subordinated to investments in technology and machinery. Access to funding is restricted and thus investment in non‐technological assets is constrained as is the growth of companies needing such investment, even though SME funding is open for all SMEs from all industries, as liberal feminism would recommend.

7. Conclusions Marlow and McAdam (2013) suggest that the underperformance of female entrepreneurs is a myth resulting from social gendered assumptions of female deficiency. The results of this article support this suggestion: any entrepreneur investing in intangible assets does so entirely at her/his own risk and cost, unless the investment is in management or business skills. In contrast, investment in technology and the financial risk entailed by it are subsidized by the state. According to Marlow and McAdam (2013), companies are limited by context in meeting market norms, which is why they suggest talking about the ‘constrained performance’ of entrepreneurs. This article showed that access to finance is constrained by the field (structure) and its cultural capital, which consists of know‐how related to material assets and technology. In the Finnish context, such cultural capital reflects abilities applicable in male‐dominated sectors. Gender influences the performance of

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Petra Merenheimo Finnish entrepreneurs by constructing the skills and abilities used in female‐dominated sectors as economically non‐relevant. Policy initiatives that do not question the male‐biased criteria of success do not change the undercapitalization of female entrepreneurs (Marlow and Patton 2005: 730) but make them accept the same terms as men (Ahl & Marlow 2012; Jones 2009). Nevertheless, the global public objective seems to be ‘to integrate women into markets’ instead of altering the hierarchical relations (Spike Peterson and Runyan 2009: 183); this means taking care of their financial and human capital needs while neglecting the institutional and legal framework (Welter 2004: 216) and subordinating women with special female entrepreneurship programs (Pettersson 2012). It is striking that the rather new concept of ‘knowledge‐based innovations’ as drivers of economic growth does not seem to challenge the present power structure but rather enforces it; according to Pettersson (2007: 34), the Finnish public innovation policy is based solely on technological innovations. The foundations identified reflect socially and culturally constructed frames for female entrepreneurship in Finland. Further research is needed on the societal value of the non‐technological assets of female‐dominated sectors. One such opportunity is the female‐dominated care‐sector entrepreneurship, which faces new challenges and growing interest as demographic change proceeds. The next step would be to determine the kinds of investment that are being enabled and constrained in care in Finland and the societal norms on which these are based. This would contribute to drawing a contextual picture of gendered opportunity development in the female‐dominated care sector and to demythologizing women entrepreneurs as underperformers.

References Ahl, H. & Marlow, S. (2012) “Exploring the Dynamics of Gender, Feminism and Entrepreneurship: Advancing Debate to Escape a Dead End?” Organization, Vol. 19 No 5, pp. 543‐562. Alsos, G., Isaksen, E., Ljunggren, E. (2006) “New Venture Financing and Subsequent Business Growth in Men‐ and Women‐ Led Businesses”, Entrepreneurship Theory and Practice, pp. 667‐686. Becchetti, L. and Trovato, G. (2002) “The Determinants of Growth for Small and Medium Sized Firms. The Role of Availability of External Finance”, Small business Economics, Vol. 19 No 4, pp. 291‐306. Bettio, F. and Verashchagina, A. (2009) Gender Segregation in the Labour Market, European Commission Directorate‐ General for Employment, Social Affairs and Equal Opportunities Unit G1. Bourdieu, P. (1986) “The Forms of Capital,” in Handbook of Theory and Research for the Sociology of Education. Ed. J. G. Richardson. New York: Greenwood Press, pp. 241–258. Bourdieu, P. (1987) “The Force of Law: Toward a Sociology of the Juridical Field”, Hastings Law Review 38, pp. 805‐853. Bourdieu, P. (2005). The Social Structures of the Economy, Cambridge, Polity Press. Brush, C. (1997) “Women Owned Businesses: Obstacles and opportunities”. Journal of Developmental Entrepreneurship, 2 No 1, pp. 1–25. Brush, C., de Bruin, A., Welter, F. (2009) “A Gender‐aware Framework for Women’s Entrepreneurship, International Journal of Gender and Entrepreneurship, Vol. 1 No 1, pp. 8‐24. Buttner, E. and Rosen, B. (1989) “Funding New Business Ventures: Are Decision Makers Biased Against Women Entrepreneurs?” Journal of Business Venturing, 4 No 4: 249‐261. Carter, S., Anderson, S., Shaw, E. (2006) Women‘s Business Ownership: A review of the Academic, Popular and Internet Literature. Report to the Small Business Service RR002/01. downloaded 8.8.2012. DeClerq, D. and Voronov, M. (2009) “The Role of Cultural and Symbolic Capital in Entrepreneurs’ Ability to Meet Expectations about Conformity and Innovation“, Journal of Small Business Management 47 No 3, pp 398–420. ELY funding decisions 2008, 2009, 2010 (SME) http://www.te‐keskus.fi/Public/?nodeid=17003&area=7543&lang=1

downloaded 25/03/2013 ELY application form (SME) https://lomake.fi/a/ec/index.cgi/download?s=dbqkl4KJbyNxjAy&id=3862%2FBED43DDABFDE037576429A092201A9 3F&type=statics, downloaded 11/02/2011 ELY application form (employment) https://lomake.fi/b/ec/index.cgi/download?s=RhwyCDzgFOtzFg5&id=4495%2FAC176EFC9C9B8E029B75625CD5E526 B0&type=statics, downloaded 11/02/2011 Eriksson, P., Katila, S. & Niskanen, M. (2009) “Gender and Sources of Finance in Finnish SMEs: a Contextual view”, International Journal of Gender and Entrepreneurship Vol. 1, No. 3 pp176‐191. Estevéz‐Abe, M. (2006) “Gendering the Varieties of Capitalism: A Study of Occupational Segregation by Sex in Advanced Industrial Societies”, World Politics 59, No 1, pp 142‐175. Fielden, S., Dawe, A. J. and Woolnough, H. (2006) “UK Government Small Business Finance Initiatives ‐ Social Inclusion or Gender Discrimination?” Equal Opportunities International, Vol. 25, No. 1, pp. 25‐37. Hisrich, R. and Brush, C. (1986) Women and Minority Entrepreneurs: A comparative analysis. Working paper. The University of Tulsa.

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Petra Merenheimo Hynninen S. M., Ritsilä J., Haapanen M., Storhammar E. (2007) Investointitukien työllisyysvaikutukset, Työministeriön työpoliittinen tutkimus 336. Jones, S. (2009) ‘Under the Influence? Symbolic Violence in UK. HE Entrepreneurship Education’, paper presented at the 31st Institute for Small Business and Entrepreneurship (ISBE) Conference Koski, H. and Ylä‐Anttila, P. (2011) Yritystukien vaikuttavuus, TEM raportteja 7/2011. KTM 2005, Naisyrittäjyys publication 11/2005, http://www.yrittajanaiset.fi/doc/Naisyrittajyysjulkaisu_2005.pdf, downloaded 11/06/2012. Marlow, S., Henry, C. and Carter, S. (2009) “Exploring the Impact of Gender upon Women’s Business Ownership, Introduction”. International Small Business Journal 27, No. 2, pp139‐148. Marlow, S. & McAdam, M. (2013). Gender and entrepreneurship, Advancing debate and callenging myths; exploring the mystery of the underperforming female entrepreneur, International Journal of Entrepreneurial Behaviour & research, Vol. 19, No.1, pp. 114‐124. Marlow, S. & Patton, D. (2005) “All Credit to Men? Entrepreneurship, Finance, and Gender” Entrepreneurship Theory and Practice, pp 717‐734. Meager, N., Court, G., and Moralee, J. (1994) Self‐employment and the Distribution of Income. Brighton, IMS Report 270. Nelson T., Maxfield, S. and Kolb, D. (2009). Women entrepreneurs and venture capital: managing the shadow negotiation, International Journal of Gender and Entrepreneurship Vol. 1 No. 1, pp 57‐76. Orser, B., Riding A. and Manley, K. (2006) “Women Entrepreneurs and Financial Capital”, Entrepreneurship Theory and Practice Vol. 30, No. 5, pp 2006‐665. Pettersson, K. (2007) Men and Male as the Norm? A Gender Perspective on Innovation Policies in Denmark, Finland and Sweden, Nordic Research Programme 2005‐2008. Report: 4. Pissarides, F. (1999) Is Lack of Funds the Main Obstacle to growth? EBRD’s experience with small and medium sized businesses in Central and Eastern Europe, Journal of Business Venturing, vol. 14 No 5/6, pp. 519‐539. Spike Peterson, V. and Runyan, A. (2009) Gender and Global Political Economy, in Peterson, V, Spike. Global Gender Issues rd in the New Millennium, (3 Edition), Boulder, CO, USA, Westview Press. Swartz, D. (1997). Culture and Power, Sociology of Pierre Bourdieu, The University of Chicago Press, Chicago. TEM Ministry of employment and the economy (2012) Toimialapäälliköiden rahoitusnäkemykset, http://www.temtoimialapalvelu.fi/files/1491/LOPULLINEN_Rahoitusnakemykset_2012_web.pdf, read 27/06/2012. van Staveren, I. (2002) “Global Finance and Gender” in Jan Aart Scholte and Albrecht Schnabel (Eds.), Civil Society and Global Finance. London: Routledge, pp. 228‐246. http://ebookbrowse.com/van‐staveren‐i‐global‐finance‐and‐ gender‐pdf‐d46195499, downloaded 21/06/2012. Welter, F. (2004) “The Environment for Female Entrepreneurship in Germany”, Journal of Small Business and Enterprise Development, 11 No. 2, pp 212‐221. Watson, J., Newby, R. and Mahuka, A. (2009) Gender and the SME “Finance Gap”, International Journal of Gender and Entrepreneurship, Vol. 1, No. 1, pp 42–56.

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Firms’ Response to Peer Behaviour* Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck Department of Managerial Economics, Strategy and Innovation, KU Leuven, Belgium, and Globalisation, Innovation and Competition research group, HU Brussels, Belgium daniel.neicu@kuleuven.be stijn.kelchtermans@kuleuven.be peter.teirlinck@hubrussel.be

Abstract: This paper sets out to investigate whether firms learn from their peers with respect to managing the cost of their R&D process. In particular, we consider to what extent R&D active firms in Belgium mimic their peers’ decision to adopt a newly introduced tax exemption for wages of R&D employees. Analysing time until first use of the R&D tax credit, we find significant peer effects, operating at the level of regions and sectors, on a firm’s probability of accessing the R&D tax credit. Furthermore, we show that the peer effect is discontinuous: it requires a critical mass of adopting peers before there is any impact on a firm’s probability of adopting the tax credit, with the peer effect further accelerating once this tipping point is crossed. Nonetheless, very high peer adoption rates have no impact on the decision of firms who have not yet adopted the measure: most of the peer influence has materialized once about a third of companies in a sector and region has adopted the tax credit. Keywords: R&D tax credits, peer effects, information diffusion, knowledge spillovers

1. Introduction Do companies learn about R&D policy measures from one another? Is such information spreading to companies with similar activities and located in the same geographical region? Literature on knowledge spillovers is quite abundant, trying to describe the various mechanisms of flows of information between different actors. Nonetheless, such research mainly focuses on the diffusion of knowledge produced in the R&D process, that is, knowledge related to new products or processes. Our paper seeks to shed light on the diffusion of “soft” knowledge about how to manage the R&D process, by analysing the timing of firms’ adoption of newly introduced tax incentives for R&D. Although news about public incentives for R&D is usually widespread – particularly in small economies – there tends to be a lag between the moment a given support measure becomes available to companies and its actual adoption, despite the clear and substantive positive net value such measures offer to the firm. Dumont (2012), reporting descriptive evidence on the uptake of the R&D tax incentive in Belgium, concludes that ‐ although application barriers are virtually zero ‐ most R&D active companies do not benefit from this measure, possibly due of the lack of knowledge of its existence. Our analysis starts from this observation and we investigate to what extent peer effects induce firms to adopt the R&D tax credit. Analysing a dataset of 2,460 R&D active companies in Flanders and Wallonia, we find that the usage of the tax exemption on R&D personnel by a firm’s peers, defined at the intersection of regions and sectors, exerts a significant influence on a firm’s probability of accessing the R&D tax credit. Further, we find that the impact of the peers’ decision is already significant at low adoption rates, but it accelerates after one in ten peers has adopted the measure. The results complement the existing literature on the role of peer effects in decision‐ making. More specifically, they suggest that firms’ informal networks play an important role in accessing not only technological but also managerial knowledge. The main finding has methodological implications for dealing with selection bias in program evaluation (see Imbens & Wooldridge, 2009) as it indicates that it is important to account for peers’ behaviour if one wants to explain which companies select into a given public support mechanism. With respect to policy, the results inform policy makers how firms rely on observation of peers’ behaviour as a mechanism to cope with a fragmented landscape of innovation support measures.

2. Literature review Our paper ties into past research on information diffusion, peer effects, as well as studies on the determinants of receiving R&D tax credits. *

We would like to thank the Belgian Federal Public Service Finance for their help in granting access to the data.

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Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck

2.1 Knowledge spillovers and the diffusion of information Knowledge flows between firms have been studied extensively in the literature, e.g. see Appleyard (1996) for an overview of the management‐oriented literature. In this paper, we focus on the non‐deliberate, localized inter‐firm transfer of managerial knowledge about the R&D process. Whether knowledge travels (merely) intentionally has long been a subject of scrutiny: mechanisms that have been studied include, among others, employee migration (Almeida and Kogut, 1999; Gupta and Govindarajan, 2000; Hansen, 2002) and research collaborations & alliances (Schilling and Phelps, 2007). In this paper, we analyse an informal transmission channel of information, viz. the effect of the behaviour of ‘peer’ firms on the focal firm’s own decision making. This social dimension is a key issue in studying adoption decisions, that is, a comprehensive assessment necessitates rising above the level of the individual firm to include social feedback effects (Hall, 2004). Literature on knowledge spillovers typically focuses on how innovation at the firm level is affected by flows of “productive ideas” (Jovanovic and Rob, 1989; Feinberg and Gupta, 2004) i.e. technological knowledge rather than expertise on the management of the R&D process. In this paper, we look at the diffusion of such managerial knowledge and, more specifically, we consider how firms learn about a mechanism to reduce their R&D costs. Empirical evidence that the spreading of (technological) information is facilitated by geographical proximity has been provided by Jaffe et al. (1993), Audretsch and Feldman (1996), Fritsch and Franke (2004) and others. Accounting for the geographically localized transfer of information, our analysis will examine how firms’ managerial decisions travel within regional and sector boundaries.

2.2 Peer effects Peer effects have been used extensively for explaining social behaviour as varied as initiation of sexual activity (Card and Giuliano, 2011) to job‐searching (Nanda and Sørensen, 2010; Cappellari and Tatsiramos, 2011). However, the social connectedness of firm decision making has been studied less extensively, which is arguably due to the difficulty in directly observing inter‐company interaction. Nevertheless, a number of studies have looked into the role of ‘social influence’ in the corporate world by considering, in various settings, whether having a larger number of adopters of a certain decision increases the probability of it spreading even further. Evidence of such frequency imitation behaviour has been provided in studies of market entry decisions (Gort & Konakayama 1982; Kennedy 2002; Lu 2002; Debruyne & Reibstein 2005), investment banking (Haunschild & Miner 1997) and corporate financial policy (Leary & Roberts 2010). Given the inherent issues with measuring peer effects in economics, we use flexible definitions of firms’ peer groups. Thus, we need not make assumptions regarding any direct interaction between firms.

2.3 Tax credits The empirical literature on tax credits for R&D, usually deals with estimating the impact on economic & innovative performance, or with additionality effects (Hall & Van Reenen, 2000; Czarnitzki et al, 2011; Takalo et al, 2013). These studies on the effect on R&D tax credits need to model the firm’s selection decision to use the tax credit. We contribute to this literature by analysing the effect of peers’ decisions, controlling for determinants used in previous studies 1 .

3. Data and model 3.1 Data Our dataset consists of the repository of R&D active firms in Flanders and Wallonia 2 , constructed by the Belgian Science Policy Office, based on the sampling procedures of the Community Innovation Survey and the biannual OECD Business R&D survey. It includes all companies known to be R&D active and it is updated on a regular basis. The dataset entails R&D related information based on the OECD Business R&D survey and is enriched with public support measures in the field of R&D funding in the form of R&D tax credits (provided by the Ministry of Finance) and R&D subsidies (provided by the regional governments). Given our focus on the R&D tax credit for wages of R&D workers, we have narrowed down the original dataset of companies to those 1

For example, Czarnitzki et al (2011) find that larger firms, with permanent R&D activities, entering new markets and in good financial health are more inclined to use tax credits. On the other hand, financially constrained SMEs seem less likely to use tax credits (Busom et al, 2012). 2 We have specifically filtered out the Brussels Capital region due to its comparatively smaller size, which might have affected the way information travels from one company to another within the region.

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Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck firms that indicate they employ R&D personnel, and that have their main activity in an ‘innovative sector’ 3 . Our unbalanced panel contains 5,092 company‐year observations, representing 2,460 companies observed in 2006 ‐ 2009. The dependent variable is a dummy indicating whether a company has received the “wage withholding (partial) tax exemption” for R&D employees in a given year 4 . The measure was introduced in 2006 for companies employing R&D personnel with PhD degrees and has been extended as of 2007 for Master degrees (other than in social sciences), across all industries. Initially, the tax exemption started at 25% of taxes on wages, but has been raised to 65% in 2008 and 75% from 2009. An important feature of the system is that companies can freely choose how to earmark the exempted tax amount. Our main explanatory variable counts, for each company and in each year, the percentage of other firms within the same region 5 and 4‐digit NACE sector, the ‘peers’, that have received the R&D tax credit in the preceding year. Following Debruyne and Reibstein (2005), we motivate the lag of the peer variable by the fact that we do not observe the exact timing of the decision to apply for the R&D tax credit, but only the end‐of‐year result 6 . Our approach of using a count of companies accessing R&D tax credits within a specific sector and region as a proxy for direct and indirect peer effects is based on widely accepted models of information diffusion within geographical and technological clusters 7 . One needs to be careful claiming that a focal firm’s decision to apply for the R&D tax credit is inspired by the behaviour of its peers while in fact it may be due to some underlying shared characteristic. A crucial attribute in this respect is a firm’s ‘savviness’ in using public support for R&D, which we proxy by an indicator of whether the firm received tax exemptions in 2005 for R&D employees involved in collaboration projects with research institutes or universities (the only R&D employee‐related tax incentive available at the time). In the same vein, we also include a (lagged) indicator capturing whether the company has received regional subsidies for R&D activities. In our analysis we control for firm age, firm size (in full‐time equivalent employees), R&D employees as a percentage of total personnel (lagged by one year), financial health (EBIT and current ratio, both lagged by 8 one year), sector, sector size, year and region . Table 2 in the appendix shows summary statistics for the main variables in the estimation sample 9 .

3.2 Model and results Since there are no clear ex ante expectations on how the residual risk to adopt the R&D tax incentive evolves over time, we estimate a Cox proportional hazard model (Cox 1972). The equation we estimate is the following:

We have followed Eurostat’s definition of innovative industries as applied in the Community Innovation Surveys, complemented with other innovative industries. Our list of sectors contains NACE rev. 1.1 industries 10‐37, 40, 41, 50‐52, 60‐67, 72, 73, 74.2, 74.3 and 90, and NACE rev. 2 industries 05‐39, 45‐47, 49‐53, 58, 61‐66, 71 and 72. 4 The partial tax exemption can thus be seen as a wage subsidy. Given that it only applies to taxes on wages, it clearly differs from other R&D tax credits, such as for fixed asset investments. 5 The split by region in the definition of peers is motivated by the fact that the regions have a different economic profile (growth, employment, key industries, etc.), have different main languages (Dutch for Flanders, French for Wallonia) and are decentralized in terms of political governance. Note however that fiscal policy (and thus also the focal R&D tax credit) is a federal i.e. national matter. 6 In the setting we study, applying for the tax exemption is essentially the same as receiving it, since companies only need to provide proof that the R&D employees are eligible for the tax credit by submitting copies of their higher education degrees, arguably a very modest effort. 7 See Porter (2000), Leamer and Storper (2001), Bathelt et al. (2004), Alcacer and Chung (2007), among others. 8 The data does not allow including a good control for a firm’s membership to a corporate group. This is relevant for our analysis in the sense that our peer effects measure may pick up information flows between entities of the same corporate group, rather than between competitors. In particular, our econometric model considers the time until first adoption of the tax credit, meaning that a control for group membership is important if one expected that firms in a group adopted the tax credit faster than independent firms. However, this issue only arises if a corporate group has multiple entities within the same sector and region since a firm’s peer group is defined at this level. In other words, the definition of peers is at a sufficiently disaggregated level to prevent the peer effect being driven by learning between corporate group members. Furthermore, the information on group membership in the OECD R&D survey indicates that group membership mostly concerns being part of international enterprise, which is unlikely to matter for a firm’s learning about the national tax credit we focus on in our study. 9 The table includes the observations prior to and including the first year of using the R&D tax credit. This way the table is consistent with the estimation sample, for which we use a single ‘failure’ survival model. Thus, all companies that receive the tax credit in a given year drop from the sample in subsequent periods.

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Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck This specification imposes no restriction on the baseline hazard, but it assumes that hazards are proportional across subjects. We have confirmed the suitability of proportional hazards by performing tests using Schoenfeld residuals (Cleves, Gould and Gutierrez, 2008). We set to test the effect of peers’ adoption decisions on the focal firm’s outcome via four specifications: firstly, the null model with no peer effects (model 0), then a linear peer effects model (1), quadratic peer effects (model 2), and non‐linear peer effects (model 3), where we use dummy variables for different thresholds of peers adopting the tax credit (under 3%, between 3% and 10%, 10% to 20%, 20% to 30%, 30% to 40%, and over 40%) 10 . Table 1 below summarises the main findings of the Cox proportional hazards models. Table 1: Cox proportional hazards models of the effect of peers' decisions on the adoption of R&D tax credits

Model 0 no peer effects

Model 1 linear peer effects

Model 2 quadratic peer effects

R&D personnel (%) t‐1 sector size t‐1 ln(age) ln(fte) current ratio t‐1 EBIT t‐1 tax credit coop. 2005 subsidies t‐1 adopting peers t‐1 adopting peers2 t‐1 0% < peers <= 3% 3% < peers <= 10% 10% < peers <= 20% 20% < peers <= 30% 30% < peers <= 40% 40% < peers <= 100% time, sector, region dummies log likelihood number of firms number of obs. number of tax credit users

0.879 (0.151)*** ‐0.000 (0.000) ‐0.191 (0.061)*** 0.453 (0.034)*** 0.004 (0.006) 0.000 (0.000)** 0.398 (0.149)*** 0.481 (0.096)*** included

0.882 (0.150)*** ‐0.000 (0.000) ‐0.194 (0.061)*** 0.455 (0.034)*** 0.004 (0.006) 0.000 (0.000)** 0.399 (0.145)*** 0.472 (0.096)*** 2.985 (0.709)*** included

0.879 (0.151)*** ‐0.000 (0.000) ‐0.192 (0.061)*** 0.454 (0.034)*** 0.003 (0.006) 0.000 (0.000)** 0.438 (0.145)*** 0.470 (0.096)*** 7.030 (1.801)*** ‐14.205 (5.312)*** included

Model 3 non‐ linear peer effects 0.886 (0.151)*** ‐0.000 (0.000) ‐0.186 (0.061)*** 0.451 (0.035)*** 0.003 (0.006) 0.000 (0.000)** 0.442 (0.145)*** 0.470 (0.096)*** 0.143 (0.163) 0.443 (0.154)*** 0.771 (0.187)*** 0.694 (0.348)** 0.643 (0.359)* 0.616 (0.664) included

‐3,315.55 2,460 5,092 491

‐3,310.21 2,460 5,092 491

‐3,307.81 2,460 5,092 491

‐3,306.97 2,460 5,092 491

Standard errors in parentheses. Significance levels .01 (***), .05(**), .1(*). We find a positive, significant peer effect (peers) throughout our models, implying that the more peers access tax credits at t‐1, the higher the chances any given company will do so at time t. We interpret this as evidence of learning through information diffusion, whose magnitude is mediated by the experience of peers located in the same region and involved in similar economic activities. 10

Note that the reference category is 0% peers adopting the tax credit at t‐1.

758

Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck The quadratic specification reveals diminishing returns of increased peer adoption, although the hazard rate function is only slightly concave. The dummies specification (model 3) indicates that higher levels of adoption by peers significantly increase adoption of the R&D tax credit by the focal firm. However, the effect is discontinuous: very modest peer adoption rates – less than 3% of other firms in the same region and industry – show no statistically significant impact on the hazard to adopt the R&D tax credit. Between 3% and 10% of peers adopting seem to be enough for the information to spread among companies, but there is an accelerating effect once 10% of peers have adopted the tax credit (the coefficients 0.443 and 0.771 are significantly different at the 10% level, as can be seen in Table 3 in the appendix). In other words, there is evidence of a ‘critical mass’ effect at the point where 3% of peers have adopted the measure. Further, there is an additional upward shift in the hazard of adoption once 10% of the peers have done so. Once this threshold has been crossed, the peer effect is essentially linear, i.e. there is no further acceleration of the hazard to adopt the R&D tax credit with increased peer adoption. The latter is somewhat surprising, and suggests that information travels relatively efficiently in the sense that a minority of adopting peers is sufficient for the peer effect to operate to its full extent. As expected, the size of the company and that of its R&D activities positively impact the outcome, larger companies seemingly having more incentives to reduce their financial burden via tax credits. Finally, we find significant, positive experience effects in the sense that companies having already used public incentives for R&D in the past (regional subsidies and tax credits for cooperating with research institutes) have higher chances of quickly capitalising on the new fiscal measure in our analysis.

4. Conclusion In this paper we identified peer effects as an important driver of adoption of volume‐based tax credits for R&D. We show that firms optimize their R&D management as information from their peers reaches them, allowing them to cope with the multitude of public support mechanisms they face, and which are not always efficiently ‘marketed’ by public authorities. Furthermore, we find that peer effects are present in an industry both at regional and national level, and that the effects are discontinuous – there is a ‘critical mass’ of 3% of peers adopting the tax credit needed in order for its use to become ‘contagious’. Moreover, there is an accelerated effect after 10% of the peers have used the measure. A methodological contribution of our findings is that they demonstrate the use of peer effects as a variable to include in the selection equation when estimating the effects of policy interventions in R&D. Our results have implications for the design of the communication of innovation policy, as there is an apparent information deficit about such support measures, which firms deal with by learning from their peers. This deficit might stem from the high number of available innovation support mechanisms for companies, as is the case in Flanders (Soete 2012) and other European countries. Moreover, the evaluation of R&D fiscal incentives’ efficacy should always take into account the ease with which companies receive relevant information, which translates into opportunity costs of the application process, a major barrier that policy makers need to consider before designing such frameworks. Our results also hint at a possible interaction between subsidies and tax credits for R&D, in the sense that companies having received subsidies in the past seem more knowledgeable about fiscal incentives than those who haven’t done so. Finally, an interesting avenue for further research is to build on the technology diffusion literature to disentangle alternative explanations for the diffusion pattern of public incentives for R&D. While the issue of choosing the ‘right’ technology is absent in the case of public incentives for innovation, further work will help to understand to what extent, as Geroski (2000) put it, “diffusion is a social process that is something other than the sum of its parts”

Appendix 1 Table 2: Summary statistics of dependent and independent variables Variable

Obs

Mean

Std. Dev.

Min

Max

tax credit use

5092

0.10

0.30

R&D personnel (%)

5092

12.45

19.27

0.01

100

759

Daniel Neicu, Stijn Kelchtermans and Peter Teirlinck Variable

Obs

Mean

Std. Dev.

Min

Max

peerst‐1

5092

0.03

0.05

0.50

sector sizet‐1

5092

198.72

309.05

2541

age

5092

25.83

18.33

145

employees (fte)

5092

127.57

345.61

0.65

12861

current ratio

4941

2.29

4.58

0.04

256.96

EBIT(1000’s of EUR)

4941

2,186

7,784

‐9,728

89,900

tax credit R&D collaboration2005

5092

0.02

0.13

subsidiest‐1

5092

0.21

0.41

Table 3: Tests for significant differences between consecutive peer thresholds Peer levels (%)

Chi2 tests

chi2 = 3.60

peers <=3% ‐ peers <=10% = 0

Prob > chi2 = 0.0579

chi2 = 3.19

peers<=10% ‐ peers<=20% = 0

Prob > chi2 = 0.0742

chi2= 0.05

peers<=20% ‐ peers<=30% = 0

Prob > chi2 = 0.8238

chi2 = 0.01

peers<=30% ‐ peers<=40% = 0

Prob > chi2 = 0.9137

peers<=40% ‐ peers<=100% = 0

chi2 = 0.00 Prob > chi2 = 0.9654

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Firm Structure and Problems of Governance in the Italian SMEs Adalberto Rangone University of Oradea, Romania, University G. D’Annunzio of Chieti‐Pescara, Italy adalberto@rangoneconsulting.com Abstract: The global economic scenery that has been developed as a result of the crisis which has begun in 2007, has led to serious changes in the world of the Corporates. If the whole Eurozone has suffered from the consequences occurred, at the same time the companies of each European country has made their own different and specific changes. In this context, Italy has shown recently relevant changes concerning the number of firms, their structure and their own management. If such changes have felt the heavy weight of the international economic repercussions, we should not forget also the other numerous factor which always are crucial in the life of a small‐sized, medium‐sized or large‐sized enterprise. They are taxes, the always changing know‐how and loans. This analysis is divided in three parts: First part: The comprehension and the analysis of the firm size and its featuring structure by cluster processing. In this part, we propose a sample of analysis which is based on the variables of identification ‐ place of activity, demographic variables ‐ mergers and acquisitions, starting and ending date of the company activity and stratification variables such as the type of activity, the size of the company and the number of employees. Second part: The analysis of the report “Size – Stakeholder – Performance”. According to this principle, in this part we propose to analyze the method and the extent through which the company management – and consequently its performance – are influenced by the relationship between the size and all the people who interact with the company, which can be employees or not. Third part: The study of the new challenges that the Corporate Governance must win to start a start‐up or to manage an already active company. The lack of resources such as loans granted by banks or new technologies designed for the production, are just some of the important choices that the company has to take in order to survive in this period of crisis. Conclusions: This study, therefore, proposes to make an analysis of the reality which today characterizes the companies, the new imposed structure and the new challenges for the Governance of the SMEs in Italy. Keywords: corporate governance, entrepreneurship, SMEs, management, stakeholder

1. Comprehension and analysis of the firm size in Italy 1.1 Analysis of the Italian companies structure for clusters: some considerations about cultural heritage When we approach the corporate world, we must always take in consideration that the firms are the result and the direct expression of endless changes that have characterized the State in which they are in. The historical context, legal provisions but also and above all the cultural settings are important factors which have influenced ‐ and still today they influence widely ‐ the firm’s development and the management by which the governance is composed. Just think about the studies of the great Economist A. D. Chandler, who succeeded, with admirable skill, to prove that starting from the early 1900 Nations such as the United States, Britain and Germany were promoters of a so diversified firm development to study its causes. (Chandler A.D., 1994) In the United States the powerful organizational development process within companies made increasingly the need for a strong managerial structure that would have pushed the birth of Competitive Managerial Capitalism. Obviously, we should not forget the exogenous conditions such as rich and growing domestic market, the wide availability of new technologies and a legal framework that limited contractual agreements on prices and on the market. The direct result was the large corporations in the field of energy, chemistry and transport, marked by a complex internal organization and a widely diversified corporate structure. This setting would forever dictated the structural rules and the governance of the large transnational corporations. Germany was perhaps the nation which has more features in common with the managerial U.S. corporations. The explosion of a massive managerial setting characterized by the interplay between first movers and senior managers gave the opportunity to leverage the entrepreneurial skills in the various sectors of production, management and marketing. However, we must take in consideration how German corporations have always kept alive and strong the family sense and the degree of interaction between management and first movers.

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Adalberto Rangone We have not to forget the fact that the degree of diversification and collaboration between the German companies has always been significantly higher than the footprint of the competitive USA corporations, so much to be defined Managerial Cooperative Capitalism. One reason for this may be found in the fact that in Germany there were no specific antitrust laws such as in U.S. (Sherman Antitrust Act, 1890). In Great Britain, on the contrary, companies were marked by a completely different evolutionary process. Although the fields of activity were the same in which large enterprises USA developed, UK companies were personally managed (Chandler, 1994: 387) or the management remained within the personal or family context. Chandler, in fact, stresses that internal corporate organizations were generally characterized as follows:

Personal Enterprise

Entrepreneurial or Family Enterprise: holding of shares by the heirs of the enterprise founders

Managerial Enterprise: where there is actually a managerial governance which, however, remains structurally limited and always under the influence of the founders or the heirs.

Although with notable differences and peculiarities that distinguish companies in each State, we can, however, support the theory that there is a common denominator amongst the family structure of Italian companies and British personally managed companies analyzed by Chandler. Even in Italy, as well as in the United States or in other Western countries, corporate governance has been heavily influenced in many ways by historical circumstances, regulations and market conditions. For instance, we can consider the importance of the access to resources and to technologies had as well as the ability to have large capital to start up (today called seed capital) for the large American firms. In Italy, proved by war and financially collapsed, there was no viable alternative to the development of simple family industry. Doing just a premise of historical‐economic character, we see the way in which the major manifestations of the large corporate groups in Italy were the State‐owned enterprises. In this sense, the IRI (Istituto per la Ricostruzione Industriale) was primarily established for the purpose of acquiring the shares that the banking system held in important private companies (as well as afterwards prescribed an act of 1936) and with the intent to rehabilitate distressed corporations. Amongst the best expressions we also emphasize ENI (Ente Nazionale Idrocarburi 1953), EGAM (Ente Gestione Attività Minerarie 1971) and EFIM (Ente per il Finanziamento Industria Meccanica 1962) that in the period from 1950 to 1980 were the highest expressions of State intervention on the market in order to create infrastructure and basic industries. (Amatori F., 1996) The setting of large State‐owned Holding Company, however, did not withstand to changing times increasingly directed to a fluid market, competitive and especially international, particularly in the economic crisis that swept Italy in the various productive sectors such as steel and that one of the facilities. In the early 1990’s the large State‐owned corporate groups reached a degree of diversification that it was unable to withstand the market challenges. The result was a gigantic process of privatization. With the law of the 8th August 1992, No. 359 IRI, ENI, INA and ENEL were forced to put their shares into the hands of the Treasury Ministry transforming themselves in Joint Stock companies. Therefore, the various industrial branches in which the presence of the Public Institution was massive (food industry, infrastructure, telecommunications and steel) were converted to private enterprise. From this historical‐economic premise, it isn't so difficult to understand because it was impossible for a country such as Italy to develop a process of competitive or cooperative management comparable to that one arose in the USA or in Germany.

763

Adalberto Rangone If on the one side the public mark was able to resettle a stagnant economy by implementing a plan for building a new industrial base, on the other side it failed to form and to establish gradually a class of officials/manager ‐ separated from the political leadership ‐ which could find valid and ready managerial solutions for the holding companies.

1.2 Analysis of the Italian companies structure for clusters: considerations about the firm average size in Italy At present day, the organizational model that can mostly be found amongst the Italian companies is the family run business. This structure, which can be also found in other Latin‐style economic markets including Spain, Portugal and in some aspects even France, is based on the entrepreneurial ability of a single firm's founder‐manager inclined to delegate the management of its activities to the household or hereditary rather than to a particular team of managers. Considerations and analysis carried out on this entrepreneurial attitude leave therefore to presume the correlation between enterprise size and type of property. In this sense, it may be noted that, generally, family run businesses have reduced in size, because the managerial or household staff does not require a complex governance structure. However, if from a managerial point of view there are no particular problems like the attribution of powers to executive officials (Agency Theory) and there is a great deal of flexibility to changing market conditions, it is harder for these companies to enlarge their structure and their size. To take a simple example, we just have to think about the need and the way to found capital: it will be limited for small and medium enterprises that can satisfy the access to credit due to the personal ability of the entrepreneur to getting into debt ‐ not in times of crisis such as the current one ‐ while in the case of larger size companies the need of capital is higher and the entrepreneur or the family run business will have more difficulty in obtaining capital. To better understand the ratio between sizes of enterprises in the context of the major EU Member States, we make use of statistics carried out by Eurostat on 2008 data: Table 1: Average firm size, by country and sector in percentage of the sectorial average of the five countries

Source: Eurostat, 2008

764

Adalberto Rangone The size of the enterprise and its type are a true expressions of the territory in which it is situated. As it is clearly to see, the relationship between entrepreneurship and the number of employees reach decidedly high levels compared to the European average. Taking in consideration the number of the active firms in industrial and services sectors, in 2010 there was a massive corporate development around 63.5 firms to thousand inhabitants.(Istat, 2013) In this context, according to Eurostat, Italy has positioned in sixth place after Rep. Czech, Slovakia, Greece, Portugal and Sweden with about 30% of business ventures. Also at the regional level it is possible to see the diversity that companies have for the percentage of entrepreneurship and the actual size of the enterprise. A classification of values expressed by the Istat statistics on the number of enterprises born from 1999 to 2010 as well as active ones, can certainly make a valuable contribution for the purposes of clarity. Table 2: Number of firms born and number of active firms for Macro Area, 1999‐2007‐2010

Source: our elaboration from Istat data, 2013 Roughly, we can see that Italian companies between 1999 and 2010 have reached their apex of birth and activity in the year 2007. Although it maintained its stable trend, Italy suffered from the global crisis and showed a slight inclination of the number of active businesses compared to 2007. On the basis of macro areas, it is possible to see that the North‐Center area expresses the greatest number of enterprises born and active between 1999 and 2010. In the table below it’s possible to understand the particular situation in each region by the number of active companies: Table 3: Number of active firms in Italy for region, from 1999 to 2010

Source: Istat, Istituto Nazionale di Statistica, “Noi Italia”, report, 2013

765

Adalberto Rangone Table 4: Number of firms born in Italy for region, from 1999 to 2010

Source: Istat, Istituto Nazionale di Statistica, “Noi Italia”, report, 2013 The data from 1999 to 2010 relating to geographical breakdowns of the business demographic development can make a good idea of how it happened on Italian territory. Obviously, the crisis contributed heavily to the decline in the number of the enterprises in Italy, and then to their structure. In this sense it’s enough to say that most recently, in 2012, according to a study by “Info Camere” ‐ an informatics society of Italian Chambers of Commerce ‐ the individual active enterprises were 3.259.192 while those ceased in 2012 were 282.367. Also the percentages of employment over the years can be useful for the purposes of our study. Having had a significant influence on the development of small and medium enterprises, it can be used as a further indicator of analysis; in the following table it is divided to sections and fields: According to the data of the National Council for Economics and Labour, in 2011 the percentage of full‐time self‐employed workers by gender was 26.6% (men) and 12.4% (women), the part‐time self‐employed 1.6% (men) and 3.4% (women), while the permanent full‐time employees 59.2% (men) and 49.7 (women) and, concluding, the permanent part‐time employees 2.6% (men) and 20.1% (women). From the data, it is possible to consider how the propensity to free business initiative is high. It's among the highest in Europe. Calculating the size of the enterprise through the relationship between number of employees and number of companies, it is also possible to see how Italy is backward in that area compared to Nations such as Great Britain and Germany. In Italy it doesn't exceed the average of 10 employees per firm. Indicatively, the regions with the highest ratio of enterprise size are Lombardy and Lazio while Molise and Calabria are the latest. (ISTAT, 2013)

766

Adalberto Rangone Table 5: Distribution of employment in Italy, values in thousands of euro

Source: data of the Economic and Labour National Council, 2013

2. Corporate Governance and some managerial‐financial considerations 2.1 Analysis about the SMEs' management through the "size‐stakeholders‐performance" relation As we have considered before, the size of the Italian company has specific parameters that for some reasons mark it from those of other European countries. The cultural and historical heritage has highlighted a significant singularity about entrepreneurship and the structure which has set, with everything that goes with it. We're not talking just about managerial techniques but also about the typology of Stakeholders who gravitate around the company and who influence it significantly. This category of entities ‐ sort with R.E. Freeman (1984) and implemented with new figures like partners, the media, the debt holders and creditors, policymakers and even competitors by Friedman (2006) ‐ plays an important role in the corporate governance, in the case of a collective enterprise or in the familiar one. Therefore, also the typology of Stakeholders will vary in base of composition and size of the enterprise. It can be easily understandable just thinking to the relationship between a large enterprise to its business partners or shareholders compared with a family company with medium size. The relationship between enterprise and suppliers, in the specific case, is the best example that can express how the category of stakeholders is important in the life of an enterprise. Coase's theory (1937) can reinforce what we said before; in fact, through the Transaction costs theory, he was able to express the capacity of the firm to avoid additional costs in the production processes. This theory can be applied to the large companies but not certainly to the SMEs which can hardly surpass or ”internalize” the production steps, avoiding to sign contracts with any suppliers. It will be also understandably different the degree of interaction that occurs between a large company and financiers‐ creditors (such as banks) and that one created in the case of SMEs. In the specific case of the relationship between Banking system and enterprise, there are a few considerations to make. The intervention of bank credit for the family business performance (or in the case of SMEs) will play a really different role in comparison with the specific case of a wide company structure. The access to finance for SMEs is now considered as a component sine qua non the company can adapt itself to the market changes. Therefore, we can widely consider the close relationship between the family business (or SMEs) and the banking system, that is hereafter considered as the main partner. By way of illustration, the following one is a summary table about the credit and financial intermediation divided by sectors of activity:

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Adalberto Rangone Table 6: Credit and financial intermediation, in millions of euro ‐ 2012

Source: Banca di Italia, Bollettino statistico, 2013 Italian SMEs have suffered enormously from the financial system crisis started in 2007 and persisting until today. The banking support to enterprises has fell and enterprises insolvency on the previously bestowed credits has widely increased. Table 7: Banking insolvency by geographical area, in millions of euro

Source: Banca di Italia, Bollettino statistico, 2013

To overcome situations of collapse and suffering, many enterprises have significantly diversified their corporate choices, sometimes recommended by their "Financial Partners". This is the case of Risk Managment and business investments in derivatives products. The mirage of risk management that was sponsored by banking system through the techniques of risk identification, measurement, and control correlated to the corporate performance have led many companies to diversify their investments in derivatives products. All

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Adalberto Rangone this, even and especially for diverting from a unfavorable economic situation. In the following study carried out by the Bank of Italy, the developments about acquiring derivatives products (in this case contracts "SWAP") during the period between 2005 and 2010 by companies in Italy are expressed: Table 8: Corporate distribution of contracts ”Swap”, 2005‐2010

Source: Banca di Italia, “Le imprese italiane e gli strumenti derivati”, n. 139, 2012 The table speaks clearly. Although the percentage values emphasize a clear prevalence of large corporations, it is undeniable the fact that the growth in the use of derivatives is constant even in the case of SMEs (general or limited partnerships) and sole traders. For many years corporate organization has shaped and based on leverage programs. Perhaps, given to the disastrous effects that the unsuspecting massive use of these instruments has meant in recent years, not only in the business world but also in the same banking system, it seems advisable to redimension the relationship persisting between enterprises and banks finding an optimal solution. Here, we're talking about a solution that allows companies to transform their stakeholders in collaborative and non‐invasive entities. In brief, a bold plan to deleverage. However, we note that if it is desirable to reduce the enterprises dependency from the banking world, in a period like the current an exasperated deleveraging action in the "PIGS" countries can result in deleterious effects sometimes leading to a debt deflation (generalized price drop) (Bortolotti B.,2013: 169) In short, following a Latin maxim ever fallen into disuse: "in medio stat virtus" (Horace). With the introduction of new production systems on the market, it was big ‐ and still today it is ‐ the need to invest in research and development. But, how it can be carried out, if the banking system in Italy is unwilling to finance projects of technological innovation and these latter are primarily accomplished through the use of set aside profits reserves. Only financial indebtedness seemed to be the escape for the enterprises survival. Banks and financing companies have become absolute and irreplaceable partners of the Italian firms. In order to overcome the need for a financial support in times of crisis such as today ‐ in which banks are disinclined to lavish credit – then, the insertion of the venture capital practice could be one of the many great ideas. The possibility to use venture capital funds combined with a public participation in risk might be in the future one of the solutions against general insolvency status of small and medium enterprises. We say "in the future" because in Europe, today, it is still just a distant mirage.

3. Challenges and opportunities for SMEs in Italy 3.1 Innovation and tax reforms in support of firm As we have seen, the Stakeholder Theory is topical and alive not only in large corporations such as Fiat, Finmeccanica, Enel or Lottomatica, but also in the reality of small and medium enterprises. This can lead us to better understand which are the challenges faced by Italian firms following the financial‐economic bubble of 2007. Usually, when we talk about business start‐up phase or about an underway business in Italy we are considering different situations and reasons for entrepreneurship.

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Adalberto Rangone In the case of a family businesses, we will consider how important it is for the entrepreneur to continue the family tradition; generally, the firm will be already underway and the sphere of people revolving around the firm will mainly figure within the family structure. In the case of a sole traders, we have seen how important it is the aspiration and the prospect of earnings or the possibility to be not a dependent worker. The interest in realizing an innovative idea has not to be overlooked. This motivation, which in Italy is very little considered by banks rather than in America, it is an attitude widely considered by individual traders, by family firms and by large enterprises. If the original motivations underpinning entrepreneurial choices are generally related to the individual sphere or to economic and social reality in which the individual or the group of individuals are living, the difficulties suffered by companies are shared at a general level. Let's take some examples: 1) amongst the major problems that start‐up or underway companies meet, there is the difficulty of doing organizational‐administrative choices. Bank indebtedness is today a practice widely observed by businesses and entrepreneurs. In fact, today, they cannot work easily without it. As argued previously, the possibility for a start‐up to get a help through seed capital or venture capital is very difficult. However, it is strictly necessary in order to emerge on the market. Also the difficulty to find banking funds has become one of the main challenges for Italian companies. The entrepreneur has never been so close to the primordial figure of entrepreneur described by Cantillon. The risk has never touched so high levels; in absence of external aid, whether public or private, companies and entrepreneurs have primarily to face the investment with their own funds. The crisis has prompted a new rule: the credit is awarded, but only if the enterprise holds a satisfactory guarantee fund for what has been lent by banks. In short, money is granted only to those who have already it and not to those who need it most. 2) together with these daily difficulties, it's also detected the burden of taxes that lie on the corporate governance, such as: IRES ("Corporate income tax" amounting to 27.50% in 2012), IRAP ("Local tax on productive activities" amounting to 3.90% ‐ this is a perverse tax also applied to companies at a loss), IRPEF ("Personal income tax", progressive from 23% to 43%) which added to other local taxes reach a taxation higher than 44% on the income produced by companies. 3) labour costs in Italy ‐ it means not only the remuneration of employees but also the burden of contribution connected to it. This cost is amongst the highest in Europe and in the world. 4) another difficulty heavily encountered by companies is the ability to find and to employ qualified personnel, because most often young people look for and find a job abroad. The economic growth accomplished in recent years has prompted more companies to use specialized technical skills and advanced technology. In recent years Knowledge Capitalism seems to have become one of the frontiers of companies operating in a globalized system. 5) another considerable difficulty is the relationship between company and its customers. In this sense the crisis weighted very much on this delicate relationship. The customer loyalty regarding firms is less than before due to higher level of competition on the market. Furthermore, the destitute customers increasingly push the company into insolvency in relation to suppliers and creditors. This vicious circle has enormously contributed to break the relationship between Bank and enterprise. However, it cannot be regarded as pure architect of the changed financial policy of banks (increasingly inclined to make financial investments rather than to invest on business and in favour of the same).

4. Conclusions Through an examination of the main characteristics held by Italian SMEs, it has been possible to bring out the countless differences that distinguish them from European companies. As it has been pointed out in the previous paragraphs, the historic and economic roots also play a decisive role in the development of entrepreneurship in Italy. However, it should be better saying "update" rather than "development" because it was possible to highlight that the range of enterprises is wider compared to the percentage of employees.

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Adalberto Rangone It also should be taken in consideration how the entrepreneurial spirit has been shaped by local realities (intimate and snug). This is a situation which for bringing out the good of the enterprise must severely collide with an impressive process of globalization. The development and survival of Italian SMEs, then, needs particular conditions that can be severely met with immediate measures. In our modest opinion, the solution is to be found through the study of the economic, historical, sociological but also legal and financial aspects that have marked the enterprise development in Italy until the current days. We are, therefore, in front of double choice: a) the undisputed process of globalization in which we are living make it necessary to find ways through which SMEs can finally become competitive not only on the European scenario but also globally. It is extremely difficult, but it should be better saying impossible, that SMEs can find their way in the world facing the competition from large transnational corporations. Then, as argued above, if the banks are no longer willing to play the role of a partner close to the enterprise, it seems appropriate that the State should intervene as a "Deus ex machina" giving the appropriate tools (subsidy ‐ tax cuts). This way inevitably needs for measures taken by the Government, including a serious range of reforms in support of enterprise and its internationalization. The tools provided by the Government in favour of the temporary statal copartnership in the business risks (for example SIMEST) already exist but are extremely woolly, hardly reachable by the companies and not operating in a rapid time. In a dramatic situation like this one suffered by the Italian companies, the biblical times of the bureaucracy do not help them and, conversely, they can deceive companies diverting the attention away from the resources useful to management. It is obvious and worrying the need for measures closely related to taxation. The burden of the taxes that relapse on corporate governance is not related to the government desire to help the enterprises during a difficult situation. This reality shows all its most intolerable drama if we consider also the lowest consumption that in the year 2012 has touched lightly historical minimum levels. Then, we could highlight the disastrous intrusiveness of the tax burden through a system of equation: Tax burden = limit to the enterprise development Welfare reduction = contraction of consumption Contraction of consumption = business crisis Exasperated State/enterprises/family deleverage = new depression b) if the road to internationalization inside a globalized system has not been the quickest and painless solution, some theorists (for example Baumann) pull also to consider the so‐called process of "Glocalization". Alongside of transnational corporations, it is necessary to stimulate the excellence of local businesses that can supply economically, politically and socially some distortions present in a globalized world. To achieve this goal is unquestionably important the role that local banks can play in this context, assisting and supporting the SMEs efforts.

References Amatori F., 1996, “Beyond state or market: Italy's futile search for a third way”, in The rise and fall of State‐Owned enterprise in the Western world , ed. Pier Angelo Toninelli, new York. Badulescu A. e D., 2011, “L’imprenditore e la sua funzione prometeica”, in Rangone E. C., “Lo Spirito dell’Economia. La direzione di una grande orchestra”, Pavia University Press, Pavia. Banca d'Italia, 2013, www.bancaditalia.it/ Bebchuk L., Cohen A., Ferrel A., 2004, “What matters in Corporate Governance?”, The Review of Financial Studies, Harvard. Banca di Italia, 2012, “Le imprese italiane e gli strumenti derivati”, n. 139. Berle A.A. , Means G.C.,1966, “Società per azioni e proprietà privata”, Einaudi, Milano. Bortolotti B., 2013, “Crescere insieme per un’ economia giusta”, Laterza, Bari. Bratton W.W., 2001, “Berle and Means Reconsidered at the Century’s Turn”, Journal of Corporation Law, Vol. 6, No. 3. Canfin P., 2013, “Quello che le Banche non dicono”, Castelvecchi Editore, Roma. Cantillon R., 1974, “Saggio sulla natura del commercio in generale”, Einaudi, Torino. Chandler A.D., 1994, “Dimensione e diversificazione”, il Mulino, Bologna. Clarkson M., 1998, “The corporation and its stakeholders ‐ the classic and contemporary readings”, University of Toronto Press, Toronto. Coase R.H., 2001, “Il problema del costo sociale”, Asterios, Trieste. Consiglio Nazionale dell'Economia e del Lavoro, 2013, www.cnel.it/

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Adalberto Rangone Costanzo P., Priori M., Sanguinetti A., 2007, “Governance e tutela del risparmio. Best practice, regole e comunicazioni al mercato”, Ed. Vita e Pensiero, Milano. De Luca F., 2008, in “Governance, adeguatezza e funzionamento organizzativo delle imprese”, (a cura) di Paolone G., Aita G., Franco Angeli, Milano. European Commission, (2011) “Are European SMEs recovering from the crisis? Annual Report on EU small and medium‐ sized enterprises 2010/2011”. European Parliament, Directorate‐General for Internal Policies. (2012) “Potential Of Venture Capital in the European Union”, Report. Eurostat, 2013, ec.europa.eu/eurostat Freeman R.E., 2010, “Strategic Management: a stakeholder approach”, Pitman, Boston. Freeman R.E., W.M. Evan, 1990, “Corporate Governance: A Stakeholders Interpretation”, Journal of Behaviour Economics. Friedman A.L., Miles S., 2006, “Stakeholders: Theory and Practice”, Oxford University Press, Oxford. Galbraith J.K., 1968, “Il nuovo stato industriale”, Edizioni Einaudi, Torino. Galbraith J.K., 1967, “L’economia e l’interesse pubblico”, Arnoldo Mondadori Editore, Milano. Guatri L., 2000, “Trattato sulla valutazione delle aziende”, EGEA Edizioni, Università Bocconi, Milano. Hagedoorn J., 1996, “Innovation and Entrepreneuship: Schumpeter Revisited ”, Oxford University Press, Oxford. Istat, Istituto Nazionale di Statistica, 2013, “Noi Italia”, report. Istituto Nazionale di Ricerca, 2013, www.istat.it/ Jensen M.C., Meckling W.H., 1976, “Theory of the firm: managerial behavior, agency costs and ownership structure”, Journal of Financial Economics. Jensen M.C., 1986, “Agency cost of free cash flow, corporate finance and takeovers”, American Economic Review. Kaldor N., 1965, “Un modello dello sviluppo economico”, in “Saggi sulla stabilità economica e lo sviluppo”, trad. it., Einaudi, Torino. Keynes J.M., 1968, “Esortazioni e Profezie”, trad. it., Il Saggiatore Milano. Marx K., 1970, “Il capitale”, trad. it., edizione Newton Compton, Milano. Mattoscio N., Colantonio E., 2011, “Economia e sviluppo Umano”, in Rangone E. C., “Lo Spirito dell’Economia. La direzione di una grande orchestra”, Pavia University Press, Pavia. Mella P., Velo D., 2007, “Creazione di valore, Corporate Governance e informativa societaria”, Giuffrè Editore, Milano. Meade E., 1961, “A neoclassical theory of economic growth”, University books, London. Mihut I., 2011, “Lo spirito imprenditoriale”, in Rangone E. “Lo Spirito dell’Economia. La direzione di una grande orchestra”, Pavia University Press, Pavia. Montani G., 1975, “La teoria economica classica”, edizioni Loescher, Torino. OECD, 1996, “The Knowledge‐Based Economy”, Paris. Orazio, 1992, “Tutte le opere”, a cura di Abbate S. M., Newton Compton, Roma. Paolone G., 2004, “Assetti di Governance e modelli societari”, Giappichelli, Torino. Pasinetti L., 1984, “Dinamica strutturale e sviluppo economico ‐ un’indagine teorica sui mutamenti nella ricchezza delle nazioni”, UTET, Torino. Post J., Preston L., Sachs S., 2002, “Redefining the Corporation ‐ Stakeholder Management and Organizational Wealth”, Stanford Business Books. Preti I., 2011, “Il meglio del piccolo ‐ l’Italia delle PMI: un modello originale di sviluppo per il Paese”, Edizioni EGEA, Università Bocconi, Milano. Rangone E.C., 2011, “Lo spirito dell’economia. La direzione di una grande Orchestra”, Pavia University Press, Pavia. Rangone E.C., 2004, “Elementi di economia e politica dello sviluppo”, University od Oradea, Oradea. Ricardo D., 1986, “The Principles of Political Economy and Taxation”, trad. it., Edizioni UTET, Torino. Robinson J., 1968, “Classificazione delle innovazioni” in Jossa B., “Progresso tecnico e sviluppo economico”, Franco Angeli, Milano. Robinson J., 1966, “Ideologie e scienza economica”, trad. it., Sansoni editore, Firenze. Rostow W.W., 1978, “The World Economy: History and Prospect”, University of Texas Press. Sargiacomo M., 2000, “Il BenchMarking nell’azienda comune. Profilo economico‐aziendale, approccio metodologico, sistema di rating delle condizioni di successo”, Giappichelli, Torino. Schumpeter J.A., 1973, “Capitalismo.Socialismo.Democrazia”, trad. it., Etas Kompass, Milano. Schumpeter J.A., 1972, “Storia dell’analisi economica”, trad it., Boringhieri, Torino. Schumpeter J.A., 1972, “Teoria economica e storia imprenditoriale”, trad. it., a cura di Cavalli A., in “Economia e società”, Il Mulino, Bologna. Williamson O.E., 1992, “Le istituzioni economiche del Capitalismo, imprese, mercati, rapporti contrattuali”, Franco Angeli, Milano. Zamagni S., 2011, “Cooperazione di credito e sviluppo civile: come esaltare il potenziale identitario delle BCC”, Working Papers 81, Università di Bologna.

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Understanding Entrepreneurial Performance in a Networked Social Environment Carla Riverola and Francesc Miralles La Salle University, Barcelona, Spain criverola@salleurl.edu fmiralles@salleurl.edu Abstract: Several theories have been trying to identify the entrepreneur’s success factors in order to improve new venture performance (Simpeh 2011). From a managerial point of view, the Resource‐Based Theory considers that the founder’s access to resources is an important mean for entrepreneurial performance (Bordieu 1983; Alvarez and Busenitz, 2001). Build under the Resource‐Based Theory, the social capital of the entrepreneur studies how the individual’s social network may provide external resources (such as knowledge, skills, capital, information...) to enhance its venture performance (Bordieu 1983; Aldrich and Zimmers 1986; Coleman 1990; Lee and Jones 2010). Concretely, strong ties (such as family or friends) are good for accessing finance and other resources (Lowik et al 2012); whereas weak ties are good for accessing information about structural holes and generating creative ideas (Burt 1992, 2004; Shane and Venkataraman 2000). It then seems clear that when increasing the entrepreneur’s social capital, its performance should increase. Contrarily, some researchers identified that entrepreneurs working in a networked social environment – where they have more opportunities to develop and maintain ties through new IT ‐ are having difficulties to identify structural holes (Teece 2009). Moreover, studies found that entrepreneurs may be fortifying the embeddedness of their social network rather than building on their weak ties (Newbert and Tornikoski 2012). In this sense, we hypothesize that the new ways of communicating are driving entrepreneurs to build embeddedness within their strong ties; leaving unattended the importance of developing weak ties to identify structural holes. This research work aims to approach this existing gap through identifying how the entrepreneur’s strong and weak ties have been affected by this networked social environment, and what’s the specific effect on entrepreneurial performance. Therefore, the contribution of this research may be for both academics and practitioners; through providing an accurate perspective of the entrepreneur’s social capital on entrepreneurial performance. Keywords: entrepreneurial performance, resource‐based theory, social capital, media use, strong ties, weak ties

1. Introduction New companies are creators of new jobs; therefore, entrepreneurship is considered an important economic force (Davidsson 1995). For this reason, there is an interest on identifying those factors that may explain business start‐up success in order to improve entrepreneurial assessment practices. Among the different theories that approach entrepreneurial performance, the Resource‐Based Theory posits that access to resources by the entrepreneur is an important predictor of new venture founding (Bordieu 1983; Alvarez and Busenitz 2001; Shane and Venkataraman 2000). In particular, social capital states that the entrepreneur’s relationships (friends, relatives, workmates, acquaintances, etc.) may facilitate collaboration and cooperation to achieve mutual benefits (Bordieu 1983; Aldrich and Zimmers 1986; Coleman 1990; Greve and Salaff 2003). Within the studies on the social capital of the individual, literature has identified that the different types of ties are good providers of different resources (Granovetter 1973; Elfring and Hulsink 2003; Lowik et al 2012). In fact, strong ties encompass those close relationships such as friends, relatives or workmates and are usually good for accessing various types of capital such finance or resources that the entrepreneur may need (Krackhardt and Stern 1988; Lowik et al 2012). Contrarily, weak ties refer to acquaintances rather than friends, and can be good means for accessing information about structural holes and generating creative ideas (Granovetter 1973; Burt 1992, 2004; Shane and Venkataraman 2000). Moreover, it has been found that the entrepreneur’s social capital has been enhanced by Information Technologies (IT), as they have access to a wide range of interactive tools that enable faster communication and access to more global resources (Karkkainen, Jussila and Janhonen 2011). Despite the current understanding that access to more resources should enhance entrepreneurial performance, some studies indicate that entrepreneurs have difficulties to capture value in technology‐based products and services in today’s competitive environment (Teece 2009); and current theories don’t help to understand this apparent paradox.

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Carla Riverola and Francesc Miralles For this reason, recent studies have focused on studying how entrepreneurs are coordinating and capturing value from their social ties, and found out that entrepreneurs rely on their embedded relationships rather than maximizing their weak ties (Newbert and Tornikoski 2012). Considering that weak ties are good providers of information about structural holes and creative ideas, we hypothesize that this networked social environment – where individuals use IT to communicate and access to information ‐ is dropping entrepreneurs to put effort on embedding their stronger ties and not taking into account the value of weak ties to identify structural holes. The aim of this research is to shed some light on how the new ways of communicating are affecting the entrepreneur’s social capital; and how this new factors may influence entrepreneurial performance. More precisely, it seems that current understanding of entrepreneurs’ social capital needs refinement through the role that strong and weak ties may have on entrepreneurial performance, and the social platforms that IT have enabled may be contributing to new factors of interaction that cannot be measured with standard indicators. This research‐in‐progress work is a first step of a PhD dissertation process that wants to uncover the gap identified on the role of communication and access to information on entrepreneurial performance through their effect on the strong and weak ties of the entrepreneur. Specifically, this contribution proposes a two‐ stage discussion to ECIE attendance. First of all, our paper includes a detailed review of the current understanding on the role that entrepreneur’s social capital may play on entrepreneurial performance. Secondly, potential research lenses are analyzed to refine the theoretical tools that can improve the understanding of the influence of those factors on entrepreneurial effort. Finally, besides the scientific interest on understanding the role of a networked social environment may have on entrepreneurial performance, this research may be of interest for those entities dedicated to promote and train entrepreneurial practices in order to make more efficient their assessment policies. The organization of the document is as follows. After this introduction, section two pretends to revise the current state of the art of the relationship between social capital and entrepreneurial performance, and how specific components of social capital have been affected by this networked social environment. Section three presents the research gap identified and section four proposes a research method to study this gap. Fifth section states the main conclusions of this document and finally, section six exposes the upcoming steps to proceed with this research proposal. The paper ends with a brief note on the implications of this PhD research.

2. Literature review The benefits of successful entrepreneurial activities are an already established fact: not only new companies are creators of new jobs (Davidsson 1995) but also these practices represent an integral part of the renewal process that defines market economies through technological change and productivity growth (Kuratko 2005). It becomes then relevant to study the different factors that influence entrepreneurial performance. Schumpeter (1934) defined the entrepreneur as an individual whose function is to carry out new combinations of means of production. Besides, entrepreneurs work within environments of uncertainty and rapid change (Duncan 1972) and they do not have well‐defined goals, standard operating procedures or organizational structures to fall back on when creating a new venture (Williamson 2000). Scholars have been approaching entrepreneurial performance through different fields such as: economics, psychology, sociology, anthropology, management, etc. in order to detect possible factors that may affect either opportunity identification or new venture growth (Simpeh 2011). From the field of management, the resource‐based theory proposes that the entrepreneur’s resources are important means for explaining new venture performance and insufficient resources are a huge obstacle for entrepreneurial activities (Bordieu 1983; Alvarez and Busenitz, 2001). Thus, the Resource‐Based Theory (Figure 1) classifies the entrepreneur’s resources in: (1) human capital ‐ the stock of knowledge and skills that resides within individuals (Becker 1964); (2) social capital ‐ entrepreneurs relationships (with friends, relatives, workmates, acquaintances, etc.) that facilitate collaboration and cooperation to achieve mutual benefits (Bourdieu 1983; Greve and Salaff 2003) and (3) financial capital ‐ the economical resources of the entrepreneur (Blanchflower, Oswald, and Stutzer 2001).

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Figure 1: The resource based theory Several studies affirm that networking and building social capital constitutes a significant proportion of resources for entrepreneurial practices (Baron and Shane 2005; Clausen 2006). In particular, it has been argued that the new venture creation is the result of the interplay of the entrepreneur’s social network and its cognitive biases (DeCarolis, Litzky, and Eddleston 2009). Contrarily to the baseline of the Resource‐Based Theory, it has been found that although social capital of the entrepreneur has been enhanced by the wide range of IT tools to communicate and access more global information (Karkkainen, Jussila and Janhonen 2011); entrepreneurs working in such networked social environments have difficulties to capturing value propositions of their new products or services (Teece 2009). In order to explain this apparent paradox we hypostasise that the current understanding on the entrepreneur’s social capital needs refinement through the particular effect on both the entrepreneur’s strong and weak ties to explain its effect on entrepreneurial performance in such a networked social environment. More precisely, it seems that these new IT platforms have engaged entrepreneurs into building embeddedness within their strong ties leaving aside the role of weak ties. The following sections detail how the individual’s social capital influences entrepreneurial performance and how this networked social environment has affected the entrepreneur’s social capital through both strong and weak ties.

2.1 The value of social capital on entrepreneurial performance Entrepreneurs require information, capital, skills and labour to start business activities. These kinds of resources can be classified as tangible or intangible. Tangible assets would include both financing and facilities (Coleman 1990; Chrisman et al. 1999); whereas intangible assets would encompass skills such as managerial, manufacturing, marketing, technical, high tech… (Liñan and Santos 2007), information and access to capital markets, distribution channels, suppliers, raw materials, etc. (Shane and Venkataraman 2000); access to outside consultants such as accountants, bankers, government, university, venture capitalists (Shane and Venkataraman 2000; Alder and Kwon 2002; Burt 1992) and emotional support (Liñan and Santos 2007). While entrepreneurs hold some of these resources themselves, they often complement their resources by accessing their contacts through their social networks (Greve and Salaff 2003). The term social capital refers to the entrepreneur’s ability to extract means from their social structures, networks and memberships (Wellman et al. 2001). From an opportunity‐based perspective (Figure 2), researchers have pointed out the importance of the entrepreneur’s social capital to explore and exploit opportunities (Davidson and Honig 2003): some individuals are keener to recognize and exploit opportunities because they have better access to information and knowledge (Aldrich 1999; Shane and Venkataraman 2000) or they have access to expert entrepreneurs in their social network (Kim, Aldrich, and Keister 2003; Elfring and Hulsink 2003). Moreover, findings also point out that the individual may have the ability to recognize a given entrepreneurial opportunity, but lack the social connections to transform the opportunity into business start‐up (Eckhardt and Shane 2003): one’s network relationships and access to external knowledge from other entrepreneurs may provide the prospective entrepreneur with useful skills and information, and decrease the ambiguity inherent in the entrepreneurial process (Johannisson 1996).

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Figure 2: Social capital, human capital and the Nascent entrepreneur (Davidson and Honig 2003) As an attempt to refine the nature of the relationships, some studies classified the strength of the ties depending on the deepness and closeness of the relationship in terms of amount of time, emotional intensity, intimacy and reciprocal services; in order to identify their nature and the type resource they provide (Granovetter 1973). Later in 2009, Gilbert and Karahilios extended this classification of ties into the following terms: intimacy, intensity, duration, social distance, services, emotional support and structure. Thus, a general agreement on the nature of the relationships classifies ties as: strong ties ‐ such as family or close friends; weak ties ‐ acquaintances rather than friends; and latent ties ‐ where a connection between actors is available but has not been activated by social interaction (Haythornthwaite 2002). Several studies point out that high quality social network structures are characterized by high number of variety of relations (Lowik et al 2012; Elfring and Hulsink 2003) and the access and development of ties is essential (Maurer and Ebers 2006) to create viable organizations (Aldrich 1999). In the field of entrepreneurship, strong ties have been found as significant means for providing emotional support (Haythornthwaite 2002; Krackhardt and Stern 1988) and for enhancing the acquisition of resources and the probability of opportunity exploitation (Aldrich and Zimmer 1986); affecting mainly in the opportunity exploitation stage of entrepreneurial performance. Contrarily, weak ties have been found useful for accessing disperse information (Haythornthwaite 2002) and generating creative ideas (Burt 2004). Moreover, this type of ties is found to be good helpers for identifying structural holes and supporting the entrepreneur in the opportunity exploration stage. In addition, literature also posits that ties can be both direct ties and indirect; whether the two parties have engaged in interactions prior to negotiating the resource exchange or their first contact is at the outset of the negotiation and through a common third party referrer (Zangh et al. 2010).

2.2 The effect of a networked social environment on social capital and entrepreneurial performance Communication is a key way to maintain ties and media enables such connection (Haythornthwaite 2002). Thus, IT is defined as the range of digital applications that enable users to communicate, create content and share it with each other via communities, social networks and virtual worlds making it easier than before (Karkkainen, Jussila, and Janhonen 2010; Cooke and Buckley 2008). The emergence of this new ways of work (NWOW) has become a trend for communication and access to information between individuals through stimulating new forms of online interaction and enhancing online relationships (Blanchard 2004; Kavanaugh and Patterson 2001; Haythornthwaite 2002; Lee and Jones 2010). Moreover, patterns of media use show how members at a network are connected and how media creates and support network structures (Haythornthwaite 2002). Literature on entrepreneurship highlights that face‐to‐ face (direct) communication is an essential medium for communicating beliefs, trust and emotion (Coleman 1990); whereas computer‐mediated communication is less useful for emotions and complex information; but provides a wider range set of contacts and creates a networking infrastructure that encourages the formation of social capital (Blanchard 2004; Lee and Jones 2010).

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Carla Riverola and Francesc Miralles Studies on the influence of this networked social environment on the individual’s social network points out that strong ties have been affected positively by new means and opportunities of connection; complementing the traditional media (Lee and Jones 2010). In this sense, it seems that the new ways of communicating offer complementary mediums for maintaining relationships with strong ties; making the relationships more embedded (Haythornthwaite 2002). Weak ties on the other hand, have also been affected by this networked environment. IT interactive tools have enabled new forms of initiating and maintaining connectivity (Quan ‐ Haase and Wellman 2004); and have been found useful for accessing disperse actors and enabling a wide range of social contacts, as well as to access a wide range of global resources (Haythornthwaite 2002; Lee and Jones 2010). Nevertheless, although it seems that this networked social environment should improve entrepreneurial performance, some studies highlight the difficulties that entrepreneurs have to capture value within this competitive environment (Teece, 2009). Thus, the NWOW may be contributing to new factors of interaction that cannot be measured with traditional indicators (Quan‐ Haase and Wellman 2004).

Figure 3: Supporter networks and organizational emergence: conceptual model (Newberck and Tornikoski, 2012) In conclusion, recent studies on how entrepreneurs interact and access resources from their social network (Figure 3) posit that these individuals may be developing more embeddedness within their stronger ties instead of building weak ties for accessing information on structural holes in the early stages of entrepreneurial process (Newberck and Tornikoski, 2012).

3. Research gap As highlighted in the literature review, building social capital is an important mean for obtaining external resources that the entrepreneur may need to support its new venture creation process (Wellman et al. 2001). In this sense, strong ties are useful means for emotional support (Haythornthwaite 2002; Krackhardt and Stern 1988) and for the acquisition of resources on opportunity exploitation (Aldrich and Zimmer 1986); whereas weak ties are good information providers (Lowik et al. 2012) and helpful for generating and assessing creative ideas (Burt 2004). Moreover, media enables individuals to communicate and access to information; in order to make possible the creation and maintenance of ties (Haythornthwaite 2002). Literature also shows that the individual’s social ties have been affected by this networked social environment: strong ties have new means and opportunities of connection; complementing the traditional media and making these ties even stronger (Quan ‐ Haase and Wellman 2004; Lee and Jones 2010); and weak ties can overcome time and space limitations (Karkkainen, Jussila, and Janhonen 2010) providing access to more global resources (Lee and Jones 2010). Contrarily to the existing relationship between building social capital and entrepreneurial performance (Bordieu 1983; Aldrich and Zimmers 1986; Coleman 1990), entrepreneurs working in a networked social environment to communicate and build social capital don’t necessarily improve their performance: it seems that this new environment is influencing the entrepreneur’s development of strong ties, making them more embedded (Haythornthwaite 2002); without taking into account the necessity of building on their weak ties in

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Carla Riverola and Francesc Miralles the early stages of their entrepreneurial process to identify structural holes (Burt 2004; Shane and Venkataraman 2000). According to this apparent paradox, the study addresses the following research questions: “Does a networked social environment drop entrepreneurs on building embeddedness within their stronger ties instead of interacting with their weak ties?” and “Is this new networked social environment deviating entrepreneurs from interacting within their weak ties to get information from structural holes and creative ideas?”. This research work posits that current theories and models to access entrepreneurial performance have not included specific factors of how communication and access to information affects entrepreneurial performance through their effect on both the strong and weak ties of the individual. Therefore, in response to the research question, this work aims to study whether the influence of the NWOW on entrepreneur’s social ties, can propose a new theoretical lens to explain entrepreneurial performance. As an attempt to understand the influence that the aforementioned environment on entrepreneurial performance; this research proposes a refinement to the social capital of the entrepreneur through the specific role of both strong and weak ties.

4. Research method According to the previous section, although new ways of communication have enhanced the entrepreneur’s social capital, individuals have difficulties to identify structural holes. In particular, it seems that the effect of new networked social environment on the entrepreneur’s development of strong and weak ties is not effective for identifying opportunities. In order to study this research gap, the current work‐in‐progress proposes a two step research process: Firstly, following the exploratory aim of this research, an initial step should follow a qualitative approach to examine the influence of both strong and weak ties on entrepreneurial performance through a networked social environment. Secondly, a confirmatory approach could be based on an empirical analysis to validate the propositions identified in the previous step. Thus, once the new components of the entrepreneurs’ social capital arise from the exploratory approach, a quantitative analysis could be held to empirically test the propositions. This analysis should be conducted through the administration of surveys to a significant sample of entrepreneurs in order to support the statements proposed. Finally, it is important to add that the second step of this research process will need refinement on the structure and sampling once dealing with the data obtained in the step one of this research process. Moreover, a deeper explanation on the exploratory approach is provided in section “4.2: Research process: Step one” to bring this step into debate within the PhD Research Colloquium during the “8th European Conference on Innovation and Entrepreneurship ‐ ECIE 2013”.

4.1 Research process: Step One The first step of the exploratory approach should include factors to understand the role of social capital on the entrepreneur and the influence of a networked social environment on the development of social capital. In this sense, two research methods have been found useful to address the exploratory process: multiple ‐ case study (Yin 2009; Eisenhardt 1989; Eisenhardt and Graebner 2007) and grounded theory (Glasser and Straus 1967). On one hand, multiple ‐ case study approaches have already been used for similar purposes in literature, where the deep analysis of different real life cases helps to fully understand the entrepreneurial process and the role of founders’ social capital. Thus, multiple ‐ case studies are usually conducted through semi‐structured interviews to entrepreneurs where topics such as types of relations, acquisition of strategies, sources of external knowledge, and kinds of resources exchanged are investigated (Yin 2009; Eisenhardt 1989). On the other hand, another interesting approach identified could be the grounded theory. This is an inductive type of research, where the researcher begins the analysis with the first data collected (through semi‐

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Carla Riverola and Francesc Miralles structured interviews) and constantly compares indicators, concepts and categories as the theory emerges (Glasser and Straus 1967). This method is interesting to generate a conceptual theory that accounts for a pattern of behaviour which is relevant and problematic for those involved. Moreover, independently from the research method implemented, the implementation of semi‐structured interviews will be basic for the development of the research (Yin 2009; Eisenhardt 1989; Glasser and Straus 1967). According to previous research on the entrepreneur’s social capital, interviews should first estimate the importance of building social capital through questions such as “with how many people would you estimate you have discussed aspects of starting or running your own business?” and “Do you spend time developing/maintaining contacts with people with whom you discuss business matters?” (Greve 1995) Further questions should also address the nature of the relationships, the resource access they provide, and how these networks and resources flows are coordinated (Hoang and Antoncic 2003). Finally, additional questions should be constructed in order to analyse the media usage and the capabilities of using different patterns of media; in order to identify the influence of ties development within this networked social environment.

5. Conclusions From the point of view of market growth, entrepreneurial performance is a central factor (Davidsson 1995). Therefore, new venture creation and performance has received special attention in order to improve entrepreneurial promotion policies. The Resource‐Based Theory has been used in literature to explain the different types of resources that the entrepreneurs may access to identify opportunities and manage their business performance (Bordieu 1983; Alvarez and Busenitz, 2001); and the social capital addresses those external resources that entrepreneurs may access through their network structure (Bordieu 1983; Aldrich and Zimmers 1986; Coleman 1990). Nevertheless, the literature review exhibits that there is still some controversy remaining on the effect that building social capital could have on entrepreneurial performance. Traditional explanations on the role of social capital posit that entrepreneurs benefit from their social network to enhance entrepreneurial performance (Lowik et al 2012; Burt 1992, 2004; Shane and Venkataraman 2000). On the other hand it has been found that entrepreneurs working in a networked social environment (where they have higher levels of social capital) have difficulties to capture value from new products and services (Teece 2009). According to literature, strong ties are good for accessing finance and other cognitive resources (Lowik et al 2012), whereas weak ties are good for accessing information about structural holes and generating creative ideas (Burt 2004; Shane and Venkataraman 2000). In this line, recent studies found that entrepreneurs are more focused on building embeddedness within their stronger ties rather than building on their weak ties (Newbert and Tornikoski 2012). Thus, we postulate that the new ways of communicating are dropping entrepreneurs into building embeddedness rather than encountering and exchanging information about structural holes within their weak ties. This could explain the apparent paradox where entrepreneurs with higher levels of social capital through a networked social environment have difficulties to identify and capture value from new products or services. This research‐in‐progress posits that there is a remaining gap literature to explain whether this networked social environment enhances specific aspects of social capital that are not enough to facilitate entrepreneurs obtain information about structural holes. Moreover, this research in progress aims to discuss ‐ within the ECIE PhD Colloquium ‐ the role that entrepreneur’s social capital may play on entrepreneurial performance within a networked environment and the research methodologies proposed to conduit such paradox. Finally, the contribution of this research may be for both academics and practitioners; through providing an accurate perspective of the entrepreneur’s social capital role on entrepreneurial performance.

6. Limitations and future steps As mentioned above, this research‐in‐progress work is a first step of a PhD dissertation process that wants to uncover the gap identified on how this networked social environment affects the individual’s strong and weak

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Carla Riverola and Francesc Miralles ties; and how this affects on both the identification and exploitation of opportunities for entrepreneurial performance. Specifically, it has been found that social capital needs refinement to assess entrepreneurial performance in order to explain why entrepreneurs have difficulties to identify structural holes despite their social capital has been enhanced. In order to proceed with this research, the next steps of this PhD dissertation process should consist on driving focus groups in order to refine the research method proposed. After validating the research method, a data collection process should be initiated.

7. Implications The implications of this research can be for both scholars and practitioners. Firstly, from a scientific point of view, this research aims to provide an accurate perspective of the influence of the entrepreneur’s social capital on entrepreneurial performance, through addressing the role of new ways of communication for the development of weak and strong ties. Secondly, from a managerial point of view, the interest of this research could be for governmental entities, training centres, entrepreneurship foundations, venture capitalists, and other consultants or advisors who should benefit from a better understanding of specific aspects that may influence the development of ties for improving entrepreneurial performance.

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Carla Riverola and Francesc Miralles Eckhardt, J. and Shane, S. (2003) “Opportunities and entrepreneurship”, Journal of management, Vol 29, No. 3, pp 333–349 Eisenhardt, K. M. (1989) “Building theories from case study research”, Academy of management review, Vol 14, No. 4, pp 532−550. Eisenhardt, K. M. and Graebner, M. (2007) “Theory building from cases: Opportunities and challenges”, Academy of management journal, Vol 50, No. 1, pp 25−32. Elfring, T. and Hulsink, W. (2003), “Networks in entrepreneurship: The case of high‐technology firms”, Small Business Economics, Vol 21, No.1, pp 409‐422 Glasser, B. and Straus, A. (1967) The discovery of grounded theory, Aldine, Chicago Gilbert, E. and Karahalios, K (2009), “Predicting tie strength with social media”, Proceedings of the 27th international conference on Human factors in computing systems, pp 211–220 Granovetter, M. S. (1973), “The Strength of Weak Ties”, The American Journal of Sociology, Vol 78, No. 6, pp 1360–1380 Greve, A. (1995), “Networks and entrepreneurship: An analysis of social relations, occupational background, and use of contacts during the establishment process”, Scandinavian Journal of Management, Vol 11, No. 1, pp 1–24 Greve, A. and Salaff, J. (2003) “Social networks and entrepreneurship”, Entrepreneurship Theory and Practice, Vol 28, No. 1, pp 1‐22 Haythornthwaite, C. (2002), “Strong, Weak, and Latent Ties and the Impact of New Media”, Information Society, Vol 18, No. 5, pp 385–401 Hoang, H. and Antoncic, B. (2003) “Network‐based research in entrepreneurship: A critical review”, Journal of Business Venturing, Vol 18, No. 2, pp 165‐187 Johannisson, B. (1996) “The dynamics of entrepreneurial networks”, Frontiers of Entrepreneurship Research, Babson College, Boston Kärkkäinen, H., Jussila, J. and Janhonen, J. (2011) “Managing customer information and knowledge with social media in business‐to‐business companies”, Proceedings of the 11th International Conference on Knowledge Management and Knowledge Technologies, Graz, Austria Kavanaugh A. L. and Petterson S. J. (2001) “The impact of community computer networks on social capital and community involvement”, American Behavioural Scientist, Vol 45, No. 3, pp 496 ‐ 509 Sociological Association, Atlanta Krackhardt, D. and Stern, R. N. (1988), “Informal Networks and Organizational Crises: An Experimental Simulation”, Social Psychology Quarterly, Vol 51, No. 2, pp 123–140 Kuratko, D. F. (2005) “The emergence of entrepreneurship education: Development, trends, and challenges”, Entrepreneurship Theory and Practice, Vol 29, No. 5, pp 577‐598. Lee R. and Jones O. (2010), “Networks, Communication and Learning during Business Start‐up” International Small Business Journal, Vol 26, No. 5, pp 559–594 Liñan, F. and Santos, F.J. (2007), “Does Social Capital Affect Entrepreneurial Intentions?” International Advances in Economic Research, Vol 13, No. 1, pp 443–453 Lowik, S., Van Rossum, D., Kraaijenbrink, J. and Groen, A. (2012) Strong Ties as Sources of New Knowledge: How Small Firms Innovate through Bridging Capabilities, Journal of Small Business Management, Vol. 50, No. 1, pp 239–256 Maurer, I. and Ebers, M. (2006), “Dynamics of social capital and their performance implications: Lessons from biotechnology start‐ups”, Administrative Science Quarterly, Vol 51, No. 1, pp 262–292 Newbert S. L. and Tornikoski E. T. (2012), “Supporter networks and network growth: a contingency model of organizational emergence” Small Business Economics, Vol 39, No. 1, pp 141–159 Quan‐Haase, A. and Wellman, B. (2004), “How does the Internet affect social capital?” In M.Huysman and V.Wulf (Eds.), Social Capital and Information Technology, pp. 113–135, Cambridge, MA: MIT Press. Schumpeter, J. A. (1934) The theory of economic development, Harvard University Press, Cambridge. Shane, S. and Venkataraman, S. (2000) “The promise of entrepreneurship as a field of research”, Academy of Management Review, Vol 25, No. 1, pp 217–226 Simpeh, K. (2011) “Entrepreneurship theories and Empirical research: A Summary Review of the Literature”, European Journal of Business and Management, Vol 3, No. 6, pp 1–9. Teece, D. J. (2009) Dynamic capabilities and strategic management: organizing for innovation and growth, Oxford University Press, USA Vasilchenko, E. and Morrish, S. (2011) “The Role of Entrepreneurial Networks in the Exploration and Exploitation of Internationalization Opportunities by Information and Communication Technology Firms”, Journal of International Marketing, Vol 19, No. 4, pp 88–105 Wellman, B., Haase, A. Q., Witte, J. and Hampton, K. (2001) “Does the Internet increase, decrease, or supplement social capital? Social networks, participation and community commitment”, American Behavioral Scientist, Vol 45, No. 1, pp 436−455 Williams, D. (2006) “On and off the ‘net’: Scales for social capital in an online era”, Journal of Computer‐Mediated Communication, Vol 11, No. 1, pp 593−628 Williamson, O.E. (2000) “The new institutional economics: taking stock, looking ahead”, Journal of Economic Literature, Vol 38, No. 3, pp 595– 613 Yin, R.K. (2009) Case study research: desing and methods, Sage Publications Ltd, Thousand Oaks Zhang, J., Soh, P. H. and Wong, P. K. (2010), “Entrepreneurial resource acquisition through indirect ties: Compensatory effects of prior knowledge”, Journal of Management Vol 36, No. 2, pp 511–536

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Performance Measurement and Management in SMEs Ted Sarmiento and David Devins Leeds Metropolitan University, Leeds, UK T.Sarmiento@leedsmet.ac.uk D.Devins@leedsmet.ac.uk Abstract: Within the wider context of researching factors that contribute towards Small and Medium sized Enterprises (SMEs) success is the notion that success should be articulated and therefore measurable, in some capacity, for every business enterprise. Research suggests that having a Performance Measurement System (PMS) will aid managerial development and this research aims to counter the criticism that little empirical evidence currently exists regarding PM practice in SMEs. Finnish academic Laitinen, building on the ideas of Kaplan and Norton’s Balanced Scorecard system tailors these ideas towards an SME focused Integrated Performance Management System (IPMS). This paper questions of whether this proposed IPMS method is suitable for a wider range of SMEs than the original study had included. Based on a study of SMEs in the Leeds area of the United Kingdom, this research considers the critical measurements that are valued by SMEs themselves. The results show a surprising similarity with the Finnish studies and that the proposed IPMS may well be suitable model for performance measurement and management in SMEs more generally. The results revealed that satisfied customers, profit and employee issues were of the highest concern for this group of companies. These results and their implications to SME performance measurement and management are discussed in the paper. This research will be of use to academics wishing to hear more about SME performance measurement and management as well as SMEs themselves. In addition consultants, or those concerned with improving overall performance of the SME sector, may also find these results of interest. Keywords: small business, SME, performance measurement, performance management

1. The research question The wider context of this research is an attempt to gain a better understanding of factors that might contribute towards small business success or otherwise, including what defines success for the small business sector. The general literature review began with general texts on entrepreneurship, enterprise and small business, including a review and summary of growth models and other issues around small business success – such as characteristics, factors, facilitators, cultures, management education and training, definitions and failure. Taking the view that success, in whatever guise it may come, should somehow be knowable (i.e. measurable), this paper will focus exclusively on research concerning measuring and managing performance in SMEs. Garengo et al (2005), Taticchi et al (2008) and Brem at al (2008) all aim to clarify the current state of Performance Measurement Systems (PMS) as applied to smaller business (SMEs) and conclude that a PMS will help SMEs to manage their way to successful outcomes. The background to this area are works such as Kaplan and Norton’s (1992) Balanced Scorecard who argued that “non‐financial measures on quality, inventory, productivity, flexibility, deliverability and employees” (Kaplan 1984 p.96) should be used more significantly by management in future decision making because we are still using “accounting systems evolved from the scientific management in the early part of the twentieth century” (Kaplan 1984 p.96, Lepore 2009). Eccles (1991) also argued for a ‘revolution’ in managing performance of (mainly large) businesses “to shift from treating financial figures as the foundation for performance measurement to treating them as one among a broader set of measures” (Eccles 1991 p.131). His mandate for revolution is an increasing dissatisfaction in using purely financial considerations that inhibit long term strategic decisions and only measure the consequence of yesterday’s decisions without necessarily providing useful data for tomorrow’s actions. Eccles stresses that this is nothing new citing Ralph Cordiner, the 1951 CEO of General Electric, who commissioned measures which included market share, productivity, employee attitudes, public responsibility and a balance of short‐ and long‐term goals. He argues that “what gets measured gets attention, particularly when rewards are tied to the measures” (Eccles 1991 p.131) which is further echoed by Kaplan & Norton as “what you measure is what you get” (1992 p.71) whose ‘Balanced Scorecard’ asks managers to create measures of their organisations performance in four areas. Laitinen’s (2002) critique of the Balanced Scorecard’ system is that there was no rational case for the inclusion of these particular four factors nor the possible relationships that exist between them. However Kaplan & Norton later defended their choice as “the four perspectives of the Balanced Scorecard have been found to be

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Ted Sarmiento and David Devins robust across a wide variety of companies and industries. But the four perspectives should be considered a template, not a strait jacket. No mathematical theorem exists that four perspectives are both necessary and sufficient” (Kaplan & Norton, 1996, p. 34 in Laitinen 2002 p.75). He suggests that a “well‐organized system of performance measurement may be the single most powerful mechanism at management's disposal to enhance the probability of [success]” (Laitinen p.66) and wishes to put forward a system that could be useful, applicable and tailored to all smaller business to help with performance monitoring and decision making as “there is very little empirical evidence for small companies of the way performance is [currently] measured” (ibid p.69). Financial perspective Customer perspective Internal business perspective Innovation and learning perspective

How do we look to Shareholders? How do Customers see us? What must we excel at? Can we continue to improve and create value?

Figure 1: Kaplan & Norton (1992) Laitinen (2002) offers us his ‘Integrated Performance Measurement System’ (IPMS) that he claims has been adopted successfully in Finland and has been cited by many other academics worldwide, however there has been less evidence that the ideas have been used elsewhere by small businesses which is the specific aim of the system and research project. The IPMS attempts to track organisational performance attributes in a logical progression of products and services from company to customer. The system suggests the organisation measure five ‘Internal’ and two ‘External’ Factors.

Financial Performance Costs Production Factors

External Performance Factors Activities

Competitiveness Products

Revenue

Internal Performance Factors

Figure 2: Adapted from Laitinen (2002) The system is not meant to be highly prescriptive as it is recognised that all organisations differ and some measures may be either unnecessary or perhaps insufficient for specific instances. Nonetheless, the measures represent a broad overview of the important aspects of most businesses and are designed to focus managerial attention on areas that will improve the business performance in the future. A summary of the proposed measures is given in Figure 3. Internal Measures Costs of production factors Production factors (resources: equipment and people) Activities Products Revenue External Measures Competitiveness Financial Performance

Financial Non‐Financial

Budget (target) values vs. actual costs Budget (target) values for utilization vs. actual (equipment) and competence & motivation of staff (people) Time, quality and cost of activities vs. budget

Financial and Non‐Financial Non‐Financial Financial Financial and Non‐Financial Financial

Budget vs. actual Quality, Flexibility, Innovativeness Product and Customer Profitability Budget (target) values vs. actual for growth of revenues and market share Budget (target) values vs. actual for profitability, liquidity and capital structure

Figure 3: Summary of Measures Adapted from Laitinen (2002) Hudson et al (2001) compare of theory and practice in SME performance management systems and have used the theory to derive a set of ‘ideal’ (theoretical) performance measurement characteristics and dimensions as shown in Figure 4.

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Ted Sarmiento and David Devins Measures in a PM system should be… Derived from strategy Clearly defined/explicit purpose Relevant and easy to maintain Simple to understand and use Provide fast, accurate feedback Link operations to strategic goals Stimulate continuous improvement

A strategic PM system should measure… Quality Flexibility Time Finance Customer satisfaction Human resources

Figure 4: Adapted from Hudson et al (2001) Having rated each PMS against the ideal, from Kaplan to Laitinen, their results showed that a key flaw in most systems was a lack of reference to strategy and that “research has shown that SMEs which link operations to their business strategies outperform the competition (Argument et al 1997)” (Hudson et al 2001 p.1105). Worryingly, most systems produced an abundance of data that was either dated or unusable and the sample group reported low utilization of the performance data in decision making, which somewhat defeats the purpose. Two further main gaps were identified in that SMEs typically did not attempt to measure ‘flexibility’ or ‘human resources’ effectively as recommended by the theory while Lussier (1995, 2001 & 2008 & 2010) advises that businesses who do not keep updated and accurate records and do not use adequate financial controls have a greater chance of failure than firms that do. Hudson et al (2001) along with Garengo (2005) criticised Laitinen’s IPMS as neither being derived from, aligned with nor linking to strategic goals. Personally I believe a more useful criticism is that few, if any, researchers have attempted to make use of Laitinen’s ideas to judge its usefulness in part because reality, day to day operations and survival seem to take centre stage and have been found to sideline such attempts. SMEs perhaps have a tendency towards, and preference for, ‘performance initiating’ (directing towards success) rather than ‘performance measuring’. A synthesis of these two operating modes could be ‘performance management’ which this paper attempts to explore further to counter the claim that “little empirical evidence currently exists which describes current PM practice in SMEs or which evaluates the appropriateness of current processes within this context” (Hudson et al 2001 p.1106). Brem et al (2008) have also recently systematically reviewed the literature in the areas of Performance Measurement and SMEs, both separately and together. They argue that while there is much research available as separate subjects, less focus has been placed on the two combined and conclude that “there is a strong need for long term studies about the usage and the influence of PMSs on the corporate success in order to determine the effectiveness of the systems.” (Brem et al 2008 p.424). They also point out that while research has made several suggestions of PMS specifically for SMEs, for example Laitinen (2002) and Chennel et al (2000) none has yet been widely accepted by the SME ‘community’ themselves (Brem et al 2008). Crucially they state that the most important element of measuring performance is the conversion of the results into relevant activities. Reijonen (2008) suggest that it is from the subjective stance (of performance measures) that that the owner‐manager will be more motivated while Gray et al (2012) find SMEs themselves regard ‘success’ as meaning growth in customer satisfaction, profits and customer retention as the top three measures. Finally and most recently, one key proposal for SME success is a deeper, more systematic and integrated approach to performance measurement (Gilman et. al. 2012) and in the view of Neely and Mills (1993 in Laitinen 2002 p.88) “measurement is a luxury – success and failure are obvious” – but can we really have one (success) without the other (measurement)?

2. The research theme The theme of this research is to consider whether Laitinen’s IPMS system, and performance measurement in general, is of value and importance to the SME community and to then further consider what effect performance measurement and management can have on the success of an organisation. This research will seek clarification about the importance of the performance measurement criteria as originally proposed by Laitinen (2002), effectively attempting to replicate a portion of this prior research in the context of Leeds based SMEs (as opposed to Finnish technology companies). This means that there may be some usefulness in comparing the previous results with the data available in this study. It is hoped that the results of the survey will indicate, within the given limitations, the importance with which SMEs regard the proposed performance measures, thus providing some evidence base as to whether the proposed IPMS is suitable for the SME

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Ted Sarmiento and David Devins market. The results of this survey will be analysed to suggest the further direction of this research. The specific research question I am seeking clarification on is therefore: What is the importance, if any, of Laitinen’s proposed performance measures to the SME community in the Leeds (UK) city region?

3. Research method Stewart (2009) Research Design Question(s) Methodology

Philosophy

Ontology

Epistemology

Method [3]

Ask Questions

Observe

Analyse Text

Technique [many]

Interview

Survey

Participant Observer

Data

Qualitative (words)

Quantitative (numbers)

Claims

[2]

Beliefs of the researcher

Axiology

Etc.

Figure 5: Stewart research design (2009) The research method chosen to gather data about this research topic has been, according to Stewart (2009), to ‘ask questions’ through participating in a survey of 250 local (Leeds region) small businesses. The nature of the survey meant that several restrictions were placed upon this research, however these disadvantages were more than compensated for by the advantages that this opportunity presented, primarily in the larger sample size of businesses and in the volume of data that was collected. The disadvantages are that the nature of the survey (telephone) meant that qualitative responses needed to be minimized and quantitative questions were required in order to stay within the time restrictions and demands of the project. The wider survey was designed to gain information such as overall characteristics (size, sector, location, age, growth orientation etc.) followed by some detailed questions concerning awareness usage/non‐usage of university services, factors influencing the decisions to purchase and perceptions and mind‐set towards universities and associated support programmes. The survey was of up to 250 autonomous small businesses based in the Leeds city region with a focus on businesses with between 10‐249 employees, reflecting the Department for Business, Innovation and Skills (BIS) definition of SMEs as businesses with fewer than 250 employees but deliberately excluded the very smallest organisations. The survey made use of a random sample 3,000 businesses enterprise contacts that included basic information including name of the firm, telephone number, size, location and sector and assumed a 1 in 15 hit rate to get the full allocation of completed questionnaires. The sample was generated and quotas for the achieved interviews set to reflect the broad sectoral breakdown of the SME business population: ‘Primary/manufacturing’, ‘Construction’, ‘Transport, retail and distribution’ and ‘Services, a sampling approach that mirrors that adopted by the BIS for their SME Business Barometer Surveys, making the survey results highly relevant. Sampling by size reflected the overall SME population in the Leeds City Region. A specific questionnaire was designed to accommodate this information and it was determined that it should to take no longer than 20 minutes for participants to complete. This research formed a subset of this survey. The subset asked questions about the importance of the performance measurement criteria as originally proposed by Laitinen (2002), effectively attempting to replicate a portion of this research in the context of Leeds based SMEs (as opposed to Finnish technology companies). The ‘technique’ therefore according to Stewart (2009) for ‘data collection’ (though often called method) chosen for this research was a survey and the majority of the data collected specifically for this research paper was quantitative as it is the opinions of those questioned translated into numbers bearing in mind that “no method is entirely qualitative or quantitative. However, the techniques [for data collection] can be either

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Ted Sarmiento and David Devins qualitative or quantitative” (Ghauri et al 1995 p.86). In this case the participants were offered a Likert scale of one to five with one representing ‘not at all important’ and five ‘very important’. Respondent were asked to choose a number between one and five to represent their option as to the importance of each criteria offered and were also given an opt out option of ‘don’t know’. These questions were first tested informally on a small business owner manager so that we could gather some some initial feedback and then were refined for inclusion in the survey where they were piloted by a commercial research organisation in November 2012 and after further minor amendments were implemented by the same organisation in December 2012. The overall response rate for the survey, calculated as achieved interviews as a proportion of all complete contacts was 58%. Three types of research identified by Ticehurst and Veal (2000) are descriptive, explanatory and evaluation. This research is seeking to be purely descriptive in that it attempts to do some ‘finding out’ and ‘describing what is’ but not necessarily ‘explain’ (Ticehurst and Veal 2000). As Ghauri et al (1995) suggest “descriptive surveys are concerned with identifying the phenomenon whose variance we wish to describe. The survey is concerned with the particular characteristics of a specific population of subjects, either at a fixed point in time or varying times for comparative purposes.” (p.60) The focus is on the accuracy of the finding and their generalizability. The use of the method of asking questions and the specific survey technique can be seen as a practical and pragmatic choice for this research, and one that even taking into account all the known limitations and implications of surveying, should give some findings that have a level of credibility as the sample size is reasonably large and representative of SMEs in Leeds. A purely qualitative data collection technique would not have been able to yield such a large sample size. The claims we wish to make in this research are about factors that are or are not import to SMEs in assessing the performance of their own organisations.

4. Analysis and results The survey consisted of 250 respondents who where contacted by telephone interview, all taken from a data set of SME businesses located in and around the Leeds area. The data set included a majority of businesses of ‘size’ 11‐49 employees with a relatively even spread of older and younger organisations, with just over half the organisations being less than 20 years old. The vast majority of businesses expected to grow in the next year or so, however this was expected from increases in sales and profits rather than from increases in head count. Growth though exports were limited to a minority (25%) of those surveyed. Performance Measurement: Internal Factors 1. Costs of Production Factors How important is it for you to understand the costs and budgets for…? Employees Knowledge Machinery / Equipment Raw Materials Software Buildings Overall Average

Overall Rating (ranked) 4.652 4.524 4.032 3.886 3.711 3.589 4.066

Respondents considered all of the above categories of reasonably significant importance in terms of keeping a close eye on costs and budgets, however understanding costs associated with employees, company knowledge and machinery and equipment were considered most important, with a lesser emphasis on raw materials, software and buildings. Overall, the average rating for the importance of understanding ‘costs’ generally is 4.066 where we assign a value of 1 for ’not at all important’ against the Likert scale and 5 for ‘very important’, and setting aside the relatively few responses for ‘don’t know’. Similarly we have provided a rating and ranking for the other six dimensions of the IMPS.

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Ted Sarmiento and David Devins 2. Utilization and ‘Readiness’ of Production factors How important is it to have knowledge of……….? Motivation of employees Capacity utilisation of employees Condition of machinery Condition of space Resources spent on employment development Capacity utilisation of space Capacity utilisation of machinery

Overall Rating (ranked) 4.628 4.596 4.065 3.994 3.964 3.896 3.775

In terms of understanding capacity utilisation, or are we getting as much as we can from our assets, only employees were considered very highly important, with far less concern over use of space and machinery. However, perhaps somewhat contraindicative was the rating of having a good knowledge of the resources spent of employee development (a possible measure of motivational input) which was lower at 68% combined (with only 38% rating this as ‘very important’). The condition of the space and machinery again were of lesser significance. 3. Performance of Activities How important is it that you measure the following…? Quality of activities Cost of activities Time taken to complete core activities

Overall Rating (ranked) 4.672 (#3 overall) 4.484 4.356

It was considered highly important to measure the three vital areas of time, quality and cost, however quality was the rated the highest with 94% opting for ‘very’ and ‘quite important combined (and 76% rating it as ‘very important’) with cost and time taken to achieve the operational activities of the organisation were only slightly less emphasised. The quality of activities was ranked the third highest in overall importance of all the factors measured. 4. Product Attributes How important is it to know how well your business performs in terms of….? Customer satisfaction with normal products Customer satisfaction with special products Number of new products or variations Resources spent on new product development

Overall Rating (ranked) 4.798 (#1 overall) 4.595 3.695 3.634

Having a good knowledge of whether or not customers are satisfied with the company’s products and services was considered of utmost importance to the respondents, with both ‘normal’ and ‘special’ products rating a score of over 90% when the top two categories are combined, though it is interesting to note that ‘standard’ products rated higher than ‘special’ or non‐standard products. In terms of developing new products and services for the future there was a lesser emphasis of having knowledge of the quantity or resources spent in this area. In summary it was important to know that the customers were happy with current products, but less important to know how or if the new product development process was progressing satisfactorily. 5. Product and Customer Profitability How important is it to have some measure to assess profitability ….? Product profitability Customer profitability

Overall Rating (ranked) 4.500 4.279

Profitability broken down by either customer or product as opposed to an overall company measure of profit (as taken from e.g. the annual accounts) were both considered important especially by product. Profit in terms of customers was considered important but perhaps secondary to the knowledge of profitability of the company’s product portfolio.

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Ted Sarmiento and David Devins External Factors: 6. Competitiveness and 7. Financial Performance How important to you is it to measure…? Profitability Liquidity Turnover Capital structure Change in market share

Overall Rating (ranked) 4.676 (#2 overall) 4.421 4.365 4.202 3.855

These are the traditional financial measures of performance of an organisation and as such we might expect to see all of these rated as important to the company’s overall measurement of performance. Of most concern was profitability followed by liquidity (a proxy for cash flow) and total sales or turnover. In other words concern here was for profit, cash and turnover in that order. Of less concern, but still highly rated was the need for measures of capital structure (gearing, borrowing etc.) and somewhat less important was the need for market information such as any changes in market share. It is possible that for many smaller businesses ‘market share’ may simply be a measure that is either hard, or almost impossible to ascertain. The following Table 1 shows two data sets, one from Laitinen’s original research paper (2002) directly compared to the results of this survey (2013). Table 1: Laitinen’s original research cf Leeds survey (2002, 2013) Laitinen 2002 1….4 n = 93

Sarmiento 2013 1…..5 n=250

Elementary cost allocation 1. Cost structure of production factors

2.989

4.066

Production factors 2. Capacity utilization of space 3. Capacity utilization of machinery 4. Capacity utilization of manpower 5. Condition of space 6. Condition of machinery 7. Motivation of employees 8. Resources spent on personnel development

2.065 2.409 3.054 2.323 2.914 3.441 #2 2.849

3.896 3.775 4.596 3.944 4.065 4.628 3.964

Efficiency of activities 11. Time of activities 12. Cost of activities 13. Quality of activities

2.731 2.957 3.075

4.356 4.484 4.672

Properties of products 14. Customer satisfaction with normal products 15. Customer satisfaction with special products 16. Resources spent on new product development 17. Number of new products or variations

3.301 #4 3.355 #3 3.054 2.602

4.798 4.595 3.634 3.695

Product and customer profitability 18. Product profitability 19. Customer profitability

3.290 3.000

4.500 4.279

Competitiveness 20. Growth of revenues 21. Change in market share

2.882 2.667

4.365 3.855

Financial performance 22. Company profitability 23. Liquidity 24. Capital structure (indebtedness)

3.516 #1 3.366 #5 3.269

4.676 4.421 4.202

Likert Scale

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Ted Sarmiento and David Devins It is perhaps dangerous to make any direct comparisons between these two data sets, due to the unknown elements of the original methods of data collection by Laitinen (2002) as well as the obvious difference of the use of the Likert scale (1‐4 cf 1‐5). However, by focusing on the highest five rated factors from each study, we find three elements that are common to both studies. Company profitability once again reigns supreme as the outstanding focus of most organisations in terms of importance. Following on from profit, concern with customer satisfaction and employees were the primary elements coming through strongly from both studies.

5. Conclusions and themes for further research The main conclusions we draw from this research are firstly, that the suggestions of the key performance indictors of the IMPS put forward by Laitinen (2002) are of significant importance to smaller businesses (in Leeds) and secondly, that the issue of actual performance management is worthy of further investigation, given the current state of the literature and the results from this research project. Laitinen’s (2002) IPMS suggests that a small business considers measures in seven broad areas, five internal and two external. For the first of these, the costs of production factors (cost of machines, equipment and people needed to produce the goods and services) the average response was 4.066 from the Likert five point scale, that also included an opt out for ‘don’t know’. This indicates a highly important performance measure, however this research does not tell us whether the companies surveyed are making any effort to actually monitor this measure, or any other others carried out by this research. While these aspects were considered initially, unfortunately they fell outside of the constraints placed upon this data gathering exercise. The decision was made to gather the quantitative responses to the IMPS criteria and then consider whether qualitative aspects should be considered if the research results warrant such further investigation. It is our assertion that follow up research should be carried to consider what performance measures are actually used by a sample of small businesses bearing in mind Brem et al’s (2008 p.424) statement that “there is a strong need for long term studies about the usage and the influence of PMSs on the corporate success in order to determine the effectiveness of the systems.” The second area of the IPMS considers the utilization and ‘readiness’ of production factors. Again all of these were rated, on average, as important with the lowest ranking going to the utilization of machinery (3.775) and the highest utilization of people with a score of 4.628. The inference I can make here is that for these smaller businesses having some knowledge that the people are performing satisfactorily or better is of great value to the small business owner‐manager. Of slightly lesser importance are use and condition of space and machinery and perhaps surprisingly, given the emphasis on people utility, resources spent on people development was ranked just below 4.0 at 3.964. The issue of time, cost and quality of activities to produce products and services is the third concern of the IMPS. Here we see very high ratings for all of these categories, all exceeding 4.356 with ‘quality’ being the third highest rated factor of the survey at 4.672. This therefore suggests that any performance management system ought to address these concerns if it is to be of significant help to the management process. The fourth area is a focus on products, how well these are perceived by customers and the new product pipeline. Customer satisfaction with standard products was the highest rated of all the factors in this survey (4.798), indicating that among this population of small businesses there is a major focus on having customers who are pleased with ‘normal’ products and services they buy on a day to day basis. Not too far behind was customer satisfaction with special or non‐standard products but almost a full point behind these two were the importance of resources spent on developing new products and having a measure for knowing whether this development work is bearing fruit in the form of quantity of actual new products. This suggests a focus on the here and now (Thorpe at al 2005) and an emphasis on shorter rather than longer ‘planning horizons’. Revenues are also of concern (Laitinen 2002) and the suggestion is to consider these internally in terms of ‘product profitability’ and ‘customer profitability’ which scored 4.500 and 4.279 respectively. This demonstrates that again these are valuable indicators with which to assess overall company performance. Finally we arrive at ‘external measures’. Growth of overall revenue, as you might well expect is rated highly at 4.365, though of course revenue itself is perhaps one item among these that would be measured as a matter of course, for normal financial reporting purposes. However the other suggested measure here is growth of

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Ted Sarmiento and David Devins market share, this was rated much lower at 3.855, perhaps indicating that market share per se is of lesser importance to smaller businesses, or perhaps reflecting the difficulty with which it might actually be measurable. The last three measures are fairly standard financial measures that again would be readily accessible thought the normal financial reporting procedures. Thus it is of little surprise the overall company profitability is rated second highest at 4.676, a measure of liquidity for the company is rated at 4.421 and capital structure (gearing) at 4.202. These last few external measures represent the conventional view of company performance so much so that we take them for granted and are therefore perhaps the least controversial in terms of organisational rating in this study. In summary the survey reveals that the IMPS as proposed by Laitinen (2002) strikes a chord with small business management in the Leeds area, and perhaps it can be generalised that this could be a typical response that we might expect get from other small businesses in the UK and beyond. Other research agrees that SMEs themselves regard success as meaning growth in customer satisfaction, profits and customer retention as the top three measures Gray et al (2012). This does provide a positive platform on which to base further research into current practice in SMEs regarding Performance Measurement and Management in Leeds, the UK and beyond.

References Brem, A., Kreusel, N., & Neusser, C. (2008). Performance measurement in SMEs: literature review and results from a German case study. International Journal of Globalisation and Small Business, 2(4), 411‐27. Chennell, A., Dransfield, S., Field, J., Fisher, N., Saunders, I., and Shaw, D. (2000), "OPM: A System for Organizational Performance Measurement". In Conference Proceedings Performance Measurement ‐ Past, Present and Future, (Cranfield: Cranfield University), pp. 96‐103. Eccles, R. G. (1991) The Performance Measurement Manifesto HARVARD BUSINESS REVIEW January‐February 1991, pp. 131‐137. Garengo, Biazzo and Bititci (2005). Performance measurement systems in SMEs: A review for a research agenda. International Journal of Management Reviews Volume 7 Issue 1 pp. 25–47. Gilman et. al. (2012) The Big Ten: The Ten Characteristics of Successful SMEs, Business Improvement and Growth Report 1. University of Kent. Gray et. al. (2012) Success in challenging times: Key lessons for UK SMEs, University of Surrey Hudson, M., A. Smart, et al. (2001). "Theory and practice in SME performance measurement systems." International Journal of Operations & Production Management 21(8): 1096. Kaplan, R. S. (1984) "Yesterday's Accounting Undermines Production." Harvard Business Review 62, no. 4 (July‐August 1984): 95‐101. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard measures that drive performance. Harvard Business Review, 70(1), p71‐79. Kaplan, R. S., & Norton, D. P. (1993). Putting the balanced scorecard to work. Harvard Business Review, 71(5), p134‐147. Laitinen, E. (2002). A dynamic performance measurement system: evidence from small Finnish technology companies. Scandinavian Journal of Management 18 Issue 18 pp. 65‐99. Lepore, J. (2009) Not So Fast: Scientific management started as a way to work. How did it become a way of life? The New Yorker, October 12, 2009, New York. Lussier, R. N. (1995). A NONFINANCIAL BUSINESS SUCCESS VERSUS FAILURE PREDICTION MODEL FOR YOUNG FIRMS. Journal of Small Business Management, 33(1), 8‐20. Retrieved from EBSCOhost. Lussier, R. N., & Pfeifer, S. (2001). A Crossnational Prediction Model for Business Success. Journal of Small Business Management, 39(3), 228‐239. Retrieved from EBSCOhost. Lussier Robert N., Halabí, Claudia E., (2008) "An analysis of small business in Chile: a correlational study", Journal of Small Business and Enterprise Development, Vol. 15 Iss: 3, pp.490 ‐ 503 Lussier, R. N., & Halabi, C. E. (2010). A Three‐Country Comparison of the Business Success versus Failure Prediction Model. Journal of Small Business Management, 48(3), 360‐377. Reijonen, H. (2008) "Understanding the small business owner: what they really aim at and how this relates to firm performance: A case study in North Karelia, Eastern Finland", Management Research News, Vol. 31 Iss: 8, pp.616 – 629. Stewart, J. (2009), DBA Introduction to Research Methods. Leeds Metropolitan University, Leeds. Taticchi, P., Cagnazzo, L. & Botarelli, M. (2008) Performance Measurement and Management (PMM) for SMEs: a literature review and a reference framework for PMM design. POMS 19th Annual Conference La Jolla, California, U.S.A. May 9 to May 12, 2008. Thorpe, R., Clarke, J., Gold, J. and Anderson, L. M. (2005), Strategic performance management and measurement in small and medium sized firms: The use of Gross Value Added (GVA), British Academy of Management Conference, Said Business School, Oxford.

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Effects of Technological Innovation on Knowledge Acquisition Inside the Organization: A Case Study Dorotéa Silva, Fernando Romero and Filipa Vieira University of Minho, Guimarães, Portugal e3643@alunos.uminho.pt fromero@dps.uminho.pt filipadv@dps.uminho.pt Abstract: This paper examines the effect(s) of technological innovation in companies’ key relationships on knowledge acquisition and knowledge exploitation. We propose, building on and contributing to the existing views of knowledge‐ based theories, that knowledge acquisition stimulates firms’ activities, transforming internal processes and creating competitive advantage. It presents the main premises of a conceptual model for understanding the processes and the impacts of knowledge transfer, acquisition and dissemination inside the organization. This is demonstrated within a case study approach, which explores the successful introduction of technological change within an enterprise setting. The case study is conducted in a high‐technology company, on the technology information sector, based in Portugal. The results indicate that technological innovation seems to be associated with indirect effects on knowledge generated in companies and increased network connections, which, in turn, are associated with increased knowledge‐based innovation. Knowledge acquisition, in turn, is positively associated with knowledge exploitation for competitive advantage through new product development and technological uniqueness. The study explores the impact of the introduction of an innovation, under the aegis of a government innovation stimulus programme, and its ensuing impacts on the firm’s trajectory of technological change. The study is particularly interested in the so called indirect impacts of innovation, especially on the effects on knowledge acquisition and its exploitation. Knowledge is an intangible asset and its dynamics are difficult to evaluate. The paper intends to contribute to the development of a new assessment approach, based on the consideration of appropriate indicators and variables collected through the case studies. The impacts of innovation go beyond the introduction of tangible products or processes, but methodologies for the evaluation of those (indirect) impacts are scarce. However, assessment of these impacts is fundamental to fully apprehend the consequences of innovation and technological change, and, as a consequence, to improve the decision processes regarding the design and implementation of projects or programs that stimulate innovation. Keywords: knowledge‐based economy; absorptive capacity; evaluate programs; SME

1. Evaluation of programs – introduction The evaluation has been necessary in the social and economic development. The experience and knowledge acquired is fundamental for planning, to take decisions about continuity, to make possible adjustments or even to cancel the project and/or the program. It also justifies to society in general the financial and human resources investment. The assessment allows the systematization of knowledge for a policy decision on processes, through economic, social and scientific instruments, in order to identify the direct and indirect impacts, predictable and unpredictable policies already completed, existing or planned, as perceived by the various actors. This is the point that should be consolidated and should converge to a single evaluation system for the purpose of respond and contribute to society justification about the efficiency and effectiveness of these programs. In countries or regions where there is not a consolidated assessment culture, it is natural that the idea remains regarding supervision and inspection. The evaluation is sometimes identified as a mere set of monitoring procedures, both physical, checking implementation of the planned actions, such as financial, to check the costs and funding provided. In both cases a narrow view prevails of what was or not done, or what should or not have been done. The term evaluation in practice seems still to have a negative role in the traditional functions of supervision and inspection. Some authors emphasize that Portugal is among the countries that adopt this position to make assessments with a role of monitoring the programs/projects, and functional contributions to meet the achievement of the goals demanded by the European Union (Mourato; 2007). However, some Portuguese firms have been given relevance to innovation as a driver of growth and differentiation. In the same segment, the Portuguese government has adopted policies to encourage,

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Dorotéa Silva, Fernando Romero and Filipa Vieira increasingly, organizations to innovate (Navarro e Dinis; 2005), to achieve the goal of reproducing a new motivation to innovation, facilitating the adaptation of the productive sector to the challenges of globalization through the diffusion, adaptation and use of new processes and forms of organizing “new” products and services. The Government has supported the start‐ups’ innovation and high‐technology, through new lines of encouragement in the National Strategic Reference Framework (NSRF), to provide a greater interaction between the business, science and technology system (Mateus, 2008). In this sense, the program aims to encourage companies to innovate. The Portuguese Government reinforces the importance of evaluation in order to encourage the promotion of innovation in the country. Through their findings, the assessment can bring clarity regarding what were the difficulties, identifying the stronger and weaker areas, and the sectors deserving more investment. Since the Lisbon Agenda in 2000, the evaluation approach began to receive a greater emphasis, especially by policy makers who have to reveal the evaluation results. As a consequence, it resulted in new assessment tools and new qualitative and participatory approaches, and an emphasis on institutionalization of evaluation. This paper analyzes the indirect impact considered as knowledge acquisition through the implementation of the NITEC (Research and Technological Development Nuclei in Companies), in a company working in the information technology sector. The structure of the paper is the following: in the first sections a literature review is made, and the in the following sections the development of the process of implementation of NITEC in a specific company is presented. Subsequent sections report the description of the study and its results, and present the main conclusions, limitations and questions for future research.

2. Knowledge economy The intangible factors have assumed an increasingly importance for the analysis of economic development, having been included in various approaches to intangible assets, when previously it was only considered capital, labour and technological change (in its component material) as the only contributors for economic development. This transition to a new state, characterized by greater integration of knowledge in order to reconcile means to assess impacts of economic competitiveness, and the quality of life associated with it, is called knowledge‐based economy. The relevance of this issue was increased since the nineties, when the OECD re‐launched the concept that was already being discussed by scientists in the field of social sciences. This concept aimed to enshrine the idea that the most advanced economies were progressing to a new level of development. It was this process that provoked a greater interest in the mechanisms of interaction between universities and industry (Stewart and Ruckdeschel; 1998). The development of high value‐added activities requires the existence of skilled human resources, as well as a body of accumulated knowledge, much of it present and produced in universities. Europe was an example, which, by modifying the structure of the framework programs for research and technological development, realized the importance of capturing the relevance of a set of elements of the production, accumulation and dissemination of knowledge, presenting estimates of intangible investment, to win a new stage of economic development (Godinho; 2007). In this context, it occurred an expansion of higher education and greater pressure to improve the performance of public universities to increase the skill levels of staff and emergent sources of financing investment projects in R&D. The increase and qualification of human resources in R&D activities were essential to the development of the Science & Technology system, which involved a continuous and increased investment in intellectual capital. Consequently, new indicators of Science & Technology, innovation and knowledge were developed, proposing new forms of statistics to measure the effort devoted to investment. The OECD has contributed with some norms, through the Frascati Manual and more recently, through the Oslo Manual, for the construction of methodologies to establish rules for statistical evaluations.

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Dorotéa Silva, Fernando Romero and Filipa Vieira It is difficult to follow the transformative processes of innovation, the market and knowledge, especially informal learning activities, such as tacit knowledge, which the companies consider relevant sources of knowledge. In this case, the knowledge economy reinforces the interest in economic analysis, since it was essential to improve the opportunities for innovation. For the OECD, the knowledge‐based economy is referential to define policies of member countries, but also for the formulation of statistics, since it derives from the understanding of knowledge networks and their relationships with the more traditional economic analysis, and the operation of the National Innovation System (Lundvall; 2005). It is important to understand that the National Innovation System is not an economic theory in the sense that neoclassical or evolutionary economics is, but the concept integrates theoretical and practical perspectives based on decades of research (Lundvall; 2005). The system involves several skills, such as suppliers, customers, research and educational institutes and policymakers, who must articulated. The quality of this interaction is important for evaluating its results. To understand the various implicit aspects in the concept of National Innovation System, new publications and new statistical indicators were developed. The remarkable factor in this new configuration is the population and the investment in higher education in the sciences and engineering, but also the interest in comparing indicators of Science & Technology and Innovation across countries. The latter is one of the components of the learning cycle which is of high importance for national companies, since most of existing knowledge is tacit and resides in each one of its employees. However, it is important to differentiate tacit knowledge from explicit knowledge. The former refers to a set of values difficult to describing due to its subjective nature, since it belongs to the individual's innate abilities. The second is visible and is an integral part of the organization, and can be easily applied. European policy has evolved, especially after the Lisbon Agenda, where the role of social and human capital was discussed, the importance of the information society and the knowledge‐based economy aiming to achieve greater competitiveness.

3. Absorptive capacity There is an inter‐organizational knowledge flowing in a way that companies do not materialize automatically. This is called absorption capacity, i.e. the ability to assimilate and replicate innovative new knowledge from external sources. To understand and use it, it is necessary to develop skills for the use or exploitation of sources external to the company. The concept of absorption capacity was first proposed by (Cohen & Levinthal; 1990), as one of the assumptions for effective learning, and reflects the ability that the organization has to absorb the endogenous knowledge from abroad. According to the authors, this ability is associated with two factors: the company's knowledge base and the intensity of effort. The intensity of effort is a measure of the energy expended by the organization for solving problems. It is not enough just to put up a set of external knowledge available to the firm. There must be adequate incentives for absorb this knowledge and use it to solve concrete problems. The existence of a strong knowledge base in the enterprise is a necessary condition for the absorption of new knowledge, since it is through the existing knowledge that the company can understand, assimilate and utilize new forms of knowledge (Bojica and Fuentes; 2012). The evaluation aims to check, on the one hand, the knowledge that the company has on its base of technological knowledge, which is one of the pillars of absorptive capacity, and on the other hand, to assess the degree of codification of knowledge in the company, through formalized knowledge that the company has in the resources invested on their technology (Cohen and Levinthal; 1990).

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Dorotéa Silva, Fernando Romero and Filipa Vieira These activities generate new information; they also increase the ability of firms to assimilate and exploit existing knowledge, or improve their absorptive capacity and learning. The absorptive capacity includes the ability to imitate new products and processes, and the possibility to exploit external knowledge, the results of basic research that underpin applied research and development. In this sense, it is justified to carry out R&D activities within the industry (Cohen and Levinthal; 1990). The level of absorption capacity of the company will determine the actual extent of transfer. To check the level of absorptive capacity of a firm, the literature uses the indicators of investment in R & D, number of researchers (Masters and PhDs), number of patents, the existence of partnerships with research institutes and universities (Mangematin and Nesta; 1999). The benefits of knowledge acquisition will depend on the amount of knowledge to be assimilated and the ease with which acquisition may occur. Therefore our study focuses on the acquisition of knowledge after the NITEC programme was concluded. The NITEC was an initiative of the Portuguese 3rd Framework Programme supported by the European Union.

4. Methodology proposal In order to achieve the proposed goals of this research, it was first made a brief theoretical review, which supported the development of the methodology, and on its turn it will also be based on the results of some case studies. This paper presents briefly the results obtained during a pilot study in a medium‐sized enterprise, in the information technology sector. The data was collected in November 2012, carrying out an interview to the Head Manager of Innovation of the enterprise. The criterion followed to select this enterprise was due to its participation in NITEC. This programme was conceived to address a key problem in the National Innovation System (NIS) in Portugal: the low level of in‐ house technology and innovation capabilities in Portuguese firms. The NITEC programme supported the implementation within the firm of a permanent team, with a maximum of three workers, fully dedicated to technology internalization and development activities, according to a project‐based action plan. Those activities lead to the design of new products, processes and/or systems, or to the introduction of significant improvements in some other already existing products. On the other hand, this specific programme was selected because of its features: 1. the funds are governmental; 2) promotes activities related to R&D; 3) the people involved are expert in the working and research area; 4) the project‐base has a limited period of time (maximum five years); 5) each company has its own project. These features are essential to identify the knowledge acquisition in the firms which participated in the programme, as a main topic being evaluated in the results. The scope of this work does not include the results of quantitative research, once it has not been completed yet. At this stage it is only considered as a partial implementation, through the application of interviews, which have been considered during the pilot project as part of a doctoral research. The method used in this research consisted of semi‐structured interviews using an interview guide. This guide was elaborated to capture the impacts of NITEC programme. The guide follows the variables listed below: 1. Network capacity in R&D; 2. Business affairs; 3.Organizational capacity; 4. Exchange capacity; 5. Capacity building in science and technology; 6. Human resources and capacity building.

5. Results The pilot study was made on a medium sized firm, in the TI sector, which had as motivation, and through the NITEC program, the implementation of a research unit with dedicated resources in exclusivity to R&D tasks. This R&D unit or nuclei was dimensioned to work with a team of three elements (analysts/programmers), and for which it was designed an activity plan for a minimal time of three years. This plan consisted in a series of activities involving experimentation of the latest technologies, which were launched in the areas on which the company operates, namely those related to next generations of operative systems and the architecture oriented to services of data processing mobile devices (pocket PC, smart phones, tablets PC), and future evolutions of development environments.

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Dorotéa Silva, Fernando Romero and Filipa Vieira The activity of this nucleus focused also on the conception of a multilanguage platform to support future products of the firm, following its plan of internationalization. This kind of activity aimed to keep always alive the process of technological watch, which maintains the innovative character of the presented solutions and it represents one of the firm’s most important competitive advantages. This nuclei participated on important activities at the end of the innovation process, namely in product development, allowing to incorporate the new systems inside the development process and, consequently, in the developed products. The segmentation of these activities and the empowerment of this unit filtered the pressure of the market, focusing their attention on R&D activities and allowing for more long range planning of the products. Before the implementation of NITEC the enterprise was dealing with situations where many people were producing different documents for the same product, the same information was produced by many different areas within the organization. This situation caused the repetition of the same task with different information about the same subject. For instances, the technician working in the enterprise spent too much time answering to the same problem coming from different workers, sometimes in the same enterprise. After the implementation of the NITEC the team working in the programme were aware of the importance of standardizing the information. Thus some descriptive documents were made to describe the activity of each unit or department. It was also elaborated a set of new tools to optimize the access to the information about the services in the working area of the enterprise. These initiatives lead to an efficient way of managing and organising internally the enterprise, as well as externally improving customer satisfaction. This new policy based on the NITEC´s implementation brought up “Innovation News Technology”. “The NITEC programme has allowed to create a research and development team and has launched the basis to the creation of a development framework, which will support the new generation of software produced by the firm, in the next years. The first new products based on this framework are during this year being produced (2012), then they will be launched to the market as new versions of brand new products in 2013, based on these tools.” (Head Manager in Innovation) At this stage the company does not have the original expert team from NITEC working, but meanwhile a technology innovation and research department was created to substitute the NITEC team. But it is important to highlight that the innovation dynamics, as NITEC involved multiple feedback routes between processes, functions and people both internal and external to the firm, where not only by technological advances and market forces but also by users and consumers. The relationship with external sources are particularly important for accessing tacit knowledge, the knowledge that is not codified in documents and that embodies know‐how, skills and expertise. Tacit knowledge is not only important for its own sake but it is often an essential supplement to codified knowledge. It is important to emphasize that knowledge and innovation capabilities are cumulative, building and growing over time and internal business R&D, while not universal, increases a firm`s absorptive capacity (Cohen and Levinthal; 1990). Firm`s that do R&D internally are therefore also better equipped that others to make use of external knowledge.

6. Discussion Taking into consideration that the project is a pilot project, the goal was to obtain information from the company about the indirect impacts due to NITEC´s implementation. The applied methodology was just a starting point for the construction of a methodology which has been structured, and that it will indicate some ways that can be explored, since it aims to consider the absorption of knowledge, translated in codified results, but also those with a more tacit nature, in order to contribute for the understanding of the transformation process in economic terms. The economic impacts were not possible to be evaluated at this stage. According to the authors (Cohen, Daniel and Levinthal, 1989), the idea of codifying knowledge and investing it by commercializing, was a result observed in the case study. Thus, the company in question initiated a successful internationalization process due to the transformation of tacit knowledge in codified knowledge that leads to commercialized technology.

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Dorotéa Silva, Fernando Romero and Filipa Vieira In addition, the identification and diffusion of “best practices” in partnership is a very important element, once it reflects acquired knowledge. This process has the potential to shorten the aggregated learning cycles, by transferring successful experiences, methods, and tools between partnerships. Building on the NITEC programme design lesson, the intention is to improve the way that mechanisms and funds for search activities are built, when new partnerships initiatives are designed. Indeed, it has been possible to identify a set of best practices that appear to influence outcomes from NITEC´S partnerships (Shapira, 2001). This programme has resulted in several positive external effects, such as the increase of employees, reinforcement of clusters, increased expenditure with R&D, development of new products. Therefore some other companies are investing time and money in this kind of programme because of its successful results.

References Bojica, M. and Fuentes, M. M. (2012). Knowledge acquisition and corporate entrepreneurship: Insights from Spanish SMEs in the ICT sector. Journal of World Business 47, 397‐408. Bozeman, B., & Klein, H. K. (1999). The case study as research heuristic: lessons from the R&D value mapping project. Evaluation and Program Planning, 22(1), 91‐103. Cohen et al, and Daniel A. Levinthal (1989) Innovation and learning: The two faces of R&D, the Economic Journal, 99, 569‐ 596. Cohen, W. M., & Levinthal, D. A. (1990). Absorptive Capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1): 128‐152. Godinho, M. M. (2007). Indicadores de C&T, inovação e conhecimento: onde estamos? Para onde vamos? Análise Social, XLII (182), 239‐274. Lundvall, B., & Borrás, S. (2005). Science, Technology, and Innovation Policy. In J. In Fagerberg, Mowery, D. C., & Nelson, R. R. (Ed.), The Oxford Handbook of Innovation (pp. 599‐631). Oxford University Press: The Oxford Handbook of Innovation. Mangematin, V., & Callon, M. (1995). Technological competition, strategies of the firms and the choice of the first users: the case of road guidance technologies. Research Policy, 24(3), 441‐458. Mateus, João Carlos (2008). O Governo Electrónico, a sua aposta em Portugal e a importância das Tecnologias de Comunicação para a sua estratégia. Tékhne [online]. n.9, pp. 23‐48. Mourato, J., Rosa Pires, A. (2007). Portugal e a perspectiva de desenvolvimento do Espaço Europeu: o EDEC como institucionalização de um discursso de mudanças. Sociedade e Território, 40: 34‐42. Navarro, T., Dinis, C. (2005). “Educação, Ciência e Tecnologia para o Desenvolvimento”, V Congresso Internacional de Educação Ambiental para o Desenvolvimento Sustentável. La Habana, Cuba. Rosenberg, N.(1990). Inside the black box – technology and economics. Cambridge University Press. Speckbacher, G. et al. (2003). A descriptive analysis on the implementation of Balanced Scorecardas in german‐speaking countries. Management Accounting Research, v. 14, p. 361‐887, Academic Press. Stewart, T., & Ruckdeschel, C. (1998). Intellectual capital: The new wealth of organizations. Performance Improvement, 37(7), 56‐59. Zahra, S. A., & George, G. (2002). Absorptive Capacity: A Review, Reconceptualization, and Extension. The Academy of Management Review, 27(2), 185‐203.

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Measuring the Validity of a Text Based Indicator for Exploration and Exploitation Activities Nazlihan Ugur University of Leuven, Managerial Economics, Strategy and Innovation, Leuven, Belgium nazlihan.ugur@kuleuven.be

Abstract: Measuring exploration and exploitation activities of firms has been a popular topic since March's (1991) pioneering work "Exploration and Exploitation in Organizational Learning". Several empirical studies have confirmed that balancing exploration and exploitation can bring superior firm performance. These studies have used different indicators to measure exploration and exploitation concepts at the firm level, including publication, patent and survey based indicators. Recently, an alternative indicator has been developed by Uotila (2009) that is based on content analysis technique to search for March's (1991) keywords related to exploration and exploitation. The basic idea of this indicator is to perform a content analysis by using March's keywords on a set of documents that contain information on firms' business activities (e.g. press releases). However the validity of this widely cited indicator is questionable, since validity depends on the chosen keywords and the implementation of content analysis. Therefore, the objective of this paper is to examine the validity of a text based indicator on the basis of March's (1991) keywords to identify exploration and exploitation activities of firms, and to provide a valid content analysis based indicator of exploration and exploitation activities. In this study, in order to assess the validity, the examination of group differences and the consistency with other methods techniques are used. By analysing more than 1 million documents and around 170.000 patents for 180 firms in 5 different technology intensive industries, we observe that exploration and exploitation keywords have different distributions and load into separate factors only if these keywords are wisely chosen. The initial results show that the use of content analysis using March's original keywords does not lead to a valid indicator. However, with a new set of keywords, using content analysis on firm documents can create a valid indicator for measuring exploration and exploitation activities. Keywords: ambidexterity, content analysis, exploration, exploitation

1. Introduction March's 1991 article opened a new era after Schumpeter and showed the importance of balancing exploitation and exploration activities to improve firm survival and performance (O’Reilly and Tushman, 2004; Raisch et al., 2009). According to March's definition, exploration refers to the creation of new capabilities by means of activities such as fundamental research, experimentation, and search whereas exploitation refers to leveraging of existing capabilities by means of activities such as standardization, upscaling and refinement. There are a lot of empirical researches that support March's view of balancing exploration and exploitation activities (He & Wong, 2004; Jansen et al., 2006; Lavie et al., 2009, Uotila et al., 2009; Venkatraman et al., 2007; Belderbos et al., 2010, Tushman & O’Reilly, 1996) and argue that ambidexterity leads to superior performance outcomes and survival. However balancing exploitation and exploration is not straightforward and there is an ongoing discussion about how ambidexterity can be achieved, the optimal balance between exploration and exploitation, and which factors can determine the effects of ambidexterity etc. (Radner & Rothschild, 1975; Gupta, Smith, & Shalley, 2006; March, 1991; Tushman & O'Reilly,1996; Van Looy, Debackere & Martens, 2005; Raisch et al., 2009). In order to give a satisfying answer to those questions an accurate indicator is essential. The existing literature relied heavily on two indicators, survey‐based indicators and patent‐based indicators. Survey based data (He & Wong, 2004; Visser et al., 2010) includes interviews with key R&D people in organizations and covers detailed information about innovation processes (Mohnen & Roller, 2005). However this method has its own drawbacks such as low international and technology comparability, data bias as a result of subjective judgements, potential heterogeneity, and endogeneity problems (Kleinknecht, Van Montfort & Bouwer, 2002). Patent‐based indicators are also commonly used in the literature since they are easy to collect and compare and include detailed information (see, for example, Belderbos et al., 2010; Rosenkopf & Nerkar, 2001; Katila & Ahuja, 2002). These indicators rely on technology class information on patents, and consider patents as explorative if they are situated in technology domains that are new to the firm. Patent data have its own disadvantages as well; not all innovations are patented since patenting is one among many protection strategies and they only provide a partial view on firms’ technology activities.

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Nazlihan Ugur Additionally, it is often unclear whether these survey and patent based indicators are consistent with the conceptual definitions of exploration and exploitation (Gupta et al., 2006). Recently, Uotila et al. (2009) proposed a new methodology to operationalize the exploitation and exploration concepts, namely computer‐assisted coding of texts. The basic idea of this method is to perform a content analysis (employing computer software) of a set of documents that contain information on firms’ business activities (e.g. press releases) by using March's keywords. Uotila et al. (2009) calculate the relative exploration orientation by dividing the number of explorative keyword hits to total number of keyword hits. Although conceptually appealing, it is unclear to what extent this new indicator is valid. Uotila et al. study does not also take into account the length and the context of the articles. The manual validation of this new indicator arises questions on its accuracy. The use of personal judgment of human coders in the instruction process and a moderate Cohen Kappa ratio (0.68) support our concerns about the validity of Uotila et al. (2009) measure. Therefore the primary objective of this study is to examine the validity of this content analysis based indicator for measuring exploitation/exploration activities in a large sample of firms, first by using factor analysis method to observe how exploration and exploitation keywords are distributed, secondly by checking within and between group correlations and lastly by comparing this indicator with commonly‐used patent‐based indicators. We believe that the validation of content analysis based indicator is a crucial contribution to the innovation management literature since this new indicator is ex‐ante, accessible and retrievable. This universal method can also be useful when comparing different technologies over time across sectors since the data is comprehensive and detailed.

2. Empirical analysis 2.1 Sample and data The sample firms are R&D‐intensive European, U.S., and Japanese firms in five industries: (1) nonelectrical machinery; (2) pharmaceuticals and biotechnology; (3) chemicals; (4) IT hardware (computers and communication equipment); and (5) electronics and electrical machinery (The detailed information can be found in Belderbos et al., 2010 JPIM paper). In order to carry out the content analysis, Lexis‐Nexis database is used to gather the press release articles relating to innovation and R&D related activities only 1 . The Lexis‐Nexis database consists of 1,030,315 articles for 2,767 firms (including 180 parent firms), and covers the time period from 1993 to 2006. Firm level patent data on parent firms and their majority owned subsidiaries were collected from European Patent Office (EPO). In addition to that only for the pharmaceuticals and biotechnology sector (37 parent firms) we extracted publication data from yearly updates of the Science Citation Index database of ISI/Thomson Scientific, including peer‐reviewed papers, letters, notes and reviews. The patent data and publication data have been used to check the consistency of new content analysis based indicator for validation.

2.2 Methodology and variables The content analysis method has been used to measure the text based indicator by using press release documents. In order to run the validity test, a patent based indicator has been used to check the consistency of text based indicator. After cleaning the missing, duplicated and non‐R&D articles we come up with 245,389 articles for 1318 subsidiary firms and 168 parent firms that contain roughly the same number of firms in each industry for each region of origin. To calculate the relative exploration ratio, the content analysis method is used via Gawk software. We experimented with different sets of keywords to classify articles as either explorative or exploitative. Keyword roots for exploitation are 'execute', 'choice', 'efficien', 'exploit', 'implement', 'production', 'refine', and 'select' whereas for exploration they are 'discover', 'experiment', 'explor', 'flexib', 'innovat', 'play', 'risk', 'search', and 'variation' (Uotila, 2009 based on March, 1991). After keyword matching analysis for each article, the relative exploration ratio is calculated by dividing the number of exploratory words by the sum of exploratory and exploitative words (Uotila et al., 2009). This ratio is then calculated for each and every parent firm as an average of its value over every article published by this firm in a given year. 1

Lexis‐Nexis has its own keywords to identify which articles are related to which issue. We give ''innovation'', ''R&D'' and "research and development" keywords in our dataset request.

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Nazlihan Ugur To test the validity of this text based indicator, we would first examine the distribution of keywords across two concepts; exploration and exploitation with factor analysis. Following, we would discuss within and between group correlations. And lastly, this indicator is compared with a patent based indicator in the following steps of the analysis (Messick, 1989). The exploration orientation is calculated also with the patent data by using technology class information. A patent is considered as an explorative one if it is situated in a new technology domain. A technology domain is defined as new to a firm in year t, if the firm did not patent in this technology domain in the past five years. The explorative orientation of a firm is calculated by dividing the number of explorative patents to total number of patents (Belderbos et al., 2010). For only pharmaceuticals and biotechnology industry, publication based explorative orientation has also been calculated by dividing the number of academic articles published in basic research journals to total number of academic articles published.

3. Research findings 3.1 Descriptive statistics Table 1 below reports the mean values of March's keywords frequency at the level of the parent firm. Table 2 shows the summary of descriptive statistics about the data and the two main variables: ''ratiopatent'' and ''ratiotext''. The patent indicator "ratiopatent" shows the ratio of firm patents in new technology classes to the total number of patents and takes a value of 21% when averaged over all firms and years. In a parallel vein, "ratiotext'' measures the number of explorative hits divided by total explorative and exploitative hits at the article level and takes the mean value of 33%. Table 1: The mean values of March 1991 keywords frequency Exploitataion Exploration Choice 0.08

Discover 0.33

Efficien 0.29

Risk 0.39

Execut 0.71

Play 0.29

Exploit 0.03

Flexib 0.12

Implement 0.20

Search 0.07

Production 0.76

Explor 0.07

Refine 0.05

Experiment 0.06

Select 0.25

Variation 0.07

Table 2: Descriptive statistics Variable # of articles # of word per article

Mean 164,6 900

Std. Dev. 450 1250

# of total patents ratiopatent

128,2 0,21

263 0,21

ratiotext

0,33

0,18

Following, Table 3 compares the averages and standard deviations of patent based and text based explorative orientation of firms in different sectors. The results indicate that the level of patent based indicator is the highest in engineering and machinery whereas text based indicator peaks in pharmaceuticals and biotechnology industry. This initial descriptive result leads us to make further tests. In order to visualize how the keywords are distributed across two concepts, we run factor analysis. The results of the confirmatory factor analysis can be seen in the graph (Figure 1). The factor loadings graph clearly shows that these 16 keywords are not perfectly loaded on two factors, exploration & exploitation. The uniqueness values for each keyword are also over 0.90 (except discovery). This result indicates that keywords are not perfectly loaded on two factors and they are simply not discriminated from each other. The graphical

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Nazlihan Ugur representation also shows that only 'discover' loads to factor 1 (exploration). One may notice that 'flexib and production', and 'experiment and execut' keyword pairs have almost identical positions although they have the opposite meanings. This graph clearly indicates that these keywords do not discriminate between exploration and exploitation activities of firms. Table 3: Comparison of patent and text based indicators per sector (Means and SD) sector Chemicals

ratiopatent ratiotext 0,19 0,28

ELEC Engineering&Mach IT Hardware Pharm&Biotech Average

(0,14) 0,19 (0,22) 0,31 (0,22) 0,18 (0,22) 0,14 (0,20) 0,20 (0,21)

(0,17) 0,32 (0,13) 0,29 (0,20) 0,31 (0,14) 0,51 (0,16) 0,33 (0,18)

Factor loadings

Factor 2 0

nmFLEXIB nmEFFICIEN nmIMPLEMENT nmPRODUCTION nmCHOICE nmPLAY nmVARIATION nmREFINE nmSEARCH nmEXPLOR nmEXPLOIT nmEXPERIMENT nmEXECUT nmRISK

-.2

nmSELECT

-.4

nmDISCOVER

Factor 1

Figure 1: Factor loadings These factor analysis results support our suspicions about the validity of content analysis based indicator by using March's keywords. Can we use March's keywords to measure exploration and exploitations activities of firms?

3.2 Results Method 1 One method to assess the validity of a content analysis based indicator is to look for within and between group correlations. These correlations simply describe how strongly units in the same group resemble each other and differ across groups. Therefore, if the keywords are adequately chosen, a high correlation within the keyword groups of exploration and exploitation should be observed, and a negative correlation between exploration and exploitation keyword groups should be obtained. The results in Table 4 indicate that the within group correlations are small. Although there is no consensus about the minimum value of correlation in the literature to get healthy results, it is expected to have at least 70% correlation within the groups if the units of the groups measure the same concepts successfully (Neuendorf, 2002). However the results show only 10% correlation for each concept. Hence neither exploitation nor exploration is measured successfully. Additional cluster analysis and discriminant analysis test results also support low within group correlations.

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Nazlihan Ugur Table 4: Within group correlations Average interitem covariance: Number of items in the scale:

Exploitation 0,02 8

Exploration 0,01 8

Scale reliability coefficient:

0,1383

0,1076

The table below shows between group correlations of exploration and exploitation keyword groups. We expect to find a negative correlation or no correlation since exploration and exploitation measure two different concepts. However, a positive correlation has been found. Table 5: Between group correlations Exploration Exploitation

Exploration 1 0,13

Exploitation 1

Method 2 Another and widely accepted method to validate a content analysis based indicator is to look for the consistency between different indicators. For this purpose we look for the correlation between text based and patent based indicators. The results are opposite to our expectations: there is a negative correlation between text based and patent based indicators. This negative relationship can also be found from a different perspective as seen in the following graph. Table 6: Correlation between patent and text based indicator

ratiotext

ratiopatent

ratiotext ratiopatent

1 ‐0.1453 (0.006)

0.45 0.4 0.35 0.3 0.25

ratiopatent ratiotext

0.2 0.15 0.1 0.05 0 1995

1996

1997

1998

1999

2000

2001

2002

2003

Figure 2: Time trend of exploratory orientation of firms based on patent and text based indicators The graph represents that there is a slight decline in the exploratory orientation of firms based on patent indicator in time. However the text based indicator exhibits the opposite and shows that firms are more explorative in their R&D activities in 2004 compared to 1995. We used a third indicator to assess the validity of text based indicator based on ISI publication data for 37 pharmaceuticals and biotechnology firms between 1995 and 2000. The "ratiopub" variable is simply calculated by dividing the number of articles published in basic research journals to all published journals. The correlation analysis results can be seen in Table 7 For this particular industry, the correlation between patent and text based indicator is negative. But the absolute value of this correlation is lower than it is for all other industries which negates the possibility that pharmaceuticals and biotechnology industry is the main cause of the anomaly. On the contrary, the text based indicator is positively related with the publication based indicator, but this relationship is not significant. In the light of these empirical evidences, we can argue that the text based indicator of Uotila et al. (2009) based on March's 1991 keywords is not a valid indicator for measuring technological exploration and exploitation orientation of firms. A primary explanation can be that March's 1991 article is about

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Nazlihan Ugur organizational learning and he did not define these keywords for empirically measuring the technological exploration and exploitation activities of firms. These keywords theoretically and logically exhibit the difference between these two concepts but using them as a hint in press release articles does not actually capture the exploration and exploitation notion. However this does not mean that each and every March keyword is misleading. The perfectl loading of 'discover' keyword supports this view. This keyword is widely used in biotechnology and it really captures the exploration activity. But the rest of the keywords are more general and it is easy to encounter them in any press release article. Therefore finding more focused keywords is the first step for developing a valid text based indicator. Hence, we direct our research focus to finding new and valid keywords. Table 6: Correlation between patent, text and publication based indicator

ratiotext

ratiopatent

ratiopub

ratiotext

ratiopatent

‐0.0655

ratiopub

0.0198

‐0.078

3.3 Research results with new keywords New keywords are intuitively selected among the most frequent words. In order to find the most frequent words, taking their synonyms into account, a software program called NVIVO is used. A sub‐sample of randomly selected articles (approximately 15% of all articles) is uploaded to the NVIVO and the most frequent 200 keywords are examined. During the examination process irrelevant (and, of, are, yes, etc...) and nonrelated common keywords (firm, ceo, sales, industry etc...) are eliminated. Among the remaining words, the ones referring to explorative and exploitative activities are intuitively selected. Some of these keywords are closely related to March's 1991 keywords such as 'manufacture' (production), 'cost' (efficient), 'operation' (implement). The following table shows the list of new keywords. Table 7: List of new keywords EXPLORATION ‐ New

EXPLOITATION‐New

research

cost

discover

design

entrepreneur

manufacture

radical

operate

innovat

process

accomplish

develop

In order to visualize how the keywords above are distributed across two concepts, we run factor analysis. The results of the factor analysis can be seen in the graph below. The results are promising. The keywords 'design', 'process', 'cost', 'manufacture', 'operation', 'discover' and 'research' are perfectly loaded on one of the two factors and they are meaningfully discriminated from each other. The uniqueness values also support this conclusion. The graphical representation clearly shows that 'discover' and 'research' load to factor 2 (exploration). Similarly, 'process', 'cost', 'design', 'manufacture' and 'operate' load to factor 1 (exploitation) successfully. The clear discrimination between two factors support our idea that using different keywords will create a better text based indicator for measuring exploration and exploitation activities of firms. In the following parts we will check whether the new keywords provide the validity requirements of a text based indicator. In the following analysis we will use only the successfully loaded keywords and discard the others (develep, innovat, radical, accomplish, entrepreneur).

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Nazlihan Ugur

Rotated factor loadings (pattern matrix) and unique variances

Factor loadings

Variable

Factor 2 .2 .4

nmDISCOVER nmRESEARCH

nmACCOMPLISH nmCOST nmDEVELOP nmDESIGN nmDISCOVER nmENTREPRE~R nmINNOVAT nmLONGTERM nmMANUFACTUR nmOPERAT nmPROCESS nmRADICAL nmRESEARCH

nmDEVELOP

nmACCOMPLISH nmLONGTERM nmINNOVAT nmRADICAL nmENTREPRE~R

-.2

nmPROCESS nmOPERAT nmDESIGN nmCOST nmMANUFACTUR

-.2

.2 Factor 1

Factor1 0.4927 0.4448 0.4723

Factor2

0.4029 0.7115

0.5398 0.5240 0.5685 0.6811

Uniqueness 0.9170 0.7572 0.6397 0.7720 0.4902 0.9821 0.8782 0.9321 0.6938 0.7254 0.6767 0.9626 0.5361

(blanks represent abs(loading)<.4) Rotation: orthogonal varimax Method: principal-component factors

Figure 3: Factor loadings and uniqueness values of new keywords Method 1 One method to assess the validity of a content analysis based indicator is to look for within and between group correlations (Messick, 1989). As we noted before, if two or more keywords are representing one common notion, the within correlation between these keywords should be high. The following table shows the within group correlations for new exploration and exploitation keywords. Table 8: Within group correlations for new keywords Average interitem covariance: Number of items in the scale:

Exploitation‐New 0,46 5

Exploration‐ New 0,41 2

Scale reliability coefficient:

0,4274

0,2041

The results in Table 8 indicate that the within group correlations are promising. Although they are below 0.70, we can still interpret that these keywords are more valid than those of March 1991 in terms of representing exploration and exploitation activities (Neuendorf, 2002). The results show that especially exploitation keywords are highly representative. Table 9: Between group correlations Exploration Exploitation

Exploration‐New 1 ‐0.1826

Exploitation‐ New 1

The above table shows between group correlations of new exploration and exploitation keyword groups. We expect to find a negative or no correlation since exploration and exploitation measure two different concepts. The negative correlation found is in line with our expectation. We interpret this result as these new keyword groups are measuring two different, negatively related concepts such as exploration and exploitation. Method 2 The second validation method is to check the consistency between different indicators (Mesick, 1989). If a new indicator is valid, it should have a positive correlation with other valid indicators that have been developed previously. For this purpose, we look for the correlation between text based and patent based indicators. The new text based indicator (ratiotextnew) is the ratio of explorativeness and it is calculated by dividing the valid exploration keywords to all keywords (Uotila, 2009). The correlation table results below clearly show that there is a positive and significant correlation between new text based indicator and patent based indicator.

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Nazlihan Ugur Table 10: Correlation between patent and new text based indicator0

ratiotextnew

ratiopatent

ratiotextnew

ratiopatent

0.1063 (0.001)

The graphical representation below also shows two indicators are correlated. Especially from 1995 to 2001 the new text based indicator and patent based indicator have shown a similar trend. We believe that the difference after 2001 can be captured by using more valid keywords.

Figure 4: Time trend of exploratory orientation of firms based on patent and new text based indicators In order to support our argument, we will check the validity of the new text based indicator by using an indicator other than patent based namely publication based indicator which we already defined as ‘ratiopub’. At this point we should remind the reader that this indicator can only be created for the biotechnology sector due to data constraints. The correlation analysis results can be seen in the following table. For this particular industry, the correlation between patent and text based indicator is positive but relatively small. More importantly the correlation between, new text based indicator and publication based indicator is highly positive and significant. This new finding supports our argument that using content analysis with better keywords will create a valid text based indicator. Table 11: Correlation between patent, new text and publication based indicators

ratiotextnew

ratiopatent

ratiopub

ratiotextnew

ratiopatent

0.0489

ratiopub

0.2555

0.0956

4. Discussion The results of this study can be criticized in terms of time difference between the publication dates of articles and patent application dates. Analyses using 1, 2 and 3 years time lag have been conducted as well and they all resulted in similar conclusions. Robustness checks also have been performed during the analysis. One may argue that press release articles are not a good representative of innovation and firms are more likely to overemphasize their R&D activities. We believe that the comprehensive datasets including large and reputable firms overcome this potential bias. Using content analysis method in press release articles to measure R&D activities is a strategically appealing method. However focusing solely on March's keywords is not adequate. Ultimately, innovation is a multidimensional and complex phenomenon in its nature. Our results show that better keywords provide a better indicator. The study can be criticized for being tautological since it is using the most frequent words as a basic guideline for selecting new keywords. However one should consider that some invalid keywords of March have a higher ranking in the most frequent word list such as ‘risk’ and ‘flexib’. This shows that our intuition in selecting new keywords is logical.

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5. Conclusion Recently new text based indicators have been used in the management and strategy literature as an alternative to patent and survey based indicators (Uotila, 2009; Kaplan & Vakili, 2012). Uotila's (2009) study creates a new text based indicator by using the keywords in March's (1991) definition of exploration and exploitation via content analysis technique for measuring exploration and exploitation activities of firms. However the validity this indicator validity depends on the chosen keywords and the implementation of the content analysis. The results of this study have shown that using content analysis in press release or text documents of firms is a valid technique for measuring exploration and exploitation activities of firm activities but if this technique utilizes March's (1991) keywords solely, the indicator is not valid at all. In other words the direct use of March's keywords does not represent firms' exploration and exploitation activities successfully and does not provide a valid text based indicator. The main rationale behind this finding is that, he did not intend to create these keywords for this specific purpose. In the light of the empirical evidences regarding the keywords, we determined a new set of keywords including 'discover', 'research', 'process', 'cost', 'design', 'manufacture' and 'operate' that provide a valid text based indicator. The empirical tests checking the validation of these new keywords show that this alternative indicator is valid. Further studies should extend the new keyword list with a more polished inductive method. A deeper analysis with more to the point keywords per sector will bring more insights about R&D activities of firms. We believe that a valid text based indicator is a crucial contribution to the innovation management literature as it is ex‐ante, accessible and retrievable. A widely applicable indicator can also be useful when comparing different technologies over time across sectors since the data is comprehensive, detailed in nature and covers all activities of firms.

References Belderbos, R., Faems, D., Leten, B. and Van Looy, B. (2010) “Technological Activities and Their Impact on the Financial Performance of the Firm: Exploitation and Exploration within and between Firms”, Journal of Product Innovation Management, Vol. 27, No. 6, pp 869‐882. Gupta A., Smith K and Shalley E. (2006) “The interplay between exploration and exploitation”, Academy of Management Journal, Vol. 49, No. 4, pp 693‐708. He, Z.L. and Wong, P.K. (2004) “Exploration Vs. Exploitation: An empirical test of the ambidexterity hypothesis”, Organization Science, Vol. 15, No. 4, pp. 481‐494. Jansen, J.J.P., Van den Bosch, F.A.J. and Volberda, H.W. (2006) “Exploratory innovation, exploitative innovation, and performance: Effects of organizational antecedents and environmental moderators”, Management Science, Vol. 52, No. 11, pp 1661–1674. Jansen, J.J.P., Tempelaar, M.P., Van Den Bosch, Frans, A.J. & Volberda, H.W. (2009) “Structural differentiation and ambidexterity: The mediating role of integration mechanisms”, Organization Science, Vol. 20, No. 4, pp 797‐811. Kaplan, S. and Vakili, K. (2012) “Identifying Breakthroughs: Using Topic Modeling to Distinguish the Cognitive from the Economic”, Working paper, DRUID 2012, Denmark. Katila R. and Ahuja G. (2002) “Something old, something new: A longitudinal study of search behavior and new product introduction”, Academy of Management Journal, Vol. 45, No. 6, pp 1183‐1194. Kleinknecht , A., Van Montfort , K. and Brouwer, E. (2002) “The non‐trivial choice between innovation indicators”, Economics of Innovation and New Technology, Vol. 11, No. 2, pp 109‐121. Lavie, D., Kang, J. and Rosenkopf, L. (2009) “The performance effects of balancing exploration and exploitation within and across alliance domains”, Paper presented at the Academy of Management Best Paper Proceedings, Chicago. Levinthal D. and March J. (1993) “The myopia of learning”, Strategic Management Journal, Vol.14, pp 95‐112. March, J.G. (1991) “Exploration and exploitation in organizational learning”, Organization Science, Vol. 2, No. 1, pp 71–87. Messick, S. (1989) “Test Validity: A matter of consequence”, Social Indicators Research, Vol. 45, No. 1‐3, pp 35‐44. Mohnen, P. and Roller, L. (2005) “Complementarities in innovation policy, European Economic Review, Vol. 49, No. 6, pp 1431‐1450. Nerkar, A. & Roberts, P. (2004) “Technological and product‐market experience and the success of new product introductions in the pharmaceutical industry”, Strategic Management Journal Special Issue: The Global Acquisition, Leverage, and Protection of Technological Competencies, Vol. 25, No. 8‐9, pp 779‐799. Neuendorf, K. A.( 2002)The Content Analysis Guidebook Thousand Oaks, CA: Sage Publications Radner, R. and M. Rothschild, ( 1975) “On the allocation of effort”, Journal of Economic Theory Vol. 10,pp 358‐376. Raisch, S., Birkinshaw, J., Probst, G. and Tushman, M. (2009) “Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance”, Organization Science, Vol. 20, No. 4, pp 685‐695. Rosenkopf, L. and Nerkar, A. (2001) “Beyond local search: Boundary‐spanning, exploration, and impact in the optical disk industry”, Strategic Management Journal, Vol. 22, pp 287–306.

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Nazlihan Ugur Schumpeter, J.A. (1934) “Business cycles: a theoretical, historical and statistical analysis of the capitalist process”. New York, McGraw‐Hill, pp. 1‐461. Teece D. (2006). “Reflections on profiting from innovation”. Special issue commemorating the 20th Anniversary of David Teece's article, "Profiting from Innovation in Research Policy. Research Policy, Vol. 35, No. 8, pp 1131‐1146. Tushman M. and O’Reilly C. (1996) “Ambidextrous organizations: Managing evolutionary and revolutionary change”, California Management Review, Vol. 38, No. 4, pp 8‐30. Uotila, J., Maula, M., Keil, T. and Zahra, S. (2009) “Exploration, Exploitation, And Financial Performance: Analysis Of S&P 500 Corporations”, Strategic Management Journal, Vol. 30, No. 2, pp 221‐231. Van Looy B., Martens T. and Debackere K. (2005) “Organizing for continuous innovation: On the sustainability of ambidextrous organizations“, Creativity and innovation management Vol. 14, No.2, pp 208‐221. Venkatraman, N., Lee, C.H. and Iyer, B. (2007) “Strategic ambidexterity and sales growth: A longitudinal test in the software sector”, working paper. Boston University. Visser M, Faems D, De Weerd‐Nederhof P, Visscher K. and Van Looy B. (2010) “Structural ambidexterity in NPD processes: A firm‐level assessment of the impact of differentiated structures on innovation performance”, Technovation, Vol. 30, No. 5‐6, pp 291 ‐ 299. Weber, R. P. (1990). Basic Content Analysis, 2nd ed. Newbury Park, CA.

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Incubators as Enablers for Academic Entrepreneurship Frank Gielen1, 2, Sven De Cleyn1, 3, 4 and Jan Coppens1 ¹iMinds, Ghent, Belgium 2 Ghent University, Belgium ³University of Antwerp, Belgium 4 Karel de Grote University College, Antwerp, Belgium Frank.gielen@iminds.be Sven.decleyn@iminds.be Jan.coppens@iminds.be Abstract: The key questions that academics are struggling with are: can one teach entrepreneurship and how can it be embedded into a science, technology or engineering curriculum while maintaining high academic standards. Furthermore, prior research has pointed to a mismatch between the competencies of the highest educated and most specialised students of our academic system and the expectations of the (corporate) market (Anseel, 2012; De Grande, De Boyser, Vandevelde et al, 2011). Therefore, this paper investigates the opportunities offered by ‘learning‐by‐doing’ in an ecosystem perspective. The organisation iMinds somehow acts as network integrator for research and entrepreneurship in ICT in Flanders. In this role, iMinds collaborates with universities and university colleges and other actors in the ecosystem supporting entrepreneurship. The various mechanisms deployed to support entrepreneurship and the development of entrepreneurial skills amongst (under)graduate students are analysed. These include extra‐curricular activities (workshop and coaching series). Additionally, these activities are embedded in and intertwined with the development of entrepreneurial behaviour and skills in the classical curriculum using new learning methods. Some examples can be found at Karel de Grote University College (the so‐called ‘The Company’ minor) and at Ghent University (‘student‐entrepreneur’ status). The enabler to drive this evolution forward is the inclusion of incubators as part of the learning system. Students that want to start a business can spend 2 years on an MBA or join an incubator; the latter generally being accepted as a faster and more effective way of learning. Results can be seen at three levels. Firstly, it results in an increased awareness of entrepreneurship as viable career opportunity. Secondly, these programs increase the number of student start‐ups, which additionally are better equipped to grow and prosper. Since the program’s start in 2011, iMinds has received eight applications for student start‐ups and has supported four. Furthermore, about 25 students have made use of the (physical) incubator space. Thirdly, this ecosystem approach results in an increased cooperation between universities (e.g., at the level of doctoral schools) and with other network actors, leading to spillover effects and more effective use of proceeds. The universities of the future will intertwine academic education with entrepreneurship. The end goal should not be that all students become entrepreneurs, but the development of entrepreneurial skills will be beneficial to all stakeholders. This requires collaboration with these stakeholders in the ecosystem, including incubators as further enablers of entrepreneurial behaviour. Keywords: incubators, academic entrepreneurship, student entrepreneurs, entrepreneurship education, entrepreneurship curriculum, action‐learning

1. Introduction In educational organisations as well as in academic studies on the subject, debate has been on‐going whether entrepreneurship can be taught (and to what extent) and how the necessary knowledge and skills can be transferred and embedded into science, technology or engineering curricula (Henry, Hill and Leitch, 2005a; Hannon, 2006). According to certain people, like Ries (2011, p. 4‐5), entrepreneurship certainly can be taught: “Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.” Furthermore, academics have been concerned on how to maintain the high academic standards of these educational programs (Béchard and Grégoire, 2005; Fayolle, Gailly and Lassas‐Clerc, 2006; Henry, Henry, Hill and Leitch, 2005b; Hannon, 2006; Kuratko, 2005; Smith, Collins and Hannon, 2006). Additionally, an important remark from prior literature concerns the distinction that needs to be made between entrepreneurship and management education, since different skills and knowledge is addressed in these programs (Gorman, Hanlon and King, 1997). Besides the concerns on how to integrate entrepreneurship education in academic curricula while maintaining the quality levels, prior research has also pointed to a mismatch between the competencies of the highest educated and most specialised students of our academic systems and the expectations of the (corporate) job market (Anseel, 2012; De Grande, De Boyser, Vandevelde et al, 2011). Master and doctoral students and academic researchers do not always have the most appropriate skills for (corporate) jobs or alternatively are

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Frank Gielen, Sven De Cleyn and Jan Coppens not always perceived as having the right qualifications (De Grande, De Boyser, Vandevelde et al, 2011; Nabi, Holden and Walmsley, 2006). Entrepreneurship education could help in closing this (perceived) gap, keeping in mind that the outcome of entrepreneurship education should relate to a set of skills, knowledge and experiences useful in any business setting, rather than solely the desire to start up a new venture. Within the aforementioned setting, this paper investigates the role of incubator programs and the opportunities offered by ‘learning‐by‐doing’ experiences in an ecosystem perspective, as part of entrepreneurship education. The paper will use the case study of iMinds as organisation and network catalyst in the Flemish region in Belgium. The structure of the paper is as follows. In the next part, a more general discussion on the role of incubators is presented, with a specific focus on entrepreneurship education. The third section highlights iMinds as an organisation and its general activity domains. Afterwards, the paper will zoom in on the specific entrepreneurship programs that have been developed by iMinds for students (mainly targeting Master and doctoral students) and researchers. The fifth section deals with insights into the (preliminary) outcomes of these programs. Finally, the paper is concluded with a discussion of incubators and their role in entrepreneurship education.

2. The role of incubators Over the centuries, economies have been evolving from ‘managed’ economic system dominated by large companies and multinationals (the ‘industrial age’) towards a more entrepreneurship‐driven knowledge economy propped up small and medium‐sized companies cooperating in networks. The former is defined by planning and determinism: companies assumed customer to know what their needs were or decided what customers might have needed. In this kind of environment, companies needed managers with the ability and expertise to design and meticulously execute “5 year plans”. To a large extent, this explains the success of MBA programs at business schools: the name “business administration” is self‐explanatory in this context. Employers and entrepreneurs in a more entrepreneurship‐driven knowledge economy, that is currently being shaped, have different expectations on the knowledge and skills of future employees and newly graduated students. Deep knowledge on scientific and technological subjects is still a key component. However, they additionally seek for skills and behaviour that allows employees to function optimally in a more entrepreneurial (or intrapreneurial) setting. Even though not all graduating students will become entrepreneurs themselves, they all need to behave in an entrepreneurial way (even within the walls of larger organisations and governments). These entrepreneurial skills then refer to for example: detecting opportunities where others see problems, dealing with complexities and uncertainties, realising ambitious plans with limited resources (the ‘lean’ philosophy; see e.g. Ries (2011)), implementing constant change and renewal, thinking out of the box and finding creative solutions, motivating people … As the economic environment changes, universities and other educational organisations need to evolve in the same direction and adapt to the new reality. Universities contributing to a more entrepreneurial society in this knowledge economy will not only need to have attention for the transfer of knowledge, but also to the development of entrepreneurial skills, e.g. through more entrepreneurial teaching methods. Furthermore, the boundaries between universities and companies will become more vague and cooperation over the boundaries will (need to) increase. In the latter environment, students will be able to develop entrepreneurial skills based on “learning‐by‐doing” experiences. In this setting, incubators can play a key role. Often, they’re located in the surroundings of universities. Incubators can provide access to learning opportunities within entrepreneurial settings. Furthermore, since they’re used to dealing with the risks inherent to entrepreneurship (including failure), incubators may be better positioned than universities to take the lead in entrepreneurship education (especially since various scholars have pointed to the need for “action‐learning” or “learning‐by‐doing” in entrepreneurship education; see e.g. Hegarty and Jones (2008) and Rasmussen and Sørheim (2006)). In this regard, an MBA could be considered as ‘a thing of the past’, whilst engaging in an incubator is more closely linked to the education of the future.

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3. iMinds as network integrator and its role in academic entrepreneurship iMinds has been established in 2004 by the government of the Flemish Region (Belgium), under its original name of IBBT (Interdisciplinary Institute for Broadband Technology). The organisation, funded by the Flemish Region, was given the task to develop demand‐driven for the ICT sector and foster the business and societal application and adoption of newly developed technologies, knowledge, products and services. Creating and maintaining a steady supply of new knowledge and technologies in this fast‐moving industry has been recognised as crucial for a healthy ICT sector. Furthermore, supporting and organising activities to fostering innovation and entrepreneurship made up an important pillar of iMinds’ activities since its inception. iMinds as an organisation somehow acts as network integrator for research and entrepreneurship in ICT in Flanders. In this role, iMinds collaborates with universities and university colleges and other actors in the ecosystem supporting entrepreneurship. From a research side, iMinds has strategic partnerships with all five universities in Flanders (Vrije Universiteit Brussel, Ghent University, Hasselt University, KU Leuven and University of Antwerp). In this regard, iMinds is somehow a virtual organisation, in the sense that its researchers are located within these five universities and have a double affiliation (iMinds and the respective university). Through these partnerships, iMinds has direct access to and involvement with the vast majority of (ICT‐related) researchers in Flanders. In this sense, iMinds as incubator (and network organisation) acts as lynchpin in a Triple Helix ecosystem for the Flemish ICT community, integrating various actors and stakeholders as depicted in Figure 1.

Figure 1: Triple Helix model The activities of iMinds are centred on two pillars: [1] collaborative and demand‐driven research, in close cooperation with Flemish, Belgian and international companies, government organisations and other societal actors, and [2] foster entrepreneurial behaviour amongst researchers and externals and supporting commercialisation and other entrepreneurial activities with various programs. Through the former, iMinds gets relatively easy access to primarily researchers (professors, post‐doc researchers, project researchers and doctoral students). However, in second order the partnerships with the universities grant indirect access to the students, especially in more science, technology or engineering orientations (given the links with these departments through joint research activities). The various mechanisms deployed to support entrepreneurship and the development of entrepreneurial skills amongst (under)graduate students are analysed in section 4. These include extra‐curricular activities

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Frank Gielen, Sven De Cleyn and Jan Coppens (workshop and coaching series, incubator facilities and pre‐seed funding). These mechanisms should however not intend to turn all students and researchers into entrepreneurs. However, as also discussed in the essay of Sarasvathy and Venkataraman (2011), entrepreneurship could be considered as a way of thinking of a general method, which could (should?) be part of everyone’s education or training. Additionally, these activities are embedded in and intertwined with the development of entrepreneurial behaviour and skills in the classical curriculum using new learning methods. Some examples can be found at Karel de Grote University College (the so‐called ‘The Company’ minor; see Trommelmans, De Wachter, De Cleyn et al, 2012), in the Faculties of Sciences and Medicine and Pharmaceutical, Biomedical and Veterinary Sciences at University of Antwerp (with a specific minor on entrepreneurship and management) and at Ghent University (‘student‐entrepreneur’ status).

4. Entrepreneurship programs for (doctoral) students and researchers Prior studies have demonstrated that knowledge is better internalised and skills adopted to a better extent if students and researchers get the opportunity to engage in learning‐by‐doing experiences (Hegarty and Jones, 2008; Rasmussen and Sørheim, 2006; Smith, Collins and Hannon, 2006). This is probably even more true for entrepreneurial skills, on which debate has been on‐going whether and to which extent they can be learnt through (classic) education (Henry, Henry, Hill and Leitch, 2005a; Hannon, 2006). Prior studies have demonstrated that heterogeneity in experiences and teaching methods is critical in entrepreneurship education (Jones and Matlay, 2011; Pittaway and Cope, 2006). Furthermore, creativity should be an important part of these learning experiences (Hamidi, Wennberg and Berglund, 2008). In this sense, incubators can play a major role in fostering the development of entrepreneurial skills and providing learning opportunities in a business context. Students and researchers that have the aspiration to start up a business, can either spend one or two years on an MBA or join an incubator, the latter generally being accepted as a faster and more effective way of learning (Matlay, 2006; Rasmussen and Sørheim, 2006). Within this line of reasoning, and as part of its entrepreneurship activities, iMinds has developed a number of tools to foster the development of entrepreneurial skills amongst researchers and students and to support those willing to start up their own venture. These tools try to address all stages of the entrepreneurial process, from early skills development and opportunity recognition onwards to hands‐on coaching, pre‐seed funding and facilities for the effective start up of the new business. The current toolbox that focuses on entrepreneurial skill development consists of following elements:

Opportunity recognition workshops to develop basic entrepreneurial skills for researchers and help in recognising societal and business applications of their own academic or applied research

Student entrepreneurship workshops to coach students on a concrete idea, support the development of their entrepreneurial skills and highlight entrepreneurship as a viable career option

Intensive bootcamps as focused coaching program to translate identified business opportunities into a first business plan, further develop entrepreneurial business sense and pay attention to team development

(Pre‐)seed funding, expert coaching and incubator facilities (co‐working and office space), which provide opportunities to interact with and learn from other start‐ups and SMEs in the iMinds’ ecosystem

The tools are complemented with follow‐up programs to support the start‐ups that emerge from the former tools and help them and other SMEs to accelerate and internationalise.

4.1 Opportunity recognition workshops iMinds organises a series of opportunity recognition workshops, in close collaboration with the doctoral schools of several (Flemish) universities (more info can be found at http://orw.iminds.be). The goal of these workshops is to help researcher tackling the first important challenge in applying their knowledge, technologies and research outcomes into societal and business applications: identifying opportunities where their research can help in solving (latent or explicit) problems or customer needs. Generally speaking, researchers are great at developing new knowledge and technologies, but somewhat less proficient at identifying challenges for potential customers and matching these with the solutions they could provide. The opportunity recognition workshops aim at supporting researchers, whether doctoral students, post‐doctoral

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Frank Gielen, Sven De Cleyn and Jan Coppens researchers or project researchers in regional, national or European‐funded projects, in the development of their human capital (mainly entrepreneurial skills, but also e.g. pitching and presentation skills). Most often, researchers are used to a technology‐push approach, where in valorisation efforts they try to identify applications where they technologies could be deployed (starting from their knowledge or technologies). The opportunity recognition workshops try to increase the researchers’ consciousness and skills for the opposite approach: what problems do (potential) customers encounter and how could the researchers’ knowledge and technologies be used to bring solutions (and value) to these customers (market‐pull approach). This opposite approach requires a new set of skills, attitudes and thinking (outside orientation). For the development and training of these skills and attitudes, hands‐on practice within an incubator may be more effective than university classes. Through cooperation, both organisations can benefit: the universities’ employees and students develop a new set of skills and expertise, developed in more market‐oriented ecosystems such as incubators, whereas incubators and their ecosystems get a knowledge‐boost through the latest technologies developed at universities. In the first series of workshop, organised together with Ghent University in May 2013, 13 researchers from various backgrounds and science domains (incl. metallurgy, information science, chemistry or education sciences) participated. Throughout the workshop week, their change in attitude, vision on how to apply their research and technologies and engagement in entrepreneurial thinking changed dramatically.

4.2 Student entrepreneurship workshops Bringing entrepreneurship education to students requires a different approach, when comparing it to programs for researchers. Students are less skilled in conducting (academic) research, but are (usually) somewhat more business‐savvy and more prone to take (entrepreneurial) risks (Edwards and Muir, 2012; Lipinski, Lester and Nicholls, 2013). Therefore, a specific student entrepreneurship program has been developed, to achieve two main goals: [1] develop entrepreneurial skills amongst students, and [2] promote entrepreneurship as a viable career option, as opposed to working for an employer. In collaboration with various universities across Flanders, a number of workshops have been put in place to help students develop their (first) business ideas and through interactive lectures and one‐on‐one coaching encourage them to draft their first version of a business plan. Experienced entrepreneurs coach a limited number of students or student teams on their own, concrete ideas. Topics typically include opportunity recognition, business modelling, business planning, entrepreneurial marketing and sales and the basics of financial planning, intellectual property rights and legal topics. The goal is not (necessarily) to develop full‐ fledged business plans, but rather to increase their appetite for entrepreneurship, further increase their enthusiasm of translating their creative ideas into business opportunities and engaging in peer learning and an entrepreneurial ecosystem. In this regard, the cooperation between universities as educational organisations on one hand and incubators as more business‐oriented organisations and ecosystems provides a win‐win situation. Students get an easily accessible learning opportunity for ‘action‐learning’ and can further increase and broaden their skills, while both universities and incubators reinforce each other in an efficient (and effective) way.

4.3 Bootcamps Even in case researchers or students have been able to recognise and identify (a number of) opportunities, they usually need additional skills to become successful entrepreneurs (or intrapreneurs). In the process towards a first business plan and the real preparation for a (new) business, team dynamics and business planning skills come to the foreground. To a certain extent, the centre of gravity moves from human capital development towards a combination of human and social capital development. iMinds uses bootcamps to support researchers, students and (future) entrepreneurs in developing more in‐depth skills and expertise in these domains. During the bootcamp, attention is devoted to three core activities. In first instance, team formation is in the centre of attention. Especially technology start‐ups (such as ICT‐related start‐ups which iMinds supports) are often started by entrepreneurs with a rather technological background (Mosey and Wright, 2007). Furthermore, in case a start‐up is prepared for or established by a team, these tend to be rather small

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Frank Gielen, Sven De Cleyn and Jan Coppens homogenous teams (Mosey and Wright, 2007). However, given the variety of tasks at hand, heterogeneous teams have been demonstrated to increase success rates (Aspelund, Berg‐Utby and Skjevdal, 2005; De Cleyn, 2011; Knockaert, Ucbasaran, Wright et al, 2010). Therefore, the first part of the bootcamp (in fact the preparation for the actual bootcamp) is devoted to building complementary and heterogeneous teams. Practice has learned that even though a heterogeneous team outperforms a homogenous one, team dynamics trump individual skills. Building an efficient and well‐functioning team is a delicate balance between the necessary skills as a team and the inter‐personal connection between the individuals. As the bootcamp is one of the first steps in starting a company, a well‐functioning rather homogeneous founding team can still be complemented with additional skills in a later stage of development. The second pillar receiving attention in the pre‐bootcamp period and during the bootcamp concerns pitching and presentation skills. In order to be attractive to potential team members, customers, partners and investors, entrepreneurs need to be able to tell a compelling and consistent story about their idea or venture. The third set of key activities concerns the transfer of more content‐related entrepreneurial skills (opportunity recognition, business modelling, business planning, entrepreneurial marketing and sales and financial planning, intellectual property rights and legal topics) during an intensive bootcamp (typically a full‐time week off‐site in an entrepreneurial hot‐spot). In this intensive period, bootcamp participants are coached on these aspects and encouraged to further develop their ideas using the input from experienced business coaches and to take advantage of the local ecosystem in which they are immersed. In this regard, collaboration with incubators provides substantial added value, given the business coaching and access to local ecosystems through the incubator. This change of environment, outside the classical academic environment, is a critical success factor for the effectiveness of the entrepreneurship ‘education’ through bootcamps. These bootcamps have been organised for about five years now. Each year, about six teams (of each typically 3‐4 people, participated. The number of participating teams has been limited each year due to the intensive nature of the coaching part (which makes it less scalable). In the 2013 edition, we received a record of 43 project application and 20 people took part in the final one‐week bootcamp.

4.4 (Pre‐)seed funding and incubator facilities The ‘final piece’ in entrepreneurship education would be the preparation and establishment of a real start‐up. Real‐life action learning probably provides the best learning opportunity to obtain and further strengthen entrepreneurial skills (Hegarty and Jones, 2008; Rasmussen and Sørheim, 2006). In this sense, engaging in an incubator program could be seen as the most effective way of doing an entrepreneurial MBA. Since (most) universities cannot offer these facilities to researchers and students, collaboration with stakeholders in the ecosystem is crucial. The end goal should not be that all researchers and students become (self‐employed) entrepreneurs, but rather fostering the development of entrepreneurial skills, which is beneficial to all stakeholders involved: the researchers and students themselves in the first place, but also universities, future employers, society …. In this sense, iMinds has two key programs to support the incubation of new start‐ups and entrepreneurial initiatives: [1] a pre‐seed incubation program where entrepreneurs get the opportunity to develop their business, using financial support and coaching by iMinds, and [2] an physical incubator, where a mix of co‐ working spaces, offices, administrative support and a vibrant ecosystem encourages peer interaction and learning. The latter (co‐working spaces and incubator facilities) is a mix of start‐ups supported by and emerging out of iMinds’ activities on one hand and external entrepreneurs joining these hotspots for their ecosystem character. This type of mix between ‘internal’ and ‘external’ entrepreneurs is hard to achieve in a one‐sided university setting. Therefore, cooperation between universities and university colleges on one side, where education and research activities take place, and incubators on the other, bringing an entire ecosystem together, increase the likelihood of great learning opportunities for researchers and students through peer contacts and interactions with businesses. Figure 2 provides some basic figures on the number of incubation projects supported in the last two years and their origin, indicating a good mix between research‐based projects and external projects (either linking to research or not).

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Frank Gielen, Sven De Cleyn and Jan Coppens Additionally, since ICT companies are “born global”, each start‐up that is supported by iMinds is stimulated to participate to the iMinds go‐global program. This program offers companies easy entrance into International locations such as New York, San Francisco and Singapore. With the support of local staff and partners, companies have access to market knowledge and will find the support they need to get introduced to those local eco‐systems. While the programs primary goal is to help Internationalise local companies, it offers an accelerated learning experience when operating in an International business context.

Figure 2: Incubation projects supported by iMinds and their links with research

5. Results Results of the various programs, even though some are very young, can (already) be seen at three levels. The rather limited history for most of these programs (most of them have only been organised since two years) makes it hard to provide results on a somewhat longer time horizon. Firstly, they result in an increased awareness of entrepreneurship as viable career opportunity. Increasingly, students and researchers are dreaming of a career as entrepreneur, following well‐known role models on both a global level and increasingly on a more local level, where Belgian entrepreneurs start achieving success on an international level. Through the regular interactions with the universities, researchers and students become more and more aware of the fact that entrepreneurial skills can also be valuable outside a start‐up context and increase the overall human and social capital. This has also resulted in an increased participation of researchers and students in programs and tools to foster the development of entrepreneurial skills. Secondly, these programs increase the number of student start‐ups, which additionally are better equipped to grow and prosper. Since the program’s start in 2011, iMinds has received eight applications for student start‐ ups and has supported four, despite the program’s rather low profile start (with a test case only in the city of

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Frank Gielen, Sven De Cleyn and Jan Coppens Ghent). The first (small) successes are already being achieved, only 1.5 year after the launch of the program. The first start‐ups have become profitable ventures and one start‐up is close to securing in investment round of several hundred euros. Furthermore, about 35 students and researchers have made use of the (physical) incubator and co‐working spaces, which embeds them to a larger extent in the entrepreneurial and business ecosystem in the region. The latter has the significant advantage of opening up new networks (social capital) and creating additional occasions to get feedback, learn and potentially increase (joint) business opportunities. Thirdly, this ecosystem approach results in an increased cooperation between universities (e.g., at the level of doctoral schools) and with other network actors, leading to spillover effects and more effective use of proceeds. Universities get the opportunity to focus (more) on their core activities (conducting research and providing education), while at the same time having more learning opportunities in real business settings within reach. Additionally, their researchers and students can further increase (and diversify) their human and social capital, often enhancing their abilities in the job market. For the incubators, the connection with researchers and students enriches their ecosystem, creates more (knowledge‐intensive) leads and strengthens the knowledge base on a network level. Increasingly, (independent) entrepreneurs find ways to team up with researchers and students, creating opportunities to strengthen their offerings towards customers and reinforcing their teams. An important concern relates to the evaluation of such initiatives, in terms of added value and contribution to regional and national economies. Since the impact is often more indirect, performance indicators are somewhat more difficult to design. For initiatives such as the opportunity recognition workshops and the student entrepreneurship workshops, the main goal is to achieve an increasing entrepreneurial attitude of researchers and students (but not an increase in start‐up projects or ‘real’ entrepreneurs per se). Currently, this increase in entrepreneurial attitude and skills has been measured using feedback forms of the participants. The impact can also be measured by the number of participants, as proxy for the extent of the impact. For more start‐up oriented programs, such as bootcamps or the incubation programs, impact measurement can be more objective, using variables such as number of participants, number of projects effectively leading to a start‐up (during the program or with a time‐lag of several months/years), employment and turnover / added value created by these start‐ups, amount of follow‐up funding secured etc. Additionally, the impact of these programs in terms of increase in entrepreneurial skills can be measured the same way as the first two programs.

6. Discussion, conclusions and recommendations The universities of the future will intertwine academic education with entrepreneurship. Currently, the number of universities and university colleges integrating entrepreneurship courses in their programs (in classic forms or using new learning methods) is increasingly. The end goal of these programs should not be that all students become entrepreneurs, but the development of entrepreneurial skills will be beneficial to all stakeholders (researchers and students, universities, future employers …). This requires collaboration with these stakeholders in the ecosystem, including incubators as further enablers of entrepreneurial behaviour. Including incubators as part of the educational programs on entrepreneurship holds several advantages: more effective use of proceeds, spillover effects from and towards all stakeholders involved, increased interaction between academia and business, and above all increased skills and expertise for researchers and students actively participating in these programs. As a result, incubators could be seen as catalysts and enablers for effective entrepreneurship education programs in academic organisations.

References Anseel, F. (2012) “Werf eens een Doctor aan”. JobAt, 14 January 2012, pp 2‐3. Aspelund, A., Berg‐Utby, T. and Skjevdal, R. (2005) “Initial Resources' Influence on New Venture Survival: A Longitudinal Study of New Technology‐Based Firms”, Technovation, Vol 25, No. 11, pp 1337‐1347. Béchard, J.‐P. and Grégoire, D. (2005) “Entrepreneurship Education Research Revisited: the case of Higher Education”, Academy of Management Learning and Education, Vol 4, No. 1, pp 22‐43. De Cleyn, S. (2011) The Early Development of Academic Spin‐Offs: A Holistic Study on the Survival of 185 European Product‐ Oriented Ventures using a Resource‐Based Perspective, University of Antwerp, Antwerp. De Grande, H., De Boyser, K., Vandevelde, K. and Van Rossem, R. (2011) “The Skills Mismatch: What Doctoral Candidates and Employers Consider Important”, ECOOM Briefs, Vol 2011, No. 4, pp 1‐4. Edwards, L.‐J. and Muir, E. J. (2012) “Evaluating Enterprise Education: Why do it?”, Education + Training, Vol 54, No. 4, pp 278‐290.

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Frank Gielen, Sven De Cleyn and Jan Coppens Fayolle, A., Gailly, B. and Lassas‐Clerc, N. (2006) “Assessing the Impact of Entrepreneurship Education Programmes: A New Methodology”, Journal of European Industrial Training, Vol 30, No. 9, pp 701‐720. Gorman, G., Hanlon, D. and King, W. (1997) “Some Research Perspectives on Entrepreneurship Education, Enterprise Education and Education for Small Business Management: A Ten‐year Literature Review”, International Small Business Journal, Vol 15, No. 3, pp 56‐77. Hamidi, D. J., Wennberg, K and Berglund, H. (2008) “Creativity in Entrepreneurship Education”, Journal of Small Business and Enterprise Development, Vol 15, No. 2, pp 304‐320. Hannon, P. D. (2006) “Teaching Pigeons to Dance: Sense and Meaning in Entrepreneurship Education”, Education + Training, Vol 48, No. 5, pp 296‐308. Hegarty, C. and Jones, C. (2008) “Graduate Entrepreneurship: More than Child's Play”, Education + Training, Vol 50, No. 7, pp 626‐637. Henry, C., Hill, F. and Leitch, C. (2005a) “Entrepreneurship Education and Training: Can Entrepreneurship be Taught? Part I”, Education + Training, Vol 47, No. 2, pp 98‐111. Henry, C., Hill, F. and Leitch, C. (2005b) “Entrepreneurship Education and Training: Can Entrepreneurship be Taught? Part I”, Education + Training, Vol 47, No. 3, pp 158‐169. Jones, C. and Matlay, H. (2011) “Understanding the Heterogeneity of Entrepreneurship Education: Going Beyond Gartner”, Education + Training, Vol 53, No. 8/9, pp 692‐703. Knockaert, M., Ucbasaran, D., Wright, M. and Clarysse, B. (2011) “The Relationship Between Knowledge Transfer, Top Management Team Composition, and Performance: The Case of Science‐Based Entrepreneurial Firms”, Entrepreneurship Theory & Practice, Vol 35, No. 4, pp 777–803. Kurakto, D. F. (2005) “The Emergence of Entrepreneurship Education: Development, Trends, and Challenges”, Entrepreneurship Theory & Practice, Vol 29, No. 5, pp 577‐598. Lipinski, J., Lester, D. L. and Nicholls, J. (2013) “Promoting Social Entrepreneurship: Harnessing Experiential Learning With Technology Transfer To Create Knowledge Based Opportunities”, The Journal of Applied Business Research, Vol 29, No. 2, pp 597‐606. Matlay, H. (2006) “Researching Entrepreneurship and Education: Part 2: What is Entrepreneurship Education and Does it Matter?”, Education + Training, Vol 48, No. 8/9, pp 704‐718. Mosey, S. and Wright, M. (2007) “From Human Capital to Social Capital: A Longitudinal Study of Technology‐Based Academic Entrepreneurs”, Entrepreneurship Theory & Practice, Vol 31, No. 6, pp 909‐935. Nabi, G., Holden, R. and Walmsley, A. (2006) “Graduate Career‐Making and Business Start‐Up: A Literature Review”, Education + Training, Vol 48, No. 5, pp 373‐385. Pittaway, L. and Cope, J. (2006) Entrepreneurship Education: A Systematic Review of the Evidence, National Council for Graduate Entrepreneurship, Birmingham. Rasmussen, E. A. and Sørheim, R. (2006) “Action‐Based Entrepreneurship Education”, Technovation, Vol 26, No. 2, pp 185‐ 194. Ries, E. (2011) The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Crown Publishing Group, New York. Smith, A. J., Collins, L. A. and Hannon, P. D. (2006) “Embedding New Entrepreneurship Programmes in UK Higher Education Institutions: Challenges and Considerations”, Education + Training, Vol 48, No. 8/9, pp 555‐567. Sarasvathy, S. D. and Venkataraman, S. (2011) “Entrepreneurship as Method: Open Questions for an Entrepreneurial Future”, Entrepreneurship Theory & Practice, Vol 35, No. 1, pp 113‐135. Trommelmans, J., De Wachter, J., De Cleyn, S. H., De Roy, L. and Daems, W. (2012) “The Company : Entrepreneurship for Engineers”, IATED, Proceedings of the INTED 2012 Conference, pp 532‐536.

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Applying the Disruptive Israeli Innovation Model to Re‐Inventing Corporate Education Janet Lea Sernack ImagineNation, Israel janet@imaginenation.co.il Abstract: Hailed as the “worlds laboratory”, Israel has an enviable reputation as the Start‐Up Nation, providing evidence

of economic success through authentic entrepreneurship, cutting edge inventiveness and ”out of the box” thinking. The ability to understand and identify the generative challenge, plus the ability to zoom in and zoom out through audacious leap goals and generative inquiry and debate delivers astonishingly creative and innovative results! The secret ingredients behind this tiny nation’s global success and leadership in disruptive high tech innovation through its “provocative competence” will be revealed. How can it be emulated, enacted and embodied within an innovative corporate culture development and learning context will be illustrated. By The Start‐Up Game™; a business simulation that integrates adult and experiential principles with gamification processes that builds innovative leadership and start‐up entrepreneurship within a business eco‐system context. Our presentation will be non academic and embody a pragmatic business context. Keywords: being innovative; innovation competences; innovative eco‐systems; innovative leadership, entrepreneurial leadership, innovation management

1. What is disruptive innovation and what causes it? Why; There is a considerable amount of information available on why Israel has developed such disruptive innovations and a culture of entrepreneurship, and little, in the cultural and leadership context on what drives this and how it has evolved. We have researched, deciphered and modelled the intrinsic motivators, mindsets and behaviours to share and replicate with corporations globally. Waze, a “lean” Israeli Start‐Up, recently won the Best Overall Mobile App by the GSM Association in the 2013 Global Mobile Awards at the Barcelona World Mobile Congress. Waze is in the data collection and sharing business, they collect data via crowd sourcing to determine road closures, heavy traffic and even speed traps, in addition to its navigation functions. In May 2013, they were in advanced negotiations with Face book to purchase their business for $1 billion. In June they completed a sale of their business to Google for $1.15 billion. Waze is a disruptive innovation; Wikipedia describes it as “an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology”. Why is Waze disruptive? Creating maps is an extremely expensive business. Because of this, the number of companies in the world who actually own global maps can be counted on one hand, because only they have the time and resources available to create them. Waze makes the process far more accurate, constantly updated, and essentially free. The consumer builds the maps as they travel; updates are also made in real time, giving users of the app an up‐ to‐date picture of the road network. Routes suggested by Waze are much more intuitive; they take into account current driving conditions, as reported by other users. And because the data is provided free‐of‐ charge by consumers, Waze’s costs are inordinately lower than if they had to create this data for themselves. Upon winning this prestigious award, they stated; "It takes 40 million drivers to make a great service that impacts the world, and that’s just the beginning. Imagine what we’ll able to do at 100 million."

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Janet Lea Sernack What if Waze builds a real‐time, constantly updated map of the world’s land, air, and sea and rail traffic? Disruptive innovations are caused by people who dare to dream, and to keep on dreaming, no matter what! They apply and practice these qualities in “real life”. They tackle big markets with big ideas, to find new ways of doing things, solving problems and transforming current ideas processes and solutions. They live and flow with instability and uncertainty, which in Israel, has become a way life, earning it the reputation of being The Start‐Up Nation! Steve Blank describes a “lean” start‐up as “favoring experimentation over elaborate planning, customer feedback over intuition, and iterative design over ‘big design up front’” developments. There are currently more than 4,500 “lean” start‐ups being developed at this very moment, in Israel. We decided to explore how these phenomena could be applied to creating entrepreneurial and innovative corporate leaders.

2. Facts and figures about Israeli innovation 2.1 Global innovation index (GIL) GII 2012 Results for Israel Key Indicators Population (millions) GDP per capita, PPP$ GDP (US$ billions) Scores Score (0–100) or value (hard data) Rank Global Innovation Index 2012 (out of 141) Output Sub‐Index Innovation

50.5

Innovation Input Sub‐Index

61.5

56.0

Innovation Eﬃciency Index 0.8 Global Innovation Index 2011 (out of 125 GII 2012 rank among GII 2011 economies (125)

7.6 31,004.6 245.3 Ranking 17 13 17 38 14 16

GII 2012 Results for Israel in Detail Key Indicator Institutions Human capital & research 21. Research & development (R&D) Infrastructure Market sophistication 4.1 Venture capital deals/tr PPP$ GDP Business sophistication 5.1 Knowledge workers 5.2 Knowledge creation Knowledge & technology outputs Creative outputs

Score 67.2 66.5 94.3

Ranking 47 4 1

54.2 64.9 288.8

21 9 3

54.8 83 72 57.2

19 4 6 10

43.8

The GII 2012 recently reinforced the need for: Collaboration, the flow of ideas between different innovation factors, and access to knowledge is all increasingly important ingredients of innovation. So‐called innovation ecosystems have become more complex and are now built on more internationalized, collaborative, and open innovation models and knowledge markets.”

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Janet Lea Sernack The 2012 GII report also underlines the importance of linkages and of supporting the optimal infrastructure for these innovation ecosystems, which is becoming an emerging global business model for effecting innovation.

2.2 The Israeli business eco‐system In the current turbulent, uncertain and unstable globalized business environment, one of the greatest challenges ahead is to find a balance between the two potentially conflicting responses of:

Reacting by reverting back to the “survival of the fittest” power and control based strategies,

Contributing and collaborating towards co‐creating responsible strategies that proactively deal and “work with”, the pace and speed of change and globalization.

Nature provides us with a solution to achieve this type of balance: Wikipedia describes an eco‐system as “a dynamic interactions between plants, animals, and microorganisms and their environment working together as a functional unit. Ecosystems will fail if they do not remain in balance. No community can carry more organisms than its food, water, and shelter can accommodate. Food and territory are often balanced by natural phenomena such as fire, disease, and the number of predators. Each organism has its own niche, or role, to play.” At ImagineNation™, we spent 2 years researching, deciphering and evolving the concept of innovative business eco‐systems. We explored how to apply this approach at the individual, team, and organization, societal and national levels as a more effective way of creating a sustainable and responsible future. We discovered that the concept of a business eco‐system transcends systems thinking. It embodies and enables us to enact a more practical approach towards enabling contribution and collaboration and the flow of ideas between the different elements of innovation. As our case study, we researched how Israel, the “lean” Start‐Up Nation, successfully evolved the Michael Porter concept of economic clusters into a unique collaborative and co‐petitive (combination of co‐operation & competition) innovative eco‐system. This has been achieved by its necessity driven, unique entrepreneurial cultural attributes, the knowledge and optimism of its most valuable resource, its people and structured government, defense, education and VC support initiatives. Israel is a tiny, resource poor, often misunderstood and isolated nation, which has pioneered the development of the innovative business eco‐system to create high levels of social and intellectual capital and a strong sense of community. Its ability to contribute globally through its disruptive high tech technological innovations in the information, medical, agricultural and energy, transportation and communications sectors is unrivalled. Israel has leveraged its adaptive ability to react speedily and nimbly to an ever changing and often hostile reality by focusing on the possibilities and opportunities inherent in instability and uncertainty. It has broken through obvious geographical and logistical constraints, and created cultural shortcuts to accelerate innovation and set the foundations for co‐opetition. Israel operates from a business eco‐system where all of the pieces and parts that support and enable people and businesses to be adaptive, sustainable and successful in an uncertain and unstable world. Our research revealed that developing and leveraging innovative business eco‐systems creates significant benefits that enable individuals, teams and organizations and nations, to:

Find new ways of responding to and balancing the fluctuating levels of uncertainty and instability now occurring at all levels of business and society globally.

Generate imaginative solutions to business challenges, key problems as well as to improbable and unexpected events.

Invent something that may not have existed previously or re‐invent or reenergize organizations and industries.

As a result of the research, culture deciphering and analysis, we designed and developed the ImagineNation™ Innovate like an Israeli (ILI) Learning Model and Learning System. The final outcome of applying this learning model and system is the development of an innovative culture and/or business eco‐system.

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These are the four key attributes present in the innovative Israeli business eco‐system; Passionate, Emergent, Experimental and Courageous.

2.3 Israel’s key cultural attributes A nation’s culture is described as a macro culture and as such becomes more stable and ordered because of the length of time it has existed. In the case of Israel, it is recognized as a cultural “salad bowl” that is a hybrid fusion consisting of more than 70 different nationalities ‐ not including sub cultures ‐ all thrown together within a short time frame of 65 years. This suggests that Israel is “a work in progress” and is still developing its own unique pattern of shared basic assumptions. Ultimately Israel will consolidate its current diffusive culture into a range of more definite and defined patterns. Currently it is being constantly disrupted in its ability to solve its problems of external adaptation due to:

The high levels of adversity it constantly faces. The need for the effective internal integration of its essentially migrant and diverse population.

Therefore, Israel is not bounded by any one accepted or correct way to perceive think and feel in relation to its problems. This inherently brings about another set of challenges including national disunity on the political, social and religious fronts. Yet, it also suggests that the Israeli culture is a “melting pot” of extreme differences, and as a young country, is still in an early phase of its cultural evolution. This tends to make it flexible and adaptive, nimble and responsive to change and uncertainty. It is also a hot bed of inventiveness, experimentation and entrepreneurship. People constantly explore and experiment embedding more common ways of perceiving, thinking and feeling. Israel is considered “The estuary region where rigid order and random chaos meet and generate high levels of adaptation, complexity and creativity.” The following cultural attributes can be described generally about Israel. Fluid and agile culture dancing on the edge of chaos. Strong affiliative networks for life. Experimentation vs. standardization. Both visionaries and patriots. Debate and disagreement are a way of life. Learning from failure. Determined informality, candor and assertiveness. Economic data supports the fact that not only has Israel weathered the recent global financial crisis; it has actually flourished during this time. Unemployment is around 6% and dropping, GDP grew at 4.7% in 2011.

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2.4 Defining innovation At ImagineNation™ we define innovation is the result of a COLLISION between different internal programming, perspectives and thought patterns resulting in an explosion of creativity that leads to innovative ideas and solutions!

Author and educator Gary Hamel states that: “Successful innovators have ways of looking at the world that throw new opportunities into sharp relief. They have developed, often by accident, a set of perpetual habits that allow them to pierce the fog of ”what is” and catch a glimpse of “what could be”.” For innovation to result from this collision of “necessity” and “possibility”, it requires a unique mix of conscious awareness (seeing what is really going on), competence (knowledge, skills and experience) and deep courage (risk taking, audacity, boldness, trust, persistence and perseverance).

3. Overview of the innovate like an Israeli (ILI) Model & Learning System 3.1 Background and approach We applied and integrated the learning model and system into a coaching and corporate learning and development methodology that is the culmination of 30 years of corporate consulting experience and 6 years of intense global research and study.

3.2 Developing provocative competence In our programs we initiate intentional and constructive collisions that disrupt the status quo and cultivate peoples “provocative competence”. This enables people to develop, manifest and maximize the “creative intelligence” and “generative capacity” required to be innovative. People learn how to challenge and question existing perspectives, programming and thought patterns in deeply disruptive and provocative ways. This engages people in generative learning which involves;

Linking existing knowledge with divergent and emerging ideas,

Adopting an iterative, rather than prescriptive approach,

Working with a “whole systems” and emergent perspective, by accepting, embracing and “working with” the current situation,

Exploring “what could be” to allow new possibilities and creative opportunities for innovative responses to organizational challenges, to effect change, solve problems and innovate.

There are four generative methodologies that involve developing the innovative leadership and entrepreneurship skills apparent in “lean” start‐ups: 1. Challenging assumptions as well as the status quo to unpack and reframe the systemic issue or problem as a generative challenge and opportunity for innovation. 2. Learning new ways of paying deep attention to see and perceive the world through different lenses resulting in multiple perspectives that create openings and thresholds for innovation. 3. Inquiring by knowing how to ask deep, intentionally disruptive and generative questions, to then deeply observe, reflect, retreat & operate at the generative level where Flow is likely to occur. 4. Debating and using conflict and the potential for conflict, and disagreement and dissent to question, deviate, disrupt and challenge the operating logic, feeling and thinking patterns. The outcomes of this approach create:

Opening of new thresholds and “cracks” in the status quo. People are present to, and open to the possibilities that arise from the integration of their “non local intuition”, reason and imagination. They create a sense of something completely “new”.

Liberation of “out of the box” ideas and solutions that raise the level of thinking. This creates openings that result in “right hand turns” or inflection points that create the shift from “incremental change”to“revolutionary leaps”.

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The space to crystallize a vision for innovation, and development of their innovative business model. Planning processes are fluid and “loose” and enable experimentation and the development of innovative prototypes.

Ultimately people take “right action” and enact plans and embodiment their business brand.

4. Re‐inventing corporate learning to build innovative and entrepreneurial leadership capability Initially, ImagineNation™ was conceived of the desire to re‐invent corporate learning; a multibillion dollar global industry in need of massive re‐invention processes to inspire and engage an emerging generation of Gen Y jobless, managers and leaders.

4.1 Integrating innovative and gamification approaches to corporate learning With “Innovation” as a current “buzzword”, The Boston Consulting Group (BCG) reports in “The Most innovative Companies 2102” that 76% of their respondents rank innovation as a “top three” strategic priority ‐ the highest level in the surveys history! That 85% of CEO’S ranked innovation as a top three priority, with almost 40% ranking it as the top priority, with a strong commitment to increase their investment in innovation. So, how does a company become a consistent innovator? How can they do this by maximizing the qualities of the “lean” Start‐Up to create a new entrepreneurial economy? Discarding most of what we “already knew”, we researched and explored a wide range of options, including enterprise gamification, to create a visceral, provocative and memorable learning experience, which ultimately became “The Start‐Up Game™”; a business simulation to teach innovative leadership and start‐up entrepreneurship to global corporations. We adopted a generative, gamified and experiential approach because it emphasizes “continuous experimentation and feedback in an ongoing examination of the way organizations go about solving problems”. This is aligned to the “lean” start‐up way. As games are often “metaphors for what happens in real life”, learning’s can also be applied and integrated at the individual, team or business levels.

5. Case study examples 5.1 The Start‐Up Game™ The Start‐Up Game™ was born, a co‐creation between Imagine Nation and The Playful Shark, two “lean” Israeli Start‐Ups. It is a one or two day business simulation that is part of a customized organizational learning process that brings innovation management processes "to life“. It aims at developing;

Innovative leadership and start‐up entrepreneurship capability.

An innovative culture of “provocative competence”.

A visceral experience of an innovative business eco‐system.

The key stages of The Start‐Up Game™ are:

Form your executive team ‐ COO, CFO, CTO, CMO.

Face and solve typical Start‐Up business dilemmas.

Solve a problem by choosing a Start‐Up enterprise ‐ water, energy or technology (based on successful Israeli Start‐Up examples).

Deliberate and define your unique value, to earn enterprise funding and reputation points.

Get sponsorship ‐ by pitching your enterprise to the Customer, Board or to VCs in ways that bring the story to life.

Face high gradient business challenges, using the capital you earned from your sponsors and earning reputation points to build your Start‐Up strength.

Take your exit. Fail, merge or monetize the asset you have built and make it attractive to an acquirer.

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Janet Lea Sernack The Start‐Up Game™ is a unique business simulation and is not an off the shelf product. Depending on client need, can be configured and customised to client specific needs to incorporate “real and live” business dilemmas and challenges that can later be developed in companywide “back end” innovation projects. Conclusion There are currently 18,330 books on Amazon under the management and leadership category. This suggests that despite the volume of information and plethora of academic programs globally on these two vital skill sets, there is still a lot to learn about being an effective manager or leader. The paradigm has shifted sharply in what constitutes critical management and leadership education, to meet the needs of our globalized, uncertain, unstable and disruptive world. st The 21 century requires a faster, nimbler and innovative approach to organizational structures and business models. The management and leadership skills sets that will respond and flourish in an emerging and transformative “lean start‐up” world are radically different to those being taught in the majority of cases in corporate learning programs and academic institutions today. Innovative technology already provides us with a range of incredible and inventive non local learning options. These will not eliminate the need for fun, frustration and challenge players experience in engaging and visceral business simulations. These are mandatory factors required to “fail fast to learn quickly”, in safe but challenging ways that transform “theories into actions” and close players “knowing‐doing” gaps. Innovators are not born, they can be made! Possible in the world, possible for me, it’s only a matter of how, and we are global experts in the pragmatic “how” when it comes to developing innovative leaders and start‐up entrepreneurship!

References Blank, S. (May, 2013) Why the lean start‐up changes everything. Harvard Business Review, Spotlight on Innovation http://hbr.org/2013/05/why‐the‐”lean”‐start‐up‐changes‐everything/ Dutta, S. Editor. The 2012 Global innovation Index Report (2012): stronger innovation linkages for global growth.INSEAD. http://www.insead.edu/home/http://www.globalinnovationindex.org/content.aspx?page=past‐reports Dyer, J.H. Gregersen, H. B. Christensen, C. (2011) The Innovators DNA. Harvard Business Review Press, Boston, Massachusetts. Gemmell, R. M. (2012) Entrepreneurial Innovation as a Learning System. Research Paper.

http://learningfromexperience.com/media/2012/06/entrepreneurial‐innovation‐as‐a‐learning‐ system.pdf Hammel, G. (2012) What matters now. Jossey‐Bass. First Edition, San Francisco. Hofstede, G. Hofstede,G. J. Minkov, M.(2010) Cultures and Organizations Revised and expanded third edition, The McGraw‐Hill Companies. Inspire Me UK, Five disruptive Israeli start‐ups and what they're doing right (2013) http://www.inspiresme.co.uk/business‐ technology/finance/five‐disruptive‐israeli‐start‐ups‐and‐what‐they‐re/ Kolb D. (2011) New Directions for Experiential Learning Research: from Style to Process. Consortium for Research on Emotional Intelligence in Organizations, http://www.eiconsortium.org. Moore, J.F. (1993) The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.http://en.wikipedia.org/wiki/The_Death_of_12_Ecosystems Scharmer, O. C. (2009) Theory U ‐ Leading from the future as it emerges. Berrett‐Koehler Publishers Inc, San Francisco. Schein, E.H. (2010) Organizational Culture and Leadership fourth edition, Jossey‐Bass, San Francisco. Senor, D. and Singer, S. (2009) Start‐Up Nation the story of Israel’s economic miracle. Council on Foreign Relations Book, Twelve Boston, Massachusetts. Taylor, A. Wagner, K. Zabit, H. The Boston Consulting Group (BCG) (2012) The Most innovative Companies 201: The State of the Art in Leading Industries.https://www.bcgperspectives.com/innovation_growth Wikipedia http://en.wikipedia.org/wiki/Ecosystem Wikipedia http://en.wikipedia.org/wiki/Business_cluster

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Entrepreneurship as Future Career for Post‐Graduate Business Students: A Realistic Option? Daniel Badulescu and Mariana Vancea University of Oradea, Romania daniel.badulescu@gmail.com mavancea@uoradea.ro Abstract: Entrepreneurship is considered as an important engine for economic development, and assessing attitudes and intentions among young people enjoys special attention. The approach on university education and the place of entrepreneurship in its framework become more and more integrative. Many researchers have investigated entrepreneurial orientation and attitudes among students, and the interest in investigating the case of post‐graduate students in Business could provide deeper insights. Further implications can also be derived, interesting both in shaping public policies to foster entrepreneurship among young people, and developing curricula and improving syllabus as to meet young students’ expectations. We focus in this paper on investigating whether entrepreneurship is effectively considered as career opportunity and how realistic are the self‐assessment and self‐efficacy in this regard. The paper is based on a survey research carried out among post‐graduate students in Business Administration from a public university in Romania. We investigate topics such as: intentions regarding their future employment, opinion on how pursuing master studies in business administration would be beneficial for their future entrepreneurial career, what are their intentions concerning starting a new venture or engaging in other entrepreneurial activities etc. The results will enable us to draw the picture of the entrepreneurial option as future possible career for post‐graduate students and to conclude on the way universities can act to enhance self‐confidence and competencies for better preparing business students for their economic active life. Keywords: post‐graduate students, business education, entrepreneurship, career option

1. Introduction The intentions of graduates entering the ”real life”, i.e. labour market, are diverse; from academic and research careers, to jobs in public or private sector, and finally, establishing and developing own businesses. The link between education and entrepreneurship highlights that an adequate education may foster entrepreneurial intention of an individual, ”since the education offered by a university mostly influences the career selection of students, universities can be seen as potential sources of future entrepreneurs” (Turker & Selcuk, 2009, p. 144). Growing challenges of the "knowledge economy" and the importance of acquiring – through study and education – of management skills, innovation and strategic thinking give a new perspective for the entrepreneurship education in higher education institutions (HEI). According to Smith et al (2001), HEI should be”more pro‐active in providing postgraduates with the opportunity to develop the core competencies they need to succeed in a competitive job market”.

2. Literature review and recent developments Entrepreneurship enjoys a rich literature, examining its nature, the driving motivations and predictors, personality of the entrepreneur, the influence exerted by the economic environment, supportive policies etc. Regarding the critical role of education for a valuable entrepreneurship, researchers tend to focus more on adult entrepreneur, and ignore the case of young people, especially students and graduates. Ang and Hong (2000) compared entrepreneurial spirits of students in Hong Kong and Singapore universities. They focused on the importance of personality characteristics, e.g. risk‐taking propensity, internal locus of control, innovativeness, independence or motivational factors in entrepreneurial process. Henderson and Robertson (2000) explain entrepreneurial interest of students through their personal traits and background (gender, family, experience, educational level, innate characteristics etc.), conditioned by the existence of external favourable factors. Lee et al. (2005) insist on social and cultural factors, pointing that only social status of entrepreneurs might be predicted as a driving factor to start a business, and each social, ethnic or familial context provides a unique cultural set up to foster entrepreneurship. Investigating entrepreneurial attitudes of economist students in five European countries, Volkman and Tokarski (2009) have found remarkable differences, both in the attitude toward entrepreneurship, and in the image of the entrepreneur. While students from Latvia were less tempted to consider themselves as potential

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Daniel Badulescu and Mariana Vancea entrepreneurs, Romanian students share the most positive image of entrepreneurs. At the same time, Romanian students were also the most tempted to consider themselves as (potential) entrepreneurs. Trying to determine what is the real perception of students from Catalonia (Spain) and Puerto Rico (U.S.) on the entrepreneurs within society, and especially how serious is their intention to get involved in entrepreneurial ventures (as a reasonable alternative in future career), Veciana et al (2005) showed that a large majority of students (between 74% and 92%), share a positive perception on new venture desirability, but are more circumspect regarding its feasibility. Although the desirability has increased considerably in recent decades, between 53% and 66% of the surveyed students consider it is much more difficult to manage a firm at present than in the past decades. Authors found a strong correlation between the existence of an entrepreneur in family and the intention to create a new venture. They also reported a positive image of entrepreneur among students, significantly improved compared to the situation two decades ago. According to Mora & Vila (2009), about 7‐8% of the graduates in Europe choose to develop their own business immediately after graduation, and this percentage seems to be higher than the proportion of first degree graduates who work as self‐employers. For Romania the share of individuals having at least post graduate degree and involved in TEA (Total Early‐Stage Entrepreneurial Activity), increased from 11.25% (2007) to 22.75% (2011). At the same time, the entrepreneurs considered as EB (Established Business Owners) having at least a post graduate degree increased from 6.64% (2007) to 13.22% (2011) (Petru, et al., 2011), proving the fast growing entrepreneurial activity in last years.

3. Research design Aiming at investigating relevant issues on the subject of entrepreneurial attitudes, orientation and potential of graduate students, we have conducted an extended survey in February 2013 and developed a sample‐based study. In the present paper we focus on emphasizing students’ opinion on the importance of master studies in Business Administration for facilitating employability, fostering entrepreneurial option, revealing their intentions and specific steps concerning forming new ventures and involving in entrepreneurial activities. Paper and pencil questionnaires were administered to 123 master students in Business Administration (1st and 2nd year) from the public university in Oradea, Romania. Main description of the sample is as follows: Table 1: Description of the sample Occupational status Full time master students Master students, with full‐time job in public sector Master students, with full‐time job in private sector Master students, with part‐time job in private sector Master students, entrepreneurs or self‐ employed

% 33

Gender Males

% 29

Females

Matrimonial status

Single

Married

Residence Cities Small towns Rural areas

% 66 10 24

4. Preliminary results As preliminary results, we will briefly present our main findings concerning the following investigated issues:

4.1 In which sector do you prefer to work after graduation? Half of the respondents (51%) intend to establish a new business or to continue an already existing business, around 28% intend to work in the private sector, as employee, 13% of them prefer to get a job in the public sector, and the rest wants to continue studies through a doctoral program. Compared to their present occupational status, we notice an obvious shift of the graduates’ preferences towards entrepreneurship and public sector, while private sector employability does not seem so attractive. Nevertheless, first we have to remember there are just intentions; second, the flexibility of the private sector, which is able to provide various employment options adequate for students (i.e. jobs for incomplete qualifications, part time and temporary jobs etc.), is not an advantage anymore when it comes to desirability for graduates.

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4.2 Are you interested in an entrepreneurial career? The interest in an entrepreneurial career seems very strong, as 91% of the respondents admitted they are interested in. However, when deepening the analysis, the interest revealed to be strongly declarative. Thus, only 18% of the respondents declared they have ever started a business before, and the survival rate of these firms is quite low: only 6% of the respondents stated their business still works. Although the majority of entrepreneurial intentions haven’t still driven to any effective, functional venture at this moment, we have also investigated the preparatory steps, if any, already undertaken by the respondents. Such preparatory actions would be an adequate proof of the seriousness and effective interest in entrepreneurial career. More than two thirds of the respondents (i.e. 68%) admitted they have not undertaken any action in this regard, while 32% of them declared they have taken some “pre‐entrepreneurial” steps. Figure 1 captures the preparatory actions already undertaken, by grouping them in a logical sequence: finding a business idea; writing a business plan; gathering information for business start‐up; identification of funding sources; possessing an existing prototype or similar. The “trend line” of positive responses is, as expected, decreasing: 40% of the respondents have already found a business idea; half of them have already written a business plan; 39% have gathered information about business start‐up; 28% have identified funding sources, but only 14% of them have already prepared a core structure for the future business.

Source: own calculations, based on the dataset Figure 1: “If you have already undertaken any entrepreneurial steps, which are they specifically? Although the figures are reasonable, we have to consider them with caution and be tempered about their potential to turn, even partially, into real ventures, starting right with the declarative layout, emerged from the previous answers: "business ideas" may be sometimes more a speculation, writing a business plan could be not related to a certain feasible idea, and gathering information may be only vague, without substantiate the business.

5. Preliminary conclusions The attitude of master students in Business Administration towards entrepreneurship, self‐efficacy, capacity to valorise own skills, competencies acquired during studies and to unleash their innovative potential into their own business should be a leading concern in the design of economic and educational policies. Our research has aimed at exploring primary results emerged from a survey‐based research recently conducted among master students in Business Administration. We have investigated their attitudes and actions already undertaken concerning issues such as: entrepreneurship as an alternative in future career, interest in business start‐up, existing entrepreneurial background, and understanding of entrepreneurship realities. We have found a significant interest of master students in Business Administration to use their acquired skills in their future career as employee or entrepreneur. However, our preliminary research revealed also the existence, for a

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Daniel Badulescu and Mariana Vancea significant part of the respondents, of a formal and declarative interest for entrepreneurship, and a superficial knowledge of the realities and requirements of an entrepreneurial career. The limited objectives of our study have not yet allowed us to capture the extent to which HEI could improve the entrepreneurship education within specific Business Administration programmes, as to integrate business and entrepreneurship issues in academic curricula. The success of such approach would lead to a positive impact on social and economic development at local and global level.

References: Ang, S. and Hong, D. (2000) "Entrepreneurial Spirit among East Asian Chinese", Thunderbird International Business Review, 42(3), pp 285‐309. Henderson, R. and Robertson, M. (2000) "Who Wants to Be an Entrepreneur? Young Adult Attitudes to Entrepreneurship as a Career", Career Development International, 5(6), pp 279‐287. Lee, S., Chang, D. and Lim, S. (2005) "Impact of Entrepreneurship Education: a Comparative Study of the US and Korea", The International Entrepreneurship and Management Journal, Volume 1, pp 27‐43. Mora, J. and Vila, L. (2009) "Some facts behind graduate’s entrepreneurship in Europe", Revista de Economica, Volume 35, 3, pp 147–164. Petru, T.‐P. et al. (2011) Entrepreneurship in Romania. 2011 Country Report, Global Entrepreneurship Monitor. Smith, A. et al. (2010) One Step Beyond: Making the most of postgraduate education, Department for Business Innovation and Skills. Turker, D. and Selcuk, S. S. (2009) "Which Factors Affect Entrepreneurial Intention of University Students?:, Journal of European Industrial Training, 33(2), pp 142‐159. Veciana, J. M., Aponte, M. and Urbano, D. (2005) "University Students’ Attitudes Towards Entrepreneurship: A Two Countries Comparison", International Entrepreneurship and Management Journal, Volume 1, pp 165‐182. Volkmann, C. K. and Tokarski, K. O. (2009) "Student Atitude to Entrepreneurship", Management & Marketing, vol. 4, nr. 1, pp 17‐38.

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How Strategic and Social Entrepreneurship can Create Sustainable Economic and Social Value: A Proposed Model for the Cooperative Sector Vítor Figueiredo and Mário Franco Department of Management and Economics, University of Beira Interior, Covilhã, Portugal vitor.mpfigueiredo@gmail.com mfranco@ubi.pt Abstract: The purpose of this paper is to deliver new insights into how the success of cooperatives and their social mission depends on carrying out actions of strategic and social entrepreneurship, and that this performance is influenced by the satisfaction of their cooperators. To achieve this goal, we propose a model which shows how entrepreneurship can create economic value in this type of social firm. However, the newly developed conceptual model has not been empirically validated. In terms of guidelines for future research, this topic should be addressed by collecting information to expand the conceptual model presented here. Keywords: entrepreneurship, cooperative sector, strategic and social entrepreneurship, satisfaction, Portugal

1. Introduction In a global and highly competitive market and at a time of crisis such as the one being experienced in the European Union, firms operate in extremely challenging environments (Ireland and Webb, 2009). In this context, social enterprises have been seen as solutions for local development, instruments of cooperation among citizens, organizations and local, regional, national and European representatives, through business organizations and practices (Matei and Matei, 2012; Steinerowski, 2012). This firm sector is a form of society reacting to the growing social and economic problems currently faced (Quintão, 2004). Nevertheless, the situation of these structures is distinct and varies from country to country and from region to region, in Europe (Perista and Nogueira, 2004; Lyons, 2003; Defourny and Nyssens, 2010). In Portugal, cooperatives are [a form of social firm] being institutionalized and of great relevance in economic and social terms (Perista and Nogueira, 2004). In addition, cooperatives are fundamental in fighting the unemployment affecting local economies and depressed areas, due to their geographical spread and presence in all the country’s local authorities. Data from 2009 show that the Portuguese cooperative sector has 2.390 cooperatives, distributed over the whole country, accounting for 51.391 direct jobs and involving a universe of 1.353.107 cooperators, corresponding in economic terms to 4,8% of GNP, 1,3% of employment in Portugal and involving 12,7% of the total population (CASES, 2012). The specificities of cooperatives as social enterprises, or tertiary sector, hybrids between association and firm, by acting according to market laws in order to also reach social objectives, means their entrepreneurial aspect cannot be neglected, with the need for continuous identification, exploration and development of new business opportunities and competitive advantages. At a time when sources of income outside the business sphere (donations, patronage, voluntarism, sponsorship) are increasingly hard to come by to finance the social mission of this type of organization, it becomes relevant for cooperatives to strengthen and develop their entrepreneurial attitude, usually studied and associated with the business context (Ireland et al. 2001; Hitt et al. 2001; Weerawardena and Mort, 2006; Steinerowski, 2012). It is therefore worth looking at this form of organization in more detail, attempting to understand their business configuration for the obtainment of economic and social wealth. In spite of the opportunities associated with this topic, there is only limited theoretical and empirical evidence of the entrepreneurial and social process in the cooperative sector. In fact, their specific characteristics make the entrepreneurship phenomenon more difficult than it is in other contexts. Consequently, the objective of our study is precisely to propose an integrative model which allows us to understand how strategic and social entrepreneurship can create sustainable economic and social value.

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Vítor Figueiredo and Mário Franco In these circumstances, this study aims to answer the following question: How do cooperatives operate socially and strategically to guarantee their sustainability and fulfil their social mission? It is also pertinent to understand the structural and process factors that can influence cooperatives’ results and consequently influence their success. For this, our proposed model is based on a combined perspective where strategic and social entrepreneurship are the ideal forms to obtain sustainable value, wealth and performance. Therefore, cooperatives should develop a balance of entrepreneurial and strategic actions with a view, on one hand, to exploiting new market opportunities, and on the other, to developing competitive advantages.

2. Literature review 2.1 Cooperatives and their particularities Cooperatives, as defined by Namorado (2007): (1) are a synthesis of association and firm; (2) they are based on cooperation and mutual help from their members; (3) internal democracy and participation are adopted as determinants; (4) they are not for profit; (5) they try to respond to needs and aspirations which may be economic, social or cultural; (6) they are autonomous and independent with regard to any power focus appearing from outside; (7) they have variable capital and compositions; and (8) they have a legal form. This particularity of being a mix between firm and association, operating in the tertiary sector, in that of social enterprise, gives them the “statute” of a form of social entrepreneurship, as considered by various authors (Mair and Martí, 2006; Peredo and McLean 2006; Zografos, 2007; Zahra et al, 2009; Matei and Matei, 2012). This sector groups both for‐profit and non‐profit making initiatives, where the existence of commercial business serves as a means to finance social activities, aiming to alleviate or solve problems and promote social transformation through satisfying the needs of their populations. This, whether through creating new business or managing that what already exists, but in an innovative way. Jerónimo Teixeira, president of CONFECOOP – Confederation of Cooperatives, summarizes as follows the social and economic function of Portuguese cooperatives: “Ways of doing business that are based on the person – their main reason for being, in cooperation, collaboration and solidarity – their behaviour according to democracy, freedom to join, autonomy, independence and interest in the community/social responsibility – their guiding principles” (Teixeira, 2012). In this context, social entrepreneurship intends to solve social problems where these exist, often substituting the State itself in the provision of goods and services which otherwise would not be available to people, especially the most disadvantaged groups. To develop their social mission, social firms and entrepreneurs have to innovate, associating non‐profit making activities of a social nature with profitable and innovative ways of obtaining income, to ensure the sustainability and viability of their social mission (Peredo and McLean, 2006; Quintão, 2004; Zahra et al. 2009; Zografos, 2007; Steinerowski, 2012). One way of ensuring the sustainability of cooperatives, as social enterprises, is by implementing actions of strategic entrepreneurship, since this is a concept that allies strategic management to entrepreneurship (Ireland et al., 2001; Hitt et al., 2001; Luke et al. 2011) through the use of processes and tools that allow firms to exploit new market opportunities and develop competitive advantages (Ireland and Webb, 2007). Another form of sustainability is through network action by cooperatives in certain places or sectors of activity. Namorado (2007: p.1), in this connection, claims that “cooperation must be highlighted as the axis of organizations at the forefront of the modern cooperative movement.” Cooperatives, just as firms operating in the market, need to increase their competitiveness (Ireland and Webb, 2007, 2009; Luke et al., 2011) and create wealth (Ireland et al., 2001; Hitt et al., 2001; Webb et al. 2010). Competitiveness is achieved through correct management and allocation of constantly limited resources, balancing the current needs of the firm [cooperative], with its future needs (Ireland and Webb, 2009).

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Vítor Figueiredo and Mário Franco To create wealth through entrepreneurial and strategic actions, organizations have available a set of tools, possible domains of strategic entrepreneurship (Ireland et al. (2001; Hitt et al.(2001): (i) innovation – creation and implementation of ideas; (ii) networks – providing access to resources; (iii) internationalization – rapid adaptation and expansion; (iv) organizational learning – knowledge transfer and resource development; (v) growth – stimulating success and change; and (vi) top management teams and governance – ensuring effective selection and implementation of strategies. This study aims to check empirically if these principles and tools also apply to cooperatives and with what results. In addition, we argue that these outputs are affected or influenced by structural and process factors (Lui and Ngo, 2005; Franco, 2011) of the relationships between cooperating parties, and their degree of satisfaction will influence positively or negatively the actions of strategic entrepreneurship carried out by cooperatives, therefore influencing the creation of wealth and the performance of the cooperative itself. Our model also intends to show that the wealth created and performance levels can also influence positively the satisfaction of cooperators, demonstrated through a greater appetite for strategic undertakings. Therefore, to optimize these tools, in order to create wealth and better performance, cooperators must feel satisfied with their relationships both inside and outside the cooperative.

2.2 An Integrated conceptual model for the cooperative sector According to our proposed integrated model (Figure 1), (social and strategic) entrepreneurship embodies the ideal way to obtain wealth and performance. For this, cooperatives must balance development of entrepreneurial and strategic actions, with a view, on one hand, to exploiting new market opportunities, and on the other, developing competitive advantages. These actions are implemented in the six domains defined by Ireland et al. (2001) and Hitt et al. (2001): innovation, networks, internationalization, organizational learning, growth and top management teams and governance. However, these outputs can be affected or influenced by structural and process factors of the relationships between cooperators and their degree of satisfaction can also have a positive or negative influence on the entrepreneurial actions carried out by cooperatives, so influencing wealth creation and the performance of the very cooperative.

Figure 1: Model of social and strategic entrepreneurship to obtain wealth and performance

3. Contributions and implications The aim of this study is to contribute to enriching the literature on the relationships formed within cooperatives, how these are organized, what actions are carried out to create wealth and performance and how these affect and are affected by cooperator satisfaction. By understanding the types of relationships formed in cooperatives and the results achieved (in satisfaction, wealth and performance), it will be possible to try to find patterns of behaviour and actions which, when

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Vítor Figueiredo and Mário Franco implemented, can help or hinder their growth. In addition, this study will allow comparisons to be made about what types of actions should be developed by cooperatives in the same sector of activity, and the behaviour to be adopted by cooperators for success. With the model proposed here, it can be seen which actions best result in wealth creation and performance, in this way helping cooperatives to better fulfil their mission and contribute to the economic and social development of the communities they are part of. In spite of a considerable body of literature on entrepreneurship in general, our paper represents one attempt to better understand strategic and social entrepreneurship for the creation of sustainable economic and social value in the cooperative sector. As a result, our study may help managers and cooperative partners to better understand the importance of an integrated approach to strategic and social entrepreneurship and their relationship with entrepreneurial performance. Finally, the newly developed conceptual model has not been empirically validated. In terms of guidelines for future research, this topic should be addressed by collecting information to expand the conceptual model presented here.

References CASES (2012). Os números do cooperativismo em Portugal, disponível em http://www.cases.pt, acedido em 23/01/2013 22:00. Defourny, J., Nyssens, M., (2010). Social enterprise in Europe: At the crossroads of market, public policies and third sector, Policy and society, 29, 231 – 242. disponível em http://www.aps.pt/cms/docs_prv/docs/DPR4616dcd72e64e_1.pdf, acedido em 28/12/2012_16:50. Franco, M. (2011). Determining factors in the success of strategic alliances: An empirical study performed in Portuguese firms, European Journal of International Management, 5 (6), 608‐632. Hitt, M. A., Ireland, R. D, Camp, S. M., Sexton, D. L. (2001). Guest Editors’ introduction to the special issue strategic entrepreneurship: Entrepreneurial strategies for wealth creation, Strategic Management Journal, 22, 479 – 491. Ireland, R. D., Hitt, M. A., Camp, S. M., Sexton, D. L., (2001). Integrating Entrepreneurship and strategic management actions to create firms wealth, The Academy of Management Executives, 15 (1), 49 – 63. Ireland, R. D., Webb, J. W. (2007). Strategic entrepreneurship: Creating competitive advantage through streams of innovation, Business Horizons, 50, 49 – 59. Ireland, R. D., Webb, J. W. (2009). Crossing the great divide of strategic entrepreneurship: Transitioning between explorations and exploitation, Business Horizons, 52, 469 – 479. Lui, S. S., Ngo, H. (2005). The Influence of Structural and Process Factors on Partnership Satisfaction in Interfirm Cooperation, Group & Organization Management, Vol. 30, No.4, 378‐397. Luke, B., Kearins, K., Verreynne, M. (2011). Developing a conceptual framework of strategic entrepreneurship, International Journal of Entrepreneurial Behaviour & Research, 17 (3), 314 – 337. Lyons, M. (2003). Book Reviews: The Emergence of Social Enterprise, Carlo Borgaza and Jacques Defourny (eds.), Routledge, London, 2001, 400 pp, in Voluntas: International Journal of Voluntary and Nonprofit Organizations, 14 ( 2), 241 – 243. Mair, J., Marti, I. (2006). Social entrepreneurship research: A source of explanation, prediction, and delight, Journal of World Business, 41, 36 – 44. Matei, L. Matei, A. (2012). The social enterprise and the social entrepreneurship – instruments of local development. A comparative study for Romania, Procedia – Social and Behavioral Sciences, 62, 1066 – 1071. Namorado, R. (2007). Cooperativismo – História e Horizontes, Oficina 278, Centro de Estudos Sociais: Faculdade de Economia de Coimbra. Peredo, A. M., Mclean, M. (2006). Social entrepreneurship: A critical review of the concept, Journal of World Business, 41, 56 – 65. Perista, H.; Nogueira, S. (2004). Empresas sociais em Portugal: Uma breve análise com base em estudos de caso, Actas dos ateliers do Vº Congresso Português de Sociologia, 1, 31 – 41, Quintão, C. (2004). Seminário “Trabalho Social e Mercado de Emprego”, Painel Políticas sociais e Mercado de Emprego, Universidade Fernando Pessoa, Faculdades de Ciências Humanas e Sociais, Porto, 28 de Abril de 2004. Steinerowski, A. (2012). Can social enterprise contribute to creating sustainable rural communities? ‐ Using the lens of structuration theory to analyse the emergence of rural social enterprise. Local Economy, 27(2), 167–182. Webb, J.W., Ketchen Jr., D. J., Ireland, R. D. (2010), Strategic entrepreneurship within family‐controlled firms: Opportunities and challenges, Journal of Family Business Strategy, 1, 67 – 77. Weerawardena, J., Mort, G. S. (2006). Investigating social entrepreneurship: a multidimensional model, Journal of World Business, 41, 21 – 35. Zahra, S., Gedajlovic, E., Neubaum, D., Shulman, J. (2009). A typology of social entrepreneurs: Motives, search processes and ethical challenges. Journal of Business Venturing, 24, 519 – 532. Zografos, C. (2007). Rurality discourses and the role of the social enterprise in regenerating rural Scotland, Journal of Rural Studies, 23, 38 – 51. Teixeira, J. (2012). O Movimento Cooperativo em Portugal no Ano Internacional das Cooperativas, Seara Nova.Disponível em www.confecoop.com, aceded in ido01/03/2013_23:58.

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Exploring the Social Dimension of Entrepreneurial Resourcefulness: A Case Study Among Family Business Entrepreneurs Bart Henssen Hogeschool Universiteit Brussel (HUB), Department of Business Science, Belgium bart.henssen@hubrussel.be Abstract: In current times of economic crisis some entrepreneurs seem to succeed better than others to manage their scant resources and to deploy them in a creative, resourceful manner (Baker & Nelson, 2005). Literature suggests that the latter entrepreneurs are being entrepreneurial resourceful. Little is known however, about how exactly entrepreneurial resourcefulness works. In search for a better understanding, we focus on the social dimension of entrepreneurial resourcefulness which received little attention. The latter we define as the relational inter‐ and intra‐organization ties that contribute to the entrepreneurs’ ability to identify and seize the opportunity for the benefit of the organization (Misra & Kumar, 2000). This social dimension may be of particular importance because relationships are building blocks of the organization and in family firms even more so. Family firms are characterized by involvement of family in the business and they have both productive and destructive relationships among (non‐) family members (Dyer, 2003). Family firms also often show remarkable entrepreneurial behavior (Craig & Salvato, 2012). They may therefore provide valuable information on the social dimension of entrepreneurial resourcefulness. Following, the aim of this paper is to shed light on how organizational relationships contribute to entrepreneurial resourcefulness. We utilize case‐study data from interviews with 36 family business entrepreneurs. We provide some preliminary findings: Our results confirm that family business entrepreneurs build strong internal and external relationships; Our results suggest that the quantity of intra‐organizational relationships is related to the extent of opportunities available to the entrepreneur; Our results suggest that the quality of intra‐organizational relationships is the most defining element for entrepreneurial resourcefulness. This paper offers deeper insight into the essence of entrepreneurial resourcefulness. This paper also contributes to knowledge on the interactions in family businesses between an owning family on the one side, and internal and external business stakeholders on the other side (Gersick, 1997). Keywords: entrepreneurial resourcefulness, family firms, organizational relationships

1. Theoretical background In current times of economic crisis entrepreneurs are being confronted with substantial resource constraints. Such constraints constitute substantial challenges for the functioning and profitability of the firm (e.g., Baker, Miner, & Eesley, 2003). However, some entrepreneurs seem to succeed better than others to manage their scant resources and to deploy them in a creative, resourceful manner (Baker & Nelson, 2005). Literature suggests that the latter entrepreneurs are being entrepreneurial resourceful. Entrepreneurial resourcefulness is defined as ‘the ability to identify opportunities in the environment and regulate and direct behaviour to successfully cope with the task of creating and managing an organisation to pursue the opportunity‘(Misra & Kumar, 2000: 144). According to Powel and Baker (2011: 378) its core lies in the ‘patterned variation in making use of limited resources.’ Little is known however, about how exactly entrepreneurial resourcefulness works. In search for an understanding of entrepreneurial resourcefulness our focus lies on the social dimension of entrepreneurial resourcefulness which received little attention. A social dimension of entrepreneurial resourcefulness we define as the relational inter‐ and intra‐organization ties that contribute to the entrepreneurs’ ability to identify and seize the opportunity for the benefit of the organization (Misra & Kumar, 2000; Bandura, 2001). This social dimension may be of particular importance because relationships are building blocks of the organization and in family firms even more so (Nahapiet & Ghoshal, 1998; Dyer, 2003; Kets de Vries, 1996). Family firms are among the most common businesses in countries around the world (IFERA, 2003). They contribute significantly to worldwide economic production and development, employment and wealth creation and often show remarkable entrepreneurial behavior (Craig & Salvato, 2012). Family firms are characterized by involvement of family in the organization and they have both productive and destructive relationships among (non‐) family members (e.g., Dyer, 2003; Kets de Vries, 1996). Relationships for the family firm can be a unique resource base of physical, human, and social capital, but also of nepotism and interpersonal conflicts (Dyer, 2003). For example, strong family relationships may lead to organizational

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Bart Henssen advantages relative to nonfamily firms (Pearson et al., 2008). The recognition and seizing of opportunities is one of them (Aldrich & Cliff, 2003). When it comes to organizational relationships it is known from literature and practice that family business entrepreneurs tend to build extensive networks with their stakeholders, both inside and outside the family firm (Arrègle et al., 2007; Miller & Le Breton‐Miller, 2005; Steier, 2001). The importance of external networks for family businesses has been recognized by literature (Anderson et al., 2005; Arrègle et al., 2007; Miller & Le Breton‐Miller, 2005). According to Miller et al. (2009) family firms develop deeper, more extensive relationships with outside stakeholders than non‐family businesses, and these close ties provide the family firm with valuable professional advice, information and external financing. They therefore may be apt to invest in external relationships more deeply to assure family firm’s success and survival (Miller et al., 2009: Miller & Le‐Breton‐Miller, 2005). Family business literature thus shows the importance of external networks, of intra‐organizational network and the connection between them. The uniqueness of a family firm, however, seems to lie in combining strong external networks with close intra‐organizational networks (Henssen, 2012). In this paper our attention goes to the role of the entrepreneur in intra‐organizational relationships. From literature it becomes clear that intra‐organizational relationships play an important role in the family businesses (cf.supra). However, it is less clear how these relationships contribute to the recognition and seizing of opportunities by family business entrepreneurs. The aim of our paper is to provide insight on how organizational relationships contribute to family business entrepreneurs’ ability to identify opportunities, to seize opportunities, and to steer their organization to pursue the opportunity (i.e., to being entrepreneurial resourceful). We focus hereby on intra‐ organizational relationships since they are the most defining example of the overlap between family and business systems. This overlap constitutes the essence of a family firm (Gersick, 1997).

2. Research question Following from the above, our research question is: ‘How do intra‐organizational relationships contribute to the ability of family business entrepreneurs to identify and seize the opportunity and steer their organization to pursue the opportunity (i.e., to be entrepreneurial resourceful)?’

3. Methodology To find an answer to our research question, we chose a case study approach (Yin, 1981). According to Yin (1981: 59) ‘as a research strategy, the distinguishing characteristic of the case study is that it attempts to examine a contemporary phenomenon in its real‐life context, especially when especially when the boundaries between phenomenon and context are not clearly evident.’ Since we were interested in the (real‐life) processes involved in entrepreneurial resourcefulness a case study provided for an appropriate research strategy. We used case‐study data from interviews with 36 family business entrepreneurs. Family businesses entrepreneurs were being selected, because they often show remarkable entrepreneurial behavior in light of expansion and survival of their firm (e.g., Sharma et al., 2004; Chua et al., 1999). Our data are being analyzed in a two‐stage process. In a first stage, data from the 36 interviews is being analyzed through abductive reasoning to explore the connection between intra‐organizational relationships and entrepreneurial resourcefulness. In this we follow the guidelines for qualitative research analysis (Yin, 1981). In a second stage, our findings are being refined and expanded, by paying attention to temporal, spatial and situational influences that can play a part in our findings.

4. Preliminary results

Our results confirm that family business entrepreneurs build strong internal and external relationships;

Our results suggest that the quantity of intra‐organizational relationships is related to the extent of opportunities available to the entrepreneur;

Our results suggest that the quality of intra‐organizational relationships is the most defining element for the recognition and seizing of opportunities and for managing the organization to pursue the opportunity, thus for connecting intra‐organizational relationships with entrepreneurial resourcefulness. The core of

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Bart Henssen the quality of relationships is their nature of mutuality, reciprocity, ‘joint‐ness’ or co‐ownership, openness, and a mutual creation of energy or continuing motivation (Bouwen, 2001; Lambrechts et al., 2009).

5. Contributions The preliminary findings in this paper offer deeper insight into the essence of entrepreneurial resourcefulness and into the dynamics of intra‐organizational entrepreneurial networks. The preliminary findings in this paper also contribute to knowledge on the interactions in family businesses between an owning family on the one side, and internal and external business stakeholders on the other side (cf. Gersick, 1997).

References Aldrich, H.E., and Cliff, J.E. (2003) “The pervasive effects of family on entrepreneurship: Toward a family embeddedness perspective” Journal of Business Venturing, Vol 18, No. 5, pp 573‐596. Anderson, A.R., Jack, S.L., and Dodd, S.D. (2005) “The role of family members in entrepreneurial networks: Beyond the boundaries of the family firm”, Family Business Review, Vol 18, No. 2, pp 135‐154. Arrègle, J., Hitt, M.A., Sirmon, D.G., & Very, P. (2007) “The development of organizational social capital: Attributes of family firms”, Journal of Management Studies, Vol 44, No.1, pp 73‐95. Baker, T. and Nelson, R. E. (2005) “Creating something from nothing: Resource construction through entrepreneurial bricolage”, Administrative Science Quarterly, Vol. 50, pp 329‐366. Baker, T., Miner, A. S., and Eesley, D. T. (2003). Improvising firms: Bricolage, account giving and improvisational competencies in the founding process. Research Policy, Vol.32, No.2, pp 255. Bandura, A. (2006) “Toward a psychology of human agency”, Perspectives on Psychological Science, Vol 1, No 2, pp 164‐ 180. Bouwen, R. (2001) “Developing relational practices for knowledge intensive organizational contexts”, Career Development International, Vol 6, pp 361‐369. Chua, J. H., Chrisman, J. J., and Sharma, P. (1999) “Defining the family business by behavior”, Entrepreneurship Theory & Practice, Vol 23, No 4, pp 19–39. Craig, J. and Salvato, C. (2012) “The Distinctiveness, design, and direction of family business research: Insights from management luminaries”, Family Business Review, Vol 25, No 1, pp 109‐116. Dyer, W.G. (2003) “The family: The missing variable in organizational research”, Entrepreneurship Theory & Practice, Vol 27, No 4, pp 401–416. Frank, H., Kessler, A., Nosé, L., and Suchy, D. (2011) “Conflicts in family firms: State of the art and perspectives for future research”, Journal of Family Business Management, Vol 1, No 2, pp 130‐153. Gersick, K.E., Davis, J.A., McCollom Hampton, M., and Lansberg, I. (1997) Generation to generation – Life cycles of the family business, Harvard Business School Press, Boston. Henssen, B. (2012). ‘Mine’ or ‘Ours’? Perspectives on Psychological Ownership in Family Firms. Doctoral dissertation. Diepenbeek: Universiteit Hasselt (KIZOK), 216 p. IFERA (2003). Family Businesses Dominate. Family Business Review, Vol 16, No.4, pp 235‐239. Kets de Vries, M.F.R. (1996). Human dilemmas in the family firm. International Thomson Business Press Lambrechts, F., Koiranen, M., & Grieten, S. (2009) “Co‐creating psychological ownership for the changing family firm. Applying a relational practice perspective”, Paper read at the 9th IFERA World Family Business Research Conference, Limassol, Cyprus, June. Miller, D. and Le Breton‐Miller, I. (2005). Managing for the long run. Lessons in competitive advantage from great family businesses. Harvard Business School Press, Massachusetts. Miller, D., Lee, J., Chang. S. and Le Breton‐Miller, I. (2009). ”Filling the institutional void: The social behavior and performance of family versus non‐family technology firms in emerging markets”, Journal of International Business Studies, Vol 40, No.5, pp 802‐817. Misra, S. & Kumar, E.S. (2000) ”Resourcefulness: A proximal conceptualisation of entrepreneurial behaviour”, Journal of Entrepreneurship, Vol 9, No.135. Nahapiet, J. & Ghoshal, S. (1998) “Social capital, intellectual capital, and the organizational advantage”, Academy of Management Review, Vol 23, No.2, pp 242‐266. Pearson, A.W., Carr, J.C., and Shaw, J.C. (2008) “Toward a theory of familiness: A social capital perspective”, Entrepreneurship Theory & Practice, Vol 32, No.6, pp 949‐969. Powell, E. & Baker, T. (2011) “Beyond making do: Toward a theory of entrepreneurial resourcefulness”, Frontiers of Entrepreneurship Research, Vol 31, No.12, Article 2 Sharma, P. (2004) “An overview of the field of family business studies: Current status and directions for the future”, Family Business Review, Vol 17, No.1, pp 1‐36. Steier, L. (2001) “Next‐generation entrepreneurs and succession: An exploratory study of modes and means of managing social capital”, Family Business Review, Vol 14, No.3, pp 259‐276. Yin,R.K. (1981) “The case study crisis: Some answers”, Administrative Science Quarterly, Vol 26, No.1, pp. 58‐65.

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Dragging One's Feet Along the way: How (In)Congruent Motives Influence Entrepreneurial Performance Julie Hermans University of Namur, Department of economics, Namur, Belgium julie.hermans@fundp.ac.be Abstract: The mechanisms that allow entrepreneurs to set and realize goals are still largely unknown (Hessels et al. 2008; Stenholm 2011). Especially, recent calls urge for the (re)opening of the entrepreneurial minds and its motivations. In this short paper, we follow the humanistic approach (Code and Langan‐Fox 2001) of human motivation which focuses on the congruence between explicit and implicit motivational systems and builds on the modern psychology of motivations. Keywords: motivational system, achievement, implicit motives, performance

1. Motivational systems Motivations are defined as internal states that impel people to goal‐directed action (Brody and Ehrlichman 1997). They are capacities to experience specific types of incentives as rewarding and others as aversive (Atkinson 1957). Since the fifties, psychology scholars have focused on three main motives (Schultheiss et al. 2010): the need for achievement (Ach), the need for Power (Power) and the need for affiliation (Aff), sometimes distinguished from the need for intimacy (Winter 1991). Individuals high in Ach enjoy mastering complicated tasks and seek for excellence. People with a strong power disposition enjoy having an (emotional, physical or social) impact on others and the world in general. Finally, the need for affiliation is the need for establishing, maintaining, and restoring warm relationships with others (Winter 1991; Brody and Ehrlichman 1997). Modern psychology recognizes the co‐existence of explicit (conscious) and implicit (unconscious) motivational systems working separately and tapping unique source of variance (Schultheiss et al. 2009). Especially, explicit and implicit systems have different impacts in terms of behavioral tendencies (McClelland et al. 1989; Brunstein and Schmitt 2004; Kehr 2004; Schultheiss et al. 2009). On the one hand, implicit motives « push » individuals : source of energy, they are aroused by the factors that are intrinsic to the (entrepreneurial) activity (Ryan and Deci 2000; Kehr 2004). As such, implicit motives are more likely to predict general performance and success over time (McClelland et al. 1989; Winter 1991). On the other hand, explicit motives « pull » individuals : they are closely related to the development of goals (Brunstein et al. 1998; Kehr 2004) This literature suggests that motivational systems are not necessarily aligned. Recent contributions (Thrash et al. 2007; Schultheiss et al. 2009) even show that their independence holds even when commensurable measures of implicit and explicit motives are used. Nonetheless, they have important interactions (Brunstein and Maier 2005). When they are incongruent, people might experience performance deficits as well as physical and emotional distress (Kehr 2004; Schultheiss et al. 2011). By contrast, system congruence energizes behavioral tendencies : explicit motives provide the energy which is channeled by the aligned explicit motives and subsequent goals (McClelland et al. 1989). In entrepreneurship research, human motivation has been integrated into the study of “personality traits”. Unfortunately, little difference between entrepreneurs and managers on these dimensions has been confirmed, leading to disappointingly inconclusive results (Busenitz and Barney 1997) and to the gradual demise of this field, human motivations included. However, some researchers argue that time might be ripe for a renaissance in entrepreneurship. Especially, van Witteloostuijn (2012) argues that “prior work took a wrong turn (1) by ignoring deeper differences between explicit and implicit motives, (2) by failing to use the appropriate advanced measurement instruments, (3) by being biased to one specific need only (achievement), (4) by missing the key issue of motivational congruence”. Concurrently, other researchers call for new motivational research (Shane et al. 2003; Carsrud and Brännback 2009; Carsrud and Brännback 2011), in particular the study of unconscious motives (Latham and Locke 2007; Locke and Baum 2007) and the influence of (in)congruent explicit and implicit motives (Brandstätter 2011).

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2. Preliminary models We briefly present two preliminary models for the study of motivational systems in entrepreneurship research. Because explicit and implicit systems work independently, we developed separate models. However, as suggested above, explicit and implicit systems interact, notably through their (in) congruence. As a result, the first model provides two important inputs for the second model: implicit‐explicit system congruence and motives‐goal congruence (alignment of explicit motives and entrepreneurial goals). Explicit motives are closely related to the development of goals which have subsequently gained attention in motivational research (Locke and Latham 2002; Carsrud and Brännback 2011). Goals are mental representations of what the future could be, enabling individuals, such as entrepreneurs, not to give up (Perwin 2003) and to organize their venture. In this model, we focus on organizational goals (Figure 1). Firstly, assuming that employment creation, sales growth and innovation are associated with prestige, we expect that people high in power will emphasize such goals through their venture. Especially, strong power disposition might be positively linked to innovativeness as innovation allows bringing changes to the world (van Witteloostuijn 2012). Secondly, we expect people with high affiliation disposition to focus on goals such as taking care of the employee. Furthermore, individuals high in Aff seek to avoid interpersonal conflicts, which may, at times, lead them to behave in ways that are at odds with other goals such as profitability. Finally, people high in achievement will emphasize goals such as being profitable, achieve sales growth and internationalize. However, because people high in achievement set goals which they think are accessible (Weiner 1980; Brody and Ehrlichman 1997), the relationship between explicit need for Achievement and those goals might be hill‐shaped (van Witteloostuijn 2012). The link between explicit motives and goal setting is contingent upon the presence of relevant incentives in the entrepreneur’s personal, organizational and external environment. In particular, we expect self‐efficacy and perceived opportunities to moderate the link between explicit motives and goals. Combined with self‐ efficacy (Bandura 1977) and perceived opportunities, explicit motives defines what the individual thinks he can achieve (Kehr 2004).

Figure 1: Explicit motives and their impact on organizational goal setting In the second model, we expect that system congruence energizes behavioral tendencies. As suggested by the humanistic paradigm (Code and Langan‐Fox 2001), congruence will impact long‐term performance of the entrepreneur and his general satisfaction. Motives‐goals congruence at the conscious level should also influence performance (Code and Langan‐Fox 2001), especially if self‐attributed, which in turn affect general satisfaction.

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Julie Hermans Because congruence can be predicted by specific individual‐level variables (Thrash et al. 2007), we control for those. First, high self‐awareness (“what I know about me”) is expected to smooth the alignment of known explicit motives with entrepreneurial goals. Other variables operating at the conscious level might shape the explicit‐implicit congruence, such as self‐monitoring and preference for consistency (Thrash et al. 2007). For instance, high self‐monitoring will enhance the alignment of explicit goals with groups’ expectations and standards (Schultheiss and Brunstein 2005) and thereby lessen implicit‐explicit congruence. Finally, body consciousness has been found as an interesting predictor of implicit‐explicit congruence (Thrash et al. 2007) and is thereby included in our model.

Figure 2: Congruence and entrepreneurial performance

3. Conclusion Motivational research is ripe for a renaissance in entrepreneurship and innovation. We develop preliminary models connecting the cognitive approach (model 1), which is focused on information processing and the way in which motivational thoughts are transformed into actions, with the humanistic approach (model 2) of human motivations. As a limitation, we acknowledge that such models lack deepness from a strategic viewpoint as we do not investigate how motives and goals are translated into strategic actions. A better understanding of the interplay between implicit and explicit motives should bring light to why we sometimes struggle to reach the goals we voluntarily set. While important for entrepreneurship and innovation research, it might also appeal to practitioners and academics alike who strive to set and realize ambitious goals.

References Atkinson, J. W. (1957). "Motivational determinants of risk‐taking behavior." Psychological Review 64(6p1): 359. Bandura, A. (1977). "Self‐efficacy: toward a unifying theory of behavioral change." Psychological Review 84(2): 191. Baum, J. R. and E. A. Locke (2004). "The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth." Journal of Applied Psychology 89(4): 587‐598. Brandstätter, H. (2011). "Personality aspects of entrepreneurship: A look at five meta‐analyses." Personality and Individual Differences 51(3): 222‐230. Brody, N. and H. Ehrlichman (1997). Personality psychology: The science of individuality, Prentice Hall. Brunstein, J. C. and G. W. Maier (2005). "Implicit and self‐attributed motives to achieve: Two separate but interacting needs." Journal of Personality and Social Psychology 89(2): 205‐222. Brunstein, J. C. and C. H. Schmitt (2004). "Assessing individual differences in achievement motivation with the Implicit Association Test." Journal of Research in Personality 38(6): 536‐555. Brunstein, J. C., O. C. Schultheiss and R. Grässman (1998). "Personal goals and emotional well‐being: The moderating role of motive dispositions." Journal of Personality and Social Psychology 75(2): 494.

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Julie Hermans Busenitz, L. W. and J. B. Barney (1997). "Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision‐making." Journal of Business Venturing 12(1): 9‐30. Carsrud, A. and M. Brännback (2011). "Entrepreneurial Motivations: What Do We Still Need to Know?" Journal of Small Business Management 49(1): 9‐26. Carsrud, A. L. and M. Brännback (2009). Understanding the entrepreneurial mind: opening the black box, Springer Verlag. Code, S. and J. Langan‐Fox (2001). "Motivation, cognitions and traits: predicting occupational health, well‐being and performance." Stress and Health 17(3): 159‐174. Hessels, J., M. van Gelderen and R. Thurik (2008). "Entrepreneurial aspirations, motivations, and their drivers." Small Business Economics 31(3): 323‐339. Kehr, H. M. (2004). "Integrating implicit motives, explicit motives, and perceived abilities: The compensatory model of work motivation and volition." The Academy of Management Review: 479‐499. Latham, G. P. and E. A. Locke (2007). "New developments in and directions for goal‐setting research." European Psychologist 12(4): 290‐300. Locke, E. A. and J. R. Baum (2007). Entrepreneurial Motivation. The pscyhology of entrepreneurship. J. R. Baum, M. Frese et R. A. Baron. Mahwah, New Jersey, Lawrence Erlbaum Associates. Locke, E. A. and G. P. Latham (2002). "Building a Practically Useful Theory of Goal Setting and Task Motivation. A 35‐year odyssey." American Psychologist 57(9): 705‐717. McClelland, D. C. (1961). The achieving society. Princeton, N.J.,, Van Nostrand. McClelland, D. C., R. Koestner and J. Weinberger (1989). "How Do Self‐Attributed and Implicit Motives Differ." Psychological Review 96(4): 690‐702. Perwin, L. (2003). The Science of Personality. Oxford, Oxford University Press. Ryan, R. M. and E. L. Deci (2000). "Self‐determination theory and the facilitation of intrinsic motivation, social development, and well‐being." American Psychologist 55(1): 68. Schultheiss, O. C. and J. C. Brunstein (2005). "An implicit motive perspective on competence." Handbook of competence and motivation: 31‐51. Schultheiss, O. C., M. Patalakh, M. Rawolle, S. Liening and J. J. MacInnes (2011). "Referential competence is associated with motivational congruence." Journal of Research in Personality 45: 59‐70. Schultheiss, O. C., A. G. Rösch, M. Rawolle, A. Kordik and S. Graham (2010). "Implicit motives: Current topics and future directions." The Decade Ahead: Theoretical Perspectives on Motivation and Achievement (Advances in Motivation and Achievement, Volume 16), Emerald Group Publishing Limited 16: 199‐233. Schultheiss, O. C., D. Yankova, B. Dirlikov and D. J. Schad (2009). "Are implicit and explicit motive measures statistically independent? A fair and balanced test using the Picture Story Exercise and a cue‐and response‐matched questionnaire measure." Journal of personality assessment 91(1): 72‐81. Shane, S., E. A. Locke and C. J. Collins (2003). "Entrepreneurial motivation." Human Resource Management Review 13(2): 257‐279. Stenholm, P. (2011). "Innovative Behavior as a Moderator of Growth Intentions." Journal of Small Business Management 49(2): 233‐251. Thrash, T. M., A. J. Elliot and O. C. Schultheiss (2007). "Methodological and dispositional predictors of congruence between implicit and explicit need for achievement." Personality and Social Psychology Bulletin 33(7): 961. van Witteloostuijn, A. (2012). Motivations of Ambitious Entrepreneurs. Ambitious Entrepreneurship: a review of the state of the art. E. Stam, S. Bogaert, N. Bosma, et al., Report for the Advisory Council for Science and Technology Policy (AWT) and the Flemish Council for Science and Innovation (VRWI). Weiner, B. (1980). "The role of affect in rational (attributional) approaches to human motivation." Educational Researcher 9(7): 4‐11. Winter, D. G. (1991). "Measuring personality at a distance: Development of an integrated system for scoring motives in running text."

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Finding New Competitive Intelligence: Using Structured and Unstructured Data Ravinder Singh Kahlon1,2 and Man‐Chie Tse1,2 1 dkode Limited, London, UK 2 University of Ulster, Ulster Business School, Northern Ireland, UK Ravi@dkode.co Man‐Chie@dkode.co Abstract: The UK public sector pharmaceutical healthcare industry is ailing and in need of help, £3.6 billion is spent annually on pharmaceutical companies. Today’s dynamic markets, the public sector, healthcare in the UK are under significant and unprecedented pressure to improve productivity, quality and embrace. Despite this enormous investment and the magnitude of opportunity for the public pharmaceutical healthcare to both do good and well, all too many efforts fail because of limited time and energy spent on innovation development. The Government, the public sector healthcare, society associations, business to business and stakeholders are inter‐dependently a business chain model. However, a salient point, there is a need for overcoming vertical and horizontal obstacle integration of activities required for analysing predictive and future performance. The aim of this paper is two‐fold. Firstly, the paper investigates the linkages and relationships between strategy and operations in pharmaceutical improvement efforts by examining the findings of uncertainty and new competitive intelligence. Secondly, the aim is to use this information to postulate an ecosystem model, as a way to achieve new products and services innovation impact. This research undertakes an exploratory approach consolidating structured and unstructured data, using Visual Decision Making (VDM) the authors have developed; to visualise new competitive intelligence and how operation and performance management prospects contributes towards strategic management. The visual modelling findings indicate a need for improved integration across operations to transform a healthcare organisation service and technology innovation level. The exploratory study finds that substantial evidence from the pharmaceutical healthcare case do not appear to be adopting intelligence impact as rapidly as expected, not least because of the lack of understanding and rationale impact of emerging industries. The paper suggests that business ecosystem excellence can offer a strong foundation to develop new strategies, activities and behaviour change in a healthcare organisation. The structured integration of the paper is split into three sections. Firstly, a problem case background is described. Secondly, building and labelling competitive attributes respectively is considered. Thirdly, a relative predictive forecast analysis by combining and mapping these data sources with VDM. Finally, further recommendation is subsequently addressed for future prospective works. Keywords: competitive intelligence, visual decision making, impact analysis, pharmaceutical healthcare, data

1. Introduction Organisations require monitoring tools to help learn and navigate the new business landscape and react more effectively to fast moving markets. Identifying new business and competitive intelligence (CI) is a critical task for any organisations. Pharmaceutical Healthcare (PH) companies are striving to continue to find new customers for their niche services and products offering in an ecosystem, interlinked to adhere to the Government and utilising the pharmaceutical supply chain. The paper explores an empirical evaluation using Visual Decision Making (VDM) metrics through integrating the handling of UK public sector healthcare pharmaceutical websites. In particular, the attributes focus on identifying contents highlighting business context strategy alignments and operational relationships through a specific competitive window. The purpose is to explore unstructured and structured data and its contribution and connection in a case study. The work evolved from Kahlon (2009) and Tse (2009) research on Knowledge Management and addressing critical business issues. The paper is split into three sections; the first section presents a case definition. Secondly, building and labelling competitive attributes is looked into more detail at how using pharmaceuticals data and web content respectively could be harnessed to provide actionable intelligence. Thirdly, a VDM mapping analysis combining data sources is presented. The last section provides a summary and future prospective work to expand further.

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2. Methodology and case application 2.1 Problem background and case definition A PH organisation is seeking for a new innovative way to deliver services and products and reposition in the market force. The research objectives were to determine concerns about marketing positioning and branding and examine how competitive intelligence could improve sales, publicity, growth and income. Alongside, data redundancy and no technological development, customers required interactive system which was not available. This led to losing on average a potential 2 in 10 customers weekly and also the reputation of failing to adapt to new technological tools. Existing research reveals efforts are limited due to the increasing complexity of the healthcare business landscape with unknown impact (McKinsey & Company, nd; Matsuk, 2009). Data and measurements were required to analyse and investigate the behaviour online to explore hidden relationships and the significant movement to discover facts. In Charles Dawin’s famous theory of evolution; survival depends on the ability to change (Pojeta & Springer, 2001). The demands for UK public sector PH services and products over the years are dramatically increasing, and to cure different types of patient diseases. PH requires useable structured data to combine with multiple data to transform opportunities; however, gathering is typically a stale manual operation and arguably, analytical problems exist due to limitations of expertise.

3. Design and scope Traditionally, information sources of PH resided in offline materials; however, with the advent of online content, a large volume of data are now widely available than ever. For an organisation to take full advantage, detailed analysis was required. Therefore, to derive structure, empirical field research was carried out developing a label data set for business competitiveness. By extracting the greatest value from data, filtering techniques were applied to identify intelligence to determine market competition. Once gathered together, the wealth of information is richer. The first step was to develop a list of potential PH companies, solely based in the UK only (public sector healthcare located in England, Scotland and Wales), products and services available, marketed customers, branding and position in market. The set of data set was narrowed down further targeting authorised pharmaceuticals. This devised the window to eliminate companies failing to meet the categorical classification area in relation to the business. There was 2312 public healthcare organisation sites (N=2312), of which only subset of approximately 25 (n=25) PH websites yielded (Figure 1).

Figure 1: Construction of the labelled data set

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3.1 Process of the study The study was carried out by obtaining the URL of each competitor website matching within the categorical range. The study lasted for three months with a focus group due to the available time frame. Narrative text, information flow, and business patterns were also incorporated in the model through action research, which typically allowed reflective data‐driven for progressive problem solving. The next step assigned labels reflecting business quality as potential equivalent collaborative partner. Each website within the 25 inspected; labels were assigned according to Low (L), Medium (M) or High (H) competitor, based on expert judgment and similarity. The outcome resulted in 3 companies, labelled as positives with the remainder 23 as negatives (Table 1). Table 1: Online competitive intelligence class Competitor

#group

#data

#features

#classes

C1 C2 C3

H M L

150 200 50

21 20 4

3 2 2

The main descriptive variables of the study revealed keywords, popularity of competitors and their use of marketing activities (Table 2). Table 2: Descriptive criteria’s

Section

Content Field & Description Information Criteria

1 2 3 4

Company Data Company Code Service & Product Details Branding & Marketing

Service & Performance

6 7

Workforce & Stakeholder Management Functionality & Features

Name, Duration, Establishment Company Specialty, Classification Area, Services Service and Product Portfolio Type Sales and Marketing Online, Use of Social Media, SEO, Email Marketing, Inbound and Outbound Linking Quality Management, Assurance and Standards, Presence of Connectivity Stakeholder Relationship, Employee, Customer Service User Intractability, Connectivity and Personalisation Texture

4. The outcome of the research The findings indicated the organisation needed improvement and manifested old practice. Assessment also found manual operation processes were no longer viable. During the execution of the inquiry, managers recognised the value of using visual decision on top of formally applied traditional methods. The team of six managers concentrated on visual representation in contribution to decision making. Training, website development and a process guideline was drawn up and implemented in place to facilitate rebranding and better position. This led to performance improvements, financial incremental prospects, service proposition and re‐alignment with the current market.

4.1 Learning from the data and mapping variables using sample space and events By gathering data of the specific market context, each competitor were inspected and classified L, M, and H, (thus, let L=x; M=y and H=z). Here, sample space or set of all possible outcomes or realisations (ω) could be calculated which enabled learning from the data. Decision rules were reflected into a sample space and events. Random Variable, is a mapping, or also known as function represented as X : Ω → R assigning a real number X(ω) to each outcome ω to build confidence levels in the complexity (Devroye, 1988). As the market industry competitiveness nature is complex, this was applied to measurable activity of the clustering and linkage of the data relativeness. In classification, online content provides a given description (d ϵ X) of a webpage content, where X is the space. The sample space or set of all possible outcomes or realisations w, is Ω = {LL, LM, LH, LM, MM, MH, LH, MH, HH} or {xx, xy, xz, xy, yy, yz, xz, yz, zz}.

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Ravinder Singh Kahlon and Man‐Chie Tse Classes (C) of labels (also known as categories, Table 1) were generated (C = c1, c2,….. cn) to aid mapping. These variables and their possible measurements revealed important differences (Table 3) between the company and the market level positioning effectiveness within the dimensional space. Table 3: Level of existing competitiveness Competitor

Average

Upper Bound

Lower Bound

Max

Min

Range

C1 C2 C3

8.08 6.31 3.00

8.75 7.06 3.86

7.40 5.56 2.14

10 8 5

6 3 1

4 5 4

5. Visual decision making The concern of the problem was querying the Competitive Intelligence {QCI} and the final deterministic was finding the best solution {FS}. The VDM technique can be found in depth in Kahlon & Tse (2011, 2012) was utilised to detect correlation mappings between {QCI} to {FS}. VDM targeted resources through actionable analysis helped decision makers respond quickly to the problem. The attributes of the model was developed using competitive strategy requirements acquired from various sources including application of process, interviews, domain experts and reports. The kiviat diagram (shown in Figure 2) presented probing interests of unexplored and undefined metrics intelligence. This enables stakeholders to understand visual representation of how events and data are connected, adding further quality of offerings before taking any action. Two components are derived, firstly, a visual strategy and secondly, classification strategy. The visual strategy depicts the problem statement, enabling recommendations to be drawn, whilst the classification corresponds to the associated levels for movement.

Figure 2: Smart decision making The VDM highlighted political, economical, social and technological, both internal and external to the organisation of processes, people behaviour and their level to compete. The visual diagram aided managers to collaboratively determine further requirements to enhance the organisation competitiveness. As illustrated,

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Ravinder Singh Kahlon and Man‐Chie Tse branding and product portfolio are relatively weak which means further clarity and verification of information is required.

6. Conclusion Organisations need a solution that can reliably ingest vast quantities of data and select combine important rudiments. This paper described finding competitive intelligence using structured and unstructured data through an empirical research for a pharmaceutical healthcare with visual learning. The VDM model contributed to assess decision makers in having a stronger position to react and allocate resources swiftly and efficiently. The findings also help towards determining the correlation of behaviour and complexity towards branding and design that may subject to arise should new intelligence behaviour be introduced. Among the potential, the tool reflected a meaningful logical visual representation in terms of the capability to spot new trends and substitution of services using probabilistic rules. The algorithm introduced and described briefly, is still questioned due to early development of the work. The paper opens research field for discovering intelligence data for competitiveness.

References Devroye, L. (1988) Automatic Pattern Recognition: A Study of the Probability Error. IEEE Transactions on Pattern Analysis and Machine Intelligence. Volume 10, No.4, Pp.530‐543. Kahlon, R. S. (2009) Knowledge Management. [WWW ‐ Weblog] Ravi's Researching Projects Development. [Online] Available from: http://www.ravi.kahlon.co/2013/01/human‐factors‐in‐km.html [Accessed: 13/04/2013]. Kahlon, R. S. & Tse, M. C. (2011) What’s Your Strategy for Measuring IT and Non‐IT for Knowledge Management in an Organization?, In: Proceedings of the 12th European Conference on Knowledge Management 1‐2 September 2011, Passau University, Germany, Volume 2, Pp.1141‐1146. Kahlon, R. S. & Tse, M. C. (2012) The New Dynamics of Strategy: Visual Decision Making in a Complex & Complicated Organization. In: Proceedings of the 13th European Conference on Knowledge Management (ECKM 2012) ‐ 6 & 7 September 2012, Universidad Politécnica de Cartagena, Cartagena, Spain, Volume 13, No. 2, Pp. 1549‐1552. McKinsey & Company, (nd) Pharmaceuticals & Medical Products – Operations [Online]. Available from: http://www.mckinsey.com/client_service/pharmaceuticals_and_medical_products/expertise/operations [Accessed: 09/06/2013]. Matsuk, R. (2009) Challenges in Contract Strategy & Operations for Pharmaceutical Manufacturers. [WWW] Available from: http://www.highpoint‐solutions.com/documents/whitepapers/HPS_Pharma%20Commerce_0609.pdf [Accessed: 09/06/2013]. Pojeta, J., & Springer, D. A. (2001) Darwin's Revolutionary Theory [Online]. Available: http://www.agiweb.org/news/evolution/darwinstheory.html [Accessed: 31/03/2013]. Tse, M. C. (2009) MC’s Research [WWW ‐ Weblog]. [Online] Available from: http://mc‐tse.blogspot.com [Accessed: 18/03/2013].

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Implications of an Emerging Model for Product Ideation, Design and Development Using Bridging Enterprises and Open Communities of Practice Karla Phlypo Walden University, Clarkston, USA karla.phlypo@waldenu.edu karla.s.phlypo@gmail.com Abstract: This work in progress describes organizations that perform a bridging function for their external communities and describes innovative models being used to facilitate external community innovation, as well as describes the value and cultural persona (using Gravesian Existence Theory) of the internal enterprise community facilitators and the external community. The management of social innovation from within conventional organizations (rational structures), often results in failure due to a misalignment between the conventional organization’s values and the values of the crowd they are attempting to engage. Entrepreneurs looking to engage in social‐centric business models must understand what drives external communities to fully participate and flourish. A paradigmatic shift is emerging of enterprises with leadership who have released the need to specify the form of the innovation and have also constructed an environment that allows for rapid innovation in their business models. The researcher considers this as the expression of an unconventional enterprise. This phenomenological case study describes, and further defines this group of enterprises as for profit, bridging organizations. The spectrum of organizations that fall into the realm of bridging enterprises, range from the well known, such as Amazon and Etsy, which provide a portal for peer to peer commerce, while a few unique others have chosen to take on a new and innovative role ‐ to establish an environment which allows for the social innovation of products, problem solving and services. The focus of this phenomenological case study describes three bridging organizations. The study was conducted using two methods. The first was an archival on‐line forum analysis, which was used to describe the community values. The second method involved interviews of the community facilitators, which helped to better describe the governance methods of the communities, as well as provide a deeper description of the unconventional internal environment. Two of these organizations focus on consumer product innovation and ideation, while the third provides a technological platform and community facilitators that manage both conventional and unconventional enterprise social innovation activities. At this point in the analysis clear themes have arisen that will support a framework and model for those who choose to engage in for‐profit social innovation enterprises and recommendations that address the concerns that arise in these social product innovation enterprises. Keywords: social innovation, communities of practice, bridging enterprises, business models, emerging industry, knowledge management, creative capacity

1. Background Innovation has been deemed a critical enabler to improved economic health, yet two challenges have befallen many conventional organizations; one they have a difficult time harnessing radical innovation and; two they rarely engage their employees in the discussion or exploration of potential innovations. Gibbons (2010) argued that 57% of employees find themselves dissatisfied with their work and mostly with how freely they are able to contribute their ideas, and creative capacity. Conventional organizations will have to consider their role in social innovation and nurture the kinds of values important to those who participate in OCoP. This study provides greater understanding through a phenomenological case study of an emerging enterprise structure called the for‐profit bridging enterprise. These enterprises center their core business process around external communities. These communities are used to develop their products. They do not rely on internal research for their product ideation or initial development. Bridging organizations have been defined primarily by the non profit sector as organizations that act as an interface between the conventional organization and a community (Hoffman, et al. 2010). The intent of this study is to understand and further define both the bridging enterprise and communities that participate therein. Two primary organizational structure are present among bridging enterprises conducting product development. Those who are led by conventional organizations and those led by OCoP. The new technology of Web 2.0, as well as other advances, have significantly enhanced the capability of the bridging organizations’ ability to harness this collective of people to develop both radical and incremental innovation at a rapid rate. These organizations democratize involvement, thus enabling anyone, regardless of

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Karla Phlypo location, education, gender or race to express their creative capacity in open communities of practice (OCoP). With sufficient development, the concept of OCoPs could potentially be channeled into various new economic models of employment and/or education.

2. Influential frameworks, models and theories Figure 1 provides an overview of the framework of the study. Three areas were addressed. Firstly the research defined the for‐profit bridging organization (based on the literature of hybrid and non‐profit bridging organizations established by Berkes (2009), Hoffman, et al. (2010), and Jolink and Niesten (2012). Secondly the framework expanded what is known about communities of practice to include a broader understanding of open communities of practice (Rogers, 1983; Scarso, et al. 2009). Additional literature was used to establish the similarities and differences between open communities of practice (OCoP) and closed communities of practice (prevalent in conventional organizations). The third aspect of the framework describes the persona of the community members and bridging organizations. Several theories where used to understand the persona (values, culture, and functioning structure) of the OCoP and the bridging enterprises (Bruhn & Lowrey’s, 2012; Graves, 2005; Kasser; 2011; Laas, 2006; Van Marrewijk, 2010).

Figure 1: Facilitated OCoP culture and persona framework

3. Purpose The purpose of this Phenomenological case study is to holistically understand the structural, operational and managerial aspects of bridging organizations and how they facilitate and create creative opportunities for their open communities of practice (OCoP). Additionally, the researcher will attempt to characterize both the for‐ profit bridging organization and the values, persona, and motivations of the community of enthusiasts and inventors/problem solvers.

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4. Problem statement The problem is that the conventional (stable) paradigm of innovation and job satisfaction are not working well. Conventional organization seemingly abhor the fluidity and greater flexibility needed to sustain and prosper in the current fluid environment. The conventional have also, in most cases, fixated on values that have become disharmonious with their customers and most of their employees, and as such, fail to evolve to expanded their creative capacity. This study identifies the challenges that will be driving conventional structures to expand their identity and to discern essential managerial attributes that will enable conventional organizations to thrive and not just survive.

5. Research questions The central questions asked by this study are:

How do the emerging “bridging” organizations represent a new paradigm of organizing and managing?

How do the organizational structures and managerial practices differ between conventional organizations and bridging organizations?

What is the nature of the relationship between the organizations, in both the conventional and bridging organizations, and highly creative individuals?

How do the emergent organizations attract, and/or fulfill, the higher order existence needs of individuals?

6. Data collection The data collection occurred in two phases. The first phase reviewed archival virtual forum discussions from two of the ideation and product development enterprises. The forums were public and the discussions were used primarily to identify the values of the community, how they felt about the enterprise and the existence level of the participants. In addition to the forums, the researcher also found several inventor interviews, videos and blog posts which were were also included. This was done to provide better balance in the archival data set. The second phase of the data was collected through a series of 60 minute eight interviews with the facilitators (conducted both in groups and individually). They had all been employed with their organizations for at least 6 months and had been facilitating the communities for at least that length of time.

7. Analysis The units of measure are the people who facilitate the OCoP, and the forum and archival discussions and interviews. The method of comparative analysis was used to generate clear explanations through the discovery of cross‐case patterns. The coding framework implemented in the study used both high influence analytic codes (primarily through discourses with the facilitators) and low analytic codes (derived through a line by line interrogation of the archival data). From this, the following themes emerged and clustered. Trustworthiness and reliability of the study was achieved through member check and external expert review of the persona descriptions. In addition to the aforementioned, the interview guide and questions had also been piloted before commencing the study.

8. Results and conclusions As a result of the analysis seven themes were discovered. They are:

Community and bridging enterprise values and predominate existence levels

How the community feels and have experienced the process.

Enterprise unconventionality as perceived by the community and facilitators

Motivations of the community and facilitators

Enterprise relationship with community

Structure and management of the enterprise

Through my initial analysis, patterns are indeed emerging within the communities in relation to persona interactions. Within the product development communities, there is a nexus of persona. As a result of this, the

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Karla Phlypo community has difficultly forming a cohesive identity ( i.e. four persona are present in the community they are called the absolutist, individualist, communal, and cognitive self expressive). From the perspective of the enterprise, these organizations support and exhibit the values most indicative of the cognitive self expressive persona. This level is system focused, considers longer time horizons, and provides active, facilitative management. Employees are self‐directed. The bridging organizations are, by and large, made up of the communal and cognitive self expressive persona. The enterprise structures are generally more flat and organic, not linear. They are highly collaborative and value openness, and integrity and purposefulness. The facilitators all expressed that there was a great deal of coherence in values between themselves and the enterprise. The preliminary findings of this study imply that organizational structures considering engaging social innovation can no longer be closed and must function across various value systems in order to effectively harness community creative capacity. I am currently finalizing the results of the study at this time.

References Antonioli, D., & Marzucchi, A. (2010). The behavioral additionally dimension in innovation policies: A review (Report 201010). Retrieved from http://ideas.repec.org/p/udf/wpaper/201010.html Ardichvili, A. (2008). Learning and knowledge sharing in virtual communities of practice: motivators, barriers, and enablers. Advances in Developing Human Resources, 10(4), 541–554. Autant‐Bernard, C., Fadairo, M., & Massard, N. (2010). Knowledge diffusion and innovation policies within the european regions: Challenges based on recent empirical evidence (GATE Working Paper No. 1010) (p. 30). France. Bruhn, J. G., & Lowrey, J. (2012). The good and bad about greed: How the manifestations of greed can be used to improve organizational and individual behavior and performance. Consulting Psychology Journal: Practice And Research, 64(2). Graves, C. W. (2005). The never ending quest: A treatise on an emergent cyclical conception of adult behavioral systems and their development; Dr. Clare W. Graves explores human nature. (C. C. Cowan & N. Todorovic, Eds.). Santa Barbara, CA: ECLET Publishing. Hoffman, A., Badiane, K., & Haigh, N. (2010). Hybrid organizations as agents of positive social change: Bridging the for‐ profit & non‐profit divide. Ross School of Business Paper, University of Michigan, Ann Arbor MI (pp. 1149). Jolink, A., & Niesten, E. (2012). Recent qualitative advances on hybrid organizations: Taking stock, looking ahead. Scandinavian Journal of Management, 28(2), 149–161. Kasser, T. (2011). Cultural values and the well‐being of future generations: A cross‐national study. Journal of Cross‐Cultural Psychology, 42(2), 206–215. doi: Laas, I. (2006). Self‐actualization and society: A new application for an old theory. Journal of Humanistic Psychology, 46(1), 77–91. Rogers, C. R. (1973). The interpersonal relationship: The core of guidance. Interpersonal growth and self actualization in groups, 32, 176. Scarso, E., Bolisani, E., & Salvador, L. (2009). A systematic framework for analyzing the critical success factors of communities of practice. Journal of Knowledge Management, 13(6), 431–447. van Marrewijk, M. (2010c). A typology of institutional frameworks for organizations. Environmental Policies and Firm Behavior with Endogenous Investment in R & D, 1(2), 101.

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Internationalisation by SMEs as a Strategy to Cope With Weakness in the Domestic Market : The Case of Spain, Ireland and France Angela Poulakidas1, Robert Hisrich2 and Claudine Kearney3 1 Department of International Business Development, Novancia Business School Paris, Paris, France 2 Walker Center for Global Entrepreneurship, Thunderbird School of Global Management, Glendale, USA 3 Quinn School of Business, University College Dublin, Dublin, Ireland apoulakidas@novancia.fr Robert.hisrich@thunderbird.edu Claudine.kearney@ucd.ie Abstract: Given the impact of the debt crisis, enterprises in general are facing slowing if not contracting market growth. In this context of slowed growth, many SMEs which have been traditionally focused on the domestic market across a wide spectrum of industries in many countries, seek to internationalize the marketing of their goods and services. This study aims to understand the relationship between heightened perceived environmental uncertainty in the domestic markets of the high debt afflicted countries of France, Ireland and Spain and internationalization of their enterprises. More specifically, this study aims to go beyond the existing literature which has generally been limited to internationalization of SMEs in periods of favorable economic environments by focusing on the trajectory of internationalization by SMEs in countries which have been or currently are experiencing a debt crisis and related economic recession. The methodology of this study is to identify and analyse how environmental uncertainty in the context of a debt crisis environment impacts the decision to internationalize. The conceptual framework of this study draws on perspectives of understanding perceived environmental uncertainty, foreign network knowledge and internationalisation (e.g. Babakus, Yavas and Haahti, 2006; Boyd & Fulk, 1996). A mix of qualitative and quantitative research such as case studies and survey interviews with a sample of SMEs in France, Ireland and Spain will be used to illuminate the extent to which environmental uncertainty in the domestic market is related to their decision to internationalize the company’s business. To give further depth to the study, the extent to which foreign network knowledge enables SMEs to cope with heightened perceived environmental uncertainty will be assessed. The managerial implications of this study is that it advances the understanding of the extent to which heightened environmental uncertainty in the domestic market is a factor which contributes to the decision to enter foreign markets. Keywords: international entrepreneurship, environmental uncertainty, network knowledge, SME development, debt‐crisis environment

1. Introduction This study investigates the relationship between perception of environmental uncertainty (PEU) within the domestic environment, foreign network knowledge and internationalization activities of SMEs of firms in France, Ireland and Spain. Due to the debt crisis and related economic weakness, these countries are lacking in domestic demand and it has been observed that SMEs are compelled to expand into international markets in the situation of facing deteriorating domestic markets (Buck, 2013). In the context of this environment, we are able to examine the extent to which perceived environmental uncertainty within the domestic environment is associated with internationalisation activities of entrepreneurs which were previously focused exclusively on the domestic market. A feature of this study which makes it different from previous studies which have highlighted the manner in which SMEs respond to and manage uncertainty in the process of their internationalization is that 1) uncertainty is conceptualized as perceived environmental uncertainty in the domestic, internal market rather than the external, international market, 2) this study explores the extent to which perceived uncertainty in the domestic market is a stimulative rather than inhibitive factor in SME internationalization. In line with previous research which shows that having a limited domestic market is a major reason for firms to enter international markets (Peiris, 2012), this study argues that heightened perceived environmental uncertainty specific to the domestic market, in the context of a debt crisis, is a force which propels rather than inhibits internationalization. The current economic crisis and ongoing recessionary conditions of the debt crisis afflicted countries of Europe provide a unique opportunity to understand how the elements of the domestic market shape the internationalization processes of SMEs.

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2. Research objectives This research specifically focuses on the following questions: 1) To what extent does perceived environmental uncertainty in the domestic market serve as an impetus to the internationalization of SMEs in debt crisis environments? 2) How do SMEs in debt crisis affected countries respond to heightened environmental uncertainty in their domestic markets? 3) To what extent does foreign network knowledge play a role in reducing perceived domestic environmental uncertainty?

3. Literature review The literature describes the trajectory of internationalization by SMEs with the management of uncertainty as a major factor in its activities (Downey and Slocum, 1975; Liesch et. al., 2011; Meyer & Gelbuda, 2006; Madhok & Liu, 2006). In these studies, uncertainty manifests itself as an inhibiting rather than a stimulative factor in the internationalisation processes of SMEs. To the contrary, there are research studies and recent business reports which publicize the increased development of SME internationalisation in countries which are experiencing heightened uncertainty owing to large drops in GDP accompanied by large rises in unemployment, changes in political regime, and economic weakness (Miesenblock 1988; Moen 2002; Bell 1995; Zou and Stan 1998). The impetus to internationalize often comes from necessity stemming from adverse domestic conditions and the need to generate revenues rather from any proactive aspirations on the part of management (Aaby and Slater, 1989). As research has yet to establish the extent to which perceived environmental uncertainty in the domestic environment is a key factor in stimulating the firm’s interest to go abroad (Bell, 1995; Evers, 2010; Zou and Stan, 1998), this study, proposes to examine how perceived environmental uncertainty within the domestic market of an ongoing debt crisis in France, Ireland and Spain is an encouraging and stimulative factor in SME internationalisation. Researchers have shown in the case of Finland, Norway, and Sweden, that SMEs which have knowledge derived from foreign networks are able to achieve a greater degree of internationalization (Babakus, Yavas, and Haahti, 2006) because of the reduction in the impact of uncertainty. This study will complement the existing research by reformulating the variables from a different perspective. More specifically, this research will contrast the differences between the stable economies of Sweden, Finland and Norway with the weaker economies of Spain, Ireland, and France. This study is also differentiated from the results of other studies in that it analyses how perceived uncertainty within the domestic rather than international market shapes the decision to internationalize.

4. The research model 4.1 Proposition development In the context of the debt‐crisis environment, by using SMEs from France, Ireland and Spain as our focus, a model of the impact of perceived environmental uncertainty in the SMEs domestic environment on SME’s foreign networking activities and subsequent effects on internationalization (Figure 1) are addressed. The propositions include: P1: Higher levels of perceived uncertainty in the domestic market will be positively related to greater internationalization. P2: Higher levels of perceived uncertainty in the domestic market will be positively related to greater foreign networking activities P3: SMEs’ greater engagement in foreign networking activities will be positively related to their internationalisation involvement.

5. Methodology Sample To test the research model and hypotheses, data collected on SMEs operating in France, Ireland, and Spain through online surveys and in‐person interviews will be obtained. The collection of data via online survey distribution will also be complemented with three to four mini case studies of SMEs from France, Ireland and

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Angela Poulakidas, Robert Hisrich and Claudine Kearney Spain. Target SMEs in each country will be randomly selected from the garment, clothing, shoe, and electrical component/equipment sector. Labor market)

(Domestic

Internationalisation Behaviour

Country selection

Network knowledge Foreign networking

Supplier market (domestic market)

Capital Market (domestic market)

Customer Market (domestic market)

Mode of entry Export sales

Figure 1: Conceptual model of propositions Measurements Perceived environmental uncertainty PEU scores for each area of the environment will be computed will be calculated for before and after the onset of the debt crisis in 2008 to establish whether there is a perceived change in environmental uncertainty due to the debt crisis. The independent variable is perceived environmental uncertainty (PEU). Three variables will be used to measure PEU: the rate of change in the environment, degree of environmental complexity and the degree to which the firm is dependent on the sector for important resource in four sectors of the environment: labor, suppliers, customers and capital. Moderating variable The effects of foreign network knowledge will be tested in this study: network knowledge. Network knowledge will be measured in the same manner as Babakus, Yavas, & Haati (2006). Respondents’ foreign networking activities will be measured by asking whether they have reached out to foreign network contacts in twelve key areas related to exporting. Internationalisation The dependent variable is the degree of international involvement. This construct will be captured by identifying export sales as a percentage of international sales. Other indices to be used include export sales volume, export sales growth and mode of entry. Mode of entry will be operationalized with an ordinal five‐

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Angela Poulakidas, Robert Hisrich and Claudine Kearney step scale and will be measured in terms of direct exporting/internet, indirect exporting, cooperations, joint ventures, and wholly‐owned subsidiaries and

6. Conclusion This study proposes to study the relationship between the break‐out of sudden economic problems and SME internationalization activities. There is little study on the impact of long term economic weakness on the internationalization of SMEs. While uncertainty plays a key role in the decision‐making process of an entrepreneur, a review of the literature shows that there are no studies which have focused on the role of heightened perceived environmental uncertainty within an SMEs domestic market during a debt crisis on the process of internationalization. This study is important because it will demonstrate how SMEs respond to uncertainty in weakened domestic markets, and looks at the extent to which networking in foreign countries enable SMEs to manage challenges presented by the weakness of the domestic market.

References Aaby, N. E. and Slater, S.F (1989). Management influence on export performance: A review of the empirical literature, 1979‐1988. International Marketing Review, 6, 7‐22. Babakus, E., Yavas, U. and Haahti, A. (2006). Perceived uncertainty, networking and export performance: A study of Nordic SMEs. European Business Review, 18, 4‐13. Bell, J. (1995). The internationalization of small computer software firms: A further challenge to “stage” theories. European Journal of Marketing, 29, 60 – 75. Boyd, B. K. and Fulk, J. (1996). Executive scanning and perceived uncertainty: a multidimensional model. Journal of Management, 22, 1, 1‐21. Buck, T. (May 2013). Spain’s exporting prowess brightens economic gloom. Financial Times. Downey, H. K. & Slocum, J. W. (1975). Uncertainty: Measures, research and sources of variation. Academy of Management Journal, Vol. 18, No. 3, pp. 562‐578. Evers, N. (2010). Factors influencing new venture internationalisation: A case analysis of the Irish aquaculture industry. Journal of International Entrepreneurship, 8, 392‐416. Liesch, P., Welch, W., Buckley, P. (2011). “Risk and uncertainty in Internationalisation and international entrepreneurship studies, Review an conceptual development.” Management International Review, Vol. 51, pp. 851 873. Madhok, A. and Liu, C. (2006). “A coevolutionary theory of the multinational firm.” Journal of International Management, Vol. 12, No. 1, pp. 1‐21. Madson, T.K. and Servais, P. (1997). The internationalization of born globals: An evolutionary process ? International Business Review, 6, 561 – 83. Meyer, K. E. and Gelbuda, M. (2006). Process perspectives in international business research, Management International Review, 46, 143‐164. Miesenblock, K. (1988). Small business and exporting: A literature review. International Small Business Journal, 6, 2, 42‐61. Moen, O. (2002). The Born Globals: A new generation of small European exporters. International Marketing Review, 19, 2, 156 – 175. Peiris, I., Akoorie, M. and Sinha, P. (2012). International entrepreneurship: A critical analysis of studies in the past two decades and future directions for research. Journal of International Entrepreneurship, 10, 4, 279‐324. Zou, S. and Stan, S. (1998). The determinants of export performance: A review of the empirical literature between 1987 and 1997. International Marketing Review, 15, 333‐56.

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